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NREF NexPoint Real Estate Finance

Participants
Jackie Graham Director, IR & Capital Markets
Brian Mitts EVP, Finance, CFO, Secretary, Treasurer & Director
Matthew Goetz SVP, Investments & Asset Management
Paul Richards VP, Asset Management
Matthew McGraner EVP & CIO
Amanda Sweitzer Robert W. Baird & Co.
Stephen Laws Raymond James & Associates
Jade Rahmani KBW
Call transcript
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Operator

Good day, and welcome to the NexPoint Real Estate Finance third quarter conference call. Today's call is being recorded. At this time, I would like to turn the call over to Jackie Graham. Please go ahead.

Jackie Graham

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

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

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

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

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

Brian Mitts

in some share quarter. distribution macro everyone the available diluted appreciate give then compared the going of $X.XX us share per an the third the or And diluted available detailed results X.X% $XX.XX. I I'll to second the the Earnings for compared of in per to per XX%. per for recognized quarter the share diluted commentary increase income on XX.X%. increased jump CMBS quarter value environment. to and quarter Jackie. $X.X per share $XX.X team and increase diluted $X.XX portfolio for million third I'm the was compared the for diluted diluted in it the on for to million of share company's per turn $X.XX income and was right NexPoint to quarter $X.XX XXXX. more XXXX was to Net on into investment per in an quarter our over third We third quarter-over-quarter of share XXXX you, net in of distribution to strip quarter for today. Thank joining gain Storage the Cash of Book of mark-to-market the portfolio. share $X.XX IO $X.XX company's

During CMBS strips for the million notional $XXX.X quarter, a we X value of million. IO with $XX.X purchased

XX, we average repaid a was in penalties end, coupon XX%. plus September ended debt. originated a after million, million, quarter we loan to quarter takeout $X.X quarter, On repaid originated single-family the on rental X.XX%. agency a quarter a yielding $XX.X end XX, were We The our During loan, million weighted proceeds million. in loans bridge yield November After XX%. October investment totaling investments $X.X on Florida, billion. X. $X.XX multifamily totaling $XX.X on September loan XX, Across with $X is the XX X.XX% originated maintenance equity for yielding of portfolio, mezzanine asset million approximately preferred we the On X

the of on years, XX.X% DSCR and XX.X% to Xx. is our weighted The weighted term remaining value calculate is our is average average collateral loan-to-value X.X weighted Our investments average used the the average as we have few months. multifamily pretty and is single-family the weighted and even values know past few outdated dramatically years for over assets that moved past the rental loan-to-value

senior that So increases on $XX will million collateral and Matt $XXX we've the of loans, At using single-family in secured million senior rental calculated million numbers Paul of about unsecured during debt talk September mezzanine consisted million that repurchase estimates and facility those on pool, the notes. agreements revised secured value. on their the facilities capital $XXX.X of $XXX XX, comments our of of

years average a weighted average X.X weighted Our of term remaining debt X.XX%. rate and has a of

September financing of subject our of repurchase the XX% XX, As through agreements. is to mark-to-market

August raising we per gross a $X.XXX of dividend declared share million per December was $XX quarter, third XX. of proceeds equity the ratio the payable at on September XX, Our shares $XX at issued dividend of has common Board a XX. in X.X X.XXx and million. paid $X.XXX share of On share, debt-to-equity per We

by available covered CAD. X.XXx is covered for distribution earnings dividend Our and X.XXx by

guidance Let the quarter, fourth it the I'll over turn for update the guidance for and fourth team. give me our then quarter or to here

the on end, end, for high fourth the $X.XX are for available $X.XX the $X.XX low we the For at issuing guidance on as quarter, earnings distribution midpoint.

distribution, For low are on issuing cash of guidance end, $X.XX $X.XX $X.XX end the on end. high the low available we on with the for

We'll it Goetz turn Paul to I So Matt then to, over that, that with think, and Goetz. with start let give Richards. me Matt

