NexPoint Residential Trust, Inc. Reports Fourth Quarter And Full Year 2017 Results; 2018 Full Year Initial Guidance

DALLAS, Feb. 13, 2018 /PRNewswire/ -- NexPoint Residential Trust, Inc. (NYSE:NXRT) reported financial results for the fourth quarter and year ended December 31, 2017.

Highlights

• NXRT reported Net Income, FFO¹, Core FFO¹ and AFFO¹ of $53.4M, $25.1M, $30.4M and $35.1M, respectively, attributable to common stockholders for the year ended December 31, 2017.
• For the year ended December 31, 2017, 2016-2017 Same Store properties average effective rent, total revenue and NOI¹ increased 4.4%, 7.0% and 8.6%, respectively, over the prior year period.
• The weighted average effective monthly rent per unit across all 33 properties held as of December 31, 2017 (the "Portfolio"), consisting of 11,775 units, was $948, while physical occupancy was 93.8%.
• NXRT paid a fourth quarter dividend of $0.25 per share of common stock on December 29, 2017; this cash dividend represented a $0.03 per share, or 13.6% increase, over the prior quarter's dividend.
• During the fourth quarter, NXRT acquired Atera Apartments, a 380-unit property in Dallas, Texas for $59.2 million.
• During the fourth quarter, NXRT used proceeds from the sale of The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls (the "NAVA Portfolio") to pay down approximately $46.0 million on the bridge facility with KeyBank National Association (the "2017 Bridge Facility").
• During 2017, for the properties in our Portfolio, NXRT completed 1,408 full and partial interior upgrades and leased 1,246 upgraded units, achieving $89 average monthly rent premiums and a 22.0% ROI. Since inception, for the properties in our Portfolio, we have completed 4,374 full and partial upgrades and achieved a $90 average monthly rental increase per unit, equating to a 21.0% ROI on all units leased as of December 31, 2017.
• During 2017, NXRT repurchased 104,361 shares of its common stock at a total cost of approximately $2,435,000, or $23.33 per share. As of December 31, 2017, NXRT had repurchased a total of 354,517 shares of its common stock at a total cost of approximately $7,022,000, or $19.81 per share.
• Our seven interest rate swap agreements have effectively fixed the interest rate on $650.0 million, or approximately 92%, of our $703.1 million of floating rate mortgage debt outstanding as of December 31, 2017. As of December 31, 2017, the adjusted weighted average interest rate of our total indebtedness was 3.24%.

"2017 symbolized a year of transformation, achievement, and strategic positioning to further bolster the future growth and development of NXRT. We worked diligently to fortify the Company's balance sheet – favorably refinancing over $500 million of mortgage debt and adding $250 million of floating rate hedge positions, reducing our floating rate exposure to <10% of total mortgage debt. We continued to execute our internal growth strategies; harvesting gains and recycling capital into well-located assets in our core markets of Dallas, Houston and Atlanta; distributing $19.3 million in dividends; buying back over 100,000 shares at discounts to our Net Asset Value estimate; and generating 20%+ ROIs on unit upgrades," stated NXRT Chairman and President, Jim Dondero. "We are also pleased to report superior same store performance for Q4 and full year 2017. Moving forward in 2018, we maintain a core focus on creating value – for our residents, for our communities, and for our shareholders."

Full Year 2017 Financial Results

• Total revenues were $144.2 million for the full year 2017, compared to $132.8 million for the full year 2016.
• Net income for the full year 2017 totaled $56.4 million, or earnings of $2.49 per diluted share, which included $78.4 million of gain on sales of real estate and $48.8 million of depreciation and amortization expense. This compared to net income of $25.9 million, or $1.03 per diluted share, for the full year 2016, which included $25.9 million of gain on sales of real estate and $35.6 million of depreciation and amortization expense.
• The change in our net income between the periods primarily relates to increases in gain on sales of real estate and same store operating results, and was partially offset by increases in depreciation and amortization expense, interest expense and loss on extinguishment of debt and modification costs. The change in our net income between the periods was also due to our acquisition and disposition activity in 2016 and 2017 and the timing of the transactions.
• For the full year 2017, NOI¹ was $76.6 million, compared to $69.7 million for the full year 2016.
• For the full year 2017, Same Store NOI¹ increased 8.6% to $55.0 million, compared to $50.7 million for the full year 2016.
• For the full year 2017, FFO¹ totaled $25.1 million, or $1.17 per diluted share, compared to $31.0 million, or $1.46 per diluted share, for the full year 2016.
• For the full year 2017, Core FFO¹ totaled $30.4 million, or $1.42 per diluted share, compared to $31.3 million, or $1.47 per diluted share, for the full year 2016.
• For the full year 2017, AFFO¹ totaled $35.1 million, or $1.64 per diluted share, compared to $33.5 million, or $1.57 per diluted share, for the full year 2016.