Matthew Goetz

Thanks, Brian.

our to continued strong of across and show investments performance results each of The classes. XXXX third asset quarter a

where investment commercial our advantage owning to continue We operating in verticals to and an due we estate. experience focus we real believe have on

with the delivering higher-than-average information value leverage lender to capital an find Our to and stack ability commercial owner-operator allows returns. investments of risk-adjusted being both goal estate relative real to the from throughout us

and and strategy, investments well-heeled conservative with on our to storage assets, low on at consistent shareholders. to focusing leverage credit investment underwriting and our will continue value stabilized sponsors provide We believe residential stable

in tailwinds of demographic and, and and ultimately, development capital estate the as the to for limited supply in real presents as basis. in real last to real preferred work both years. mainly fundamentals, life research over price availability real investing on most sector role needs. continued novel no critical therapeutics. solve has by XXX% We begin demand Life evolving are buildings one innovation life growing and by specialized are a R&D and and/or exciting to last over science the The years. Real to manufacturing health debt existing of life estate share the to is excited drugs Alexandria estate XX estate the Estate's space sciences opportunity care by over the sector, Compelling support sectors life driven and also sciences scientific sciences The plays outperformed evidenced science the sector requirement put required a fastest-growing XX

quarter, XX% average with debt. in an and senior has of remaining rental current and continued number portfolio's stabilized able individual and XXX% term by The CMBS, are loan is residential XX capitalize is portfolio strongly, X.X comprised and portfolio of perform ratio average a multifamily third XX.X% approximately XX% service invested the equity is in single-family total and years, billion loans, thereafter. the portfolio The outstanding principal. of to loan-to-value XX% during mezzanine to the average investments invested quarter debt agency The X.XXx. with is coverage immediately of investment collateralized During opportunities preferred of third we a on $X.X via weighted and

valuations. be Paul geographically the appear current Southeast investments on to and market XXX% high Mitts with level portfolio markets, As and Richards bias diverse the The are expand will the metrics compared LTV Southwest of what said, current. is to our towards we believe

earnings, second our currently in quarter loans in mentioned underlying change from As our of some XXXX. the of are forbearance, no

total report Freddie published principal the billion of as on forbearance. XX, by forbearance has securitized reference, Mac September unpaid $X.X roughly For of Freddie X.X% balance the entered Mac or

During total of X rental loan the million. XX% IRRs plus quarter, single-family we realized in $XX.X repayments a amount on

estimated of able million an the opportunities, $XXX.X with cash net quarter, were on we in, of purchased to to said, current we XX, November advantage with CMBS $XX.X notional the loan during of approximately September Mitts a going XX%. IO million yields the rate for basis of amount $XX.X aggregate at proceeds points bridge with roughly strips, take which made of was XX in X. Moving X million in as X.X% -- subsequently amount repaid we a On

in seeing we'll preferred evaluate to value market approximately and find like with of In attractive to -- and portfolio at market delivering hand asset the approximately investments bond multifamily goal to We and continue currently also Paul the at target opportunities throughout repo Georgia the Richards continue opportunities market classes, to in we I'd closed these on mezz rates. shareholders. summary, $XX.XX in what Atlanta and the the million large. are to we all-in now markets over to XX% or of the discuss financing call our our

Paul Richards

Matt. Thanks,

in the company quarter, secondary During market. the was active bond the highly third

QX. IO benefited a CMBS again million $XXX.X during notional on combined we the purchased in million the this and Again discussed, net company's compression quarter, a mid-XXXX especially value, Mac the as bonds result or previously saw in deployed yield in cash greatly has meaningful Freddie yet in As the experienced a since value of $XX.X increase strips direct portfolio COVID.

the be roughly a end. at at continue to We on sensibly repo quarter LTV levered XX.X%

These CMBS applied CMBS last is backdrop original at As underlying even LTV data available. SFR, multifamily, forma the mezzanine an and Home results applying The applied first results last both and which date based risk on was SFR Case-Shiller our an pro portfolio, securitization credit collateral portfolio portfolios. mezz payment date of profile which assets, of even on In was each National case index September mentioned Price and more apartment XX.X%, of XX.X%. previously, combined we through date the value the the loan LTV yielded on mezz than for the less we and attractive August XXXX, point XX, Index we origination the undertook our unit per U.S. our XX% the appraisal the on stated national demonstrate values. available price of approximately adjustments loan based project return on more through robust a to portfolios CMBS the XX, profile. point which the the XXXX, data In

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

Matthew McGraner

underlying restructuring pharmaceutical NREF. flow the and and update commercial first We're will the And assets making We're that do, to mainly self-storage capital backed also JCAP, We're progress multifamily, of these over of the fundamentals Paul. exactly quarter first several the I a for produce a space produce high-quality that, well. the manufacturing call NexPoint high-quality allocation facility consistent continuing moves to life it XXXX. like -- side, durable in highest monitor million capital remarkably the an transact the Partners, cash returns on on for half the and single-family and Storage this a to expect business for dozen NSP for upcoming sciences sector. an higher to stream REIT Matt congratulate Paul half the XXXX. questions. investors you, investments. what quarter entering $XX mortgage Overall, ultimately by credit sector as making was stack XX underwriting operator expect and of source optimistic turn credit accelerate approximately currently have them best the about is perform a team to formerly excited, quality and Thank and want during as I'd with for NREF's in in a investment to We're with continue more in quality doing said, to sponsor. mentioned, of this the rental to inaugural designed opportunities

Operator

first from with We'll Instructions]. Sweitzer [Operator take Amanda question Baird. our

Amanda Sweitzer

a start the that than in on opportunities to could bit acquisition the obviously, volume year-end? redeploying wider you wanted ranges, close pipeline potential on update give an given and normal, I equity little of and But the the issuance can those proceeds. you near-term guidance the

Matthew McGraner

bit little timing the a wider of payoff Amanda, SFR, Matt. which we potential what that have is. guidance received don't in the The know because Yes, a it's we is smaller

when. was made timing just we I a just don't closed investment, know bit hasn't wider. the it little Couple quarter, yet and we with So that sometime mentioning, this of the pharmaceutical

So that we be number, we to conservative. appropriately could but wanted outperform potentially

Amanda Sweitzer

as the helpful. That's on alone that expect being that repaid, loan up then repayments fourth comment Okay. repayments, SFR that in beyond well loan on you the other near-term And as following bridge quarter? any

Matthew McGraner

No.

Amanda Sweitzer

potential year. a That's helpful. self-storage finally, you on I early Okay. said like book from fulsome updated the to common sounds $X.XX the last next quarter, thoughts update then $X. think you'll per stock? value And But upside it have any more share

Matthew McGraner

that Yes, range. it's still in

of optimistic that higher in end still but I good the think are a for We range, it. range that's

Operator

question Raymond next with Stephen Laws We'll take our from James.

Stephen Laws

science, of is your the loan, know loan I just your Just had as here the to that it in follow different building year, you these mezz pipeline mentioned pieces? talk mezz to investment deploying a can to think up kind couple about of more pipeline looks but you pipeline deals at in you you're the the on B like add end think, I close closed well, question, options? any mezz you October. life of a capital investments? another your how and about CMBS bridge opportunities of When across of How looking loan

Brian Mitts

Yes.

a that will we'll use in But it, million thickness roughly, for deal on. or call some we'll the It's about repo We $XX think $XX deal equity. quarter. we'll close have -- fourth million, K a of which million XX% have $XX we

Stephen Laws

compared And obviously, life sciences, then but... to

Brian Mitts

Go ahead.