Fourth Quarter 2017 Financial Results

• Total revenues were $34.9 million for the fourth quarter of 2017, compared to $32.6 million for the fourth quarter of 2016.
• Net loss for the fourth quarter of 2017 totaled $(4.3) million, or a loss of $(0.21) per share, which included depreciation and amortization expense of $12.9 million. This compared to net income of $0.2 million, or $0.01 per diluted share, for the fourth quarter of 2016, which included depreciation and amortization expense of $9.3 million.
• The change in our net income (loss) between the periods primarily relates to increases in depreciation and amortization expense and interest expense.
• For the fourth quarter of 2017, NOI¹ was $19.3 million, compared to $17.5 million for the fourth quarter of 2016.
• For the fourth quarter of 2017, Same Store NOI¹ increased 10.5% to $14.9 million, compared to $13.4 million for the fourth quarter of 2016.
• For the fourth quarter of 2017, FFO¹ totaled $8.5 million, or $0.40 per diluted share, compared to $8.3 million, or $0.39 per diluted share, for the fourth quarter of 2016.
• For the fourth quarter of 2017, Core FFO¹ totaled $8.4 million, or $0.39 per diluted share, compared to $7.3 million, or $0.34 per diluted share, for the fourth quarter of 2016.
• For the fourth quarter of 2017, AFFO¹ totaled $9.5 million, or $0.44 per diluted share, compared to $8.1 million, or $0.38 per diluted share, for the fourth quarter of 2016.

2016-2017 Same Store Results of Operations for the Years Ended December 31, 2017 and 2016

There are 26 properties encompassing 8,871 units of apartment space in our same store pool for the years ended December 31, 2017 and 2016 (our "2016-2017 Same Store" properties). As of December 31, 2017, our 2016-2017 Same Store properties were approximately 94.0% leased with a weighted average monthly effective rent per occupied apartment unit of $901. As of December 31, 2016, our 2016-2017 Same Store properties were approximately 93.6% leased with a weighted average monthly effective rent per occupied apartment unit of $863.

The following table reflects the revenues, property operating expenses and NOI for the years ended December 31, 2017 and 2016 for our 2016-2017 Same Store and Non-Same Store properties (dollars in thousands):

2015-2017 Same Store Results of Operations for the Years Ended December 31, 2017, 2016 and 2015

There are 17 properties encompassing 5,546 units of apartment space in our same store pool for the years ended December 31, 2017, 2016 and 2015 (our "2015-2017 Same Store" properties). As of December 31, 2017, our 2015-2017 Same Store properties were approximately 94.4% leased with a weighted average monthly effective rent per occupied apartment unit of $923. As of December 31, 2016, our 2015-2017 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $885. As of December 31, 2015, our 2015-2017 Same Store properties were approximately 94.9% leased with a weighted average monthly effective rent per occupied apartment unit of $827.

The following table reflects the revenues, property operating expenses and NOI for the years ended December 31, 2017, 2016 and 2015 for our 2015-2017 Same Store and Non-Same Store properties (dollars in thousands):

Q4 Same Store Results of Operations for the Three Months Ended December 31, 2017 and 2016

There are 27 properties encompassing 9,088 units of apartment space in our same store pool for the three months ended December 31, 2017 and 2016 (our "Q4 Same Store" properties). As of December 31, 2017, our Q4 Same Store properties were approximately 94.0% leased with a weighted average monthly effective rent per occupied apartment unit of $908. As of December 31, 2016, our Q4 Same Store properties were approximately 93.6% leased with a weighted average monthly effective rent per occupied apartment unit of $869.

The following table reflects the revenues, property operating expenses and NOI for the three months ended December 31, 2017 and 2016 for our Q4 Same Store and Non-Same Store properties (dollars in thousands):

Acquisition of Property

On October 25, 2017, NXRT acquired Atera Apartments, a 380-unit property in Dallas, TX for $59.2 million. NXRT acquired Atera Apartments using approximately $17.0 million of cash on hand and $14.1 million of proceeds from the NAVA Portfolio, which related to the sale of The Crossings at Holcomb Bridge, in the opening leg of a 1031 Exchange. NXRT completed the reverse portion of the 1031 Exchange of Atera Apartments with the sale of Timberglen on January 31, 2018 (see "Subsequent Events" below). This is NXRT's eleventh acquisition in Dallas, expanding its footprint in the market to 3,556 units and bringing its total portfolio to 33 properties consisting of 11,775 units in 10 markets as of December 31, 2017.

For the full year 2017, NXRT completed three acquisitions totaling 1,348 units for a combined gross purchase price of $197.2 million.

Disposition of Property

As previously reported, NXRT completed the disposition of nine properties during the year, totaling 2,538 units, for net cash proceeds of $224.4 million, before debt repayments. The combined returns totaled an IRR of approximately 46% and a 2.73x multiple on invested capital¹.

Value-Add Programs

For the properties in our Portfolio as of December 31, 2017, we completed full and partial renovations on 1,408 units in 2017 at an average cost of $4,897 per renovated unit. Since inception, for the properties in our Portfolio, we have completed full and partial renovations on 4,374 units at an average cost of $4,962 per renovated unit that has been leased as of December 31, 2017. We have achieved average rent growth of 10.8%, or a $90 average monthly rental increase per unit, on all units renovated and leased as of December 31, 2017, resulting in a return on invested capital for interior renovations of 21.0%.

The following table sets forth a summary of our capital expenditures related to our value-add program for the years ended December 31, 2017, 2016 and 2015 (in thousands):

First Quarter 2018 Dividend

On February 12, 2018, NXRT's board of directors declared a quarterly dividend of $0.25 per share of common stock. The dividend will be paid on March 30, 2018 to stockholders of record on March 20, 2018.

Share Repurchase Program

During the year ended December 31, 2017, NXRT repurchased 104,361 shares of its common stock at a total cost of approximately $2,435,000, or $23.33 per share. As of December 31, 2017, NXRT had repurchased a total of 354,517 shares of its common stock at a total cost of approximately $7,022,000, or $19.81 per share. As of December 31, 2017, NXRT had 21,049,565 shares of its common stock issued and outstanding.

Subsequent Events

Disposition of Timberglen

On January 31, 2018, NXRT sold Timberglen, a 304-unit property in Dallas, Texas, for $30.0 million (numbers in the below table are in thousands).

Renewal of Advisory Agreement

On February 12, 2018, the Board, including the independent directors, unanimously approved the renewal of the Advisory Agreement with the Adviser for a one-year term that expires on March 16, 2019.

Share Repurchase Program

Subsequent to December 31, 2017, NXRT repurchased 118,927 shares of its common stock at a total cost of approximately $3,000,000, or $25.23 per share. As of February 12, 2017, NXRT had repurchased a total of 473,444 shares of its common stock at a total cost of approximately $10,022,000, or $21.17 per share.

2018 Full Year Guidance Summary

NXRT is providing initial 2018 guidance ranges¹ for Earnings (loss) per diluted share, Core FFO per diluted share² Same Store Rental Income, Same Store Total Revenue, Same Store Total Expenses, and Same Store NOI² as follows:

Additional information on fourth quarter and full year 2017 results and 2018 financial and earnings guidance is included in supplemental data that can be found in the Investor Relations section of the Company's website at www.nexpointliving.com.

Supplemental Information

Supplemental information to this press release can be found in the Investor Relations