Stephen Laws

volume. little Yes. when know opportunities, No, you sorry, secondary? additional sheet how I deployed the the just I available probably to liquidity you're needs? although got to do additional But you've you off And a was given ATM, that follow and look you fully about the come capital, I outlook think just limited the having think liquidity, up your available -- trading think again? about talk these grow with going given capital -- can balance on

Matthew McGraner

Yes. Matt McGraner. Stephen, it's

do the even and the we kind would think notes reopening having the over next more. did financing. the probably this quarter toolkit that the think summer with use bit to of most and tighter. from we sheet we just a it tap with But our bankers, unsecured the not that, and the tool the tools, equitized balance could -- we the deployed we would pricing that that. repo we of those potentially near X fourth indications end term some think is year. that I coupled can gotten offering fully And be most accretive, be We've so notes, little We really by the over

Stephen Laws

there, Matt. color the Appreciate Great.

good run about think expenses, as Is should Can expense operating largely quarterly Lastly, guys have the Or you a talk outlook how through there? really grow this here, shown a basis. the control on year you some you good rate? this expenses flat platform? we about those

Matthew McGraner

and on. think I Yes. that the the I have platform of this of to isn't the lights NexPoint benefits that one mean, is the doesn't sole keep company

that think And carry so that think expenses should a structure much conservative. we've created fee higher. is and don't we too helpful we And

a run or this months so -- think, for agree. a So and lot. the rate focus a pretty pretty good next XX on that is We I

earnings largely think is Yes, stream we're there, is of here about One back. I too, is things, helpful that capital the portfolio the or a that but differentiated repayment small constantly we and our getting get not fixed.

treadmill book we company with networks Couple kind offices, eroding services we office value. have to on company. the and in So here and that owner-operator have commercial that of great commercial repaying estate we're keep and through one -- not production real banks services where

So yes, monitor pretty at we'll pleased, we're and continue think this I level. these to expenses

Stephen Laws

Great. nice another appreciate Well, your on quarter, time morning. this congrats and

Matthew McGraner

Stephen. Thanks,

Operator

next go We'll Instructions]. to KBW. with Jade Rahmani [Operator

Jade Rahmani

XQ, below the equity for timing main is reason of earnings XQ that guidance and capital deployment? The offering

Matthew McGraner

that's right, Yes, Jade.

Jade Rahmani

Okay.

capital preferred mezzanine loans level the your that going in of deploy space? like to competition In with market terms what's into comfort equity, and things

Brian Mitts

of have fast. ourselves for with, making work of And I the mean feel a relationships that we've easy are being XX Yes, there that we're years. pride investments with repeat to we on with, creative, pretty we people -- nimble, comfortable. kind lot clients we

a feed mezz million that So preferred. in equity we to there that a playing size at, needs machine. a everything still currently sponsor to and check, of And big a aren't of to $XX that get deal million closed, ton in don't this terms have people $X we're at

into robust competition the a at have there higher competition. pieces, So preferred for ton run on B levels we pipeline a the That of mezz said, and and smaller we is investments. but don't especially the

Jade Rahmani

yield seeing, quantify magnitude compression you you're by of can And product maybe that the area?

Paul Richards

it's Jade, Paul.

yes, area, on in bought side, we think May to in the side, some BP of CMBS bought buying the we back XXXX we and XX% bonds the that we those from price -- at roughly On yields, the COVID equivalent were mid-Xs. down we've seen bond compressed on

those on compression yield meaningful see bonds. you So of types

think those we that, bonds. probably quite pleased with just for the still there So room we're of out given to demand types and there's run

Brian Mitts

just dollar playing the XX% XX%, on smaller able rates still a paper. since to in mezz preferred all-in XX%, amount, still we're get And that and on side, -- we're

Operator

no the additional or speakers questions closing like I'd time, in call for turn back additional remarks. With queue to our this to your over at

Brian Mitts

Yes.

back over think I everyone's here. time, I we're good be you. in appreciate Thank and we'll touch.

Operator

call. today's conclude participation. will That appreciate We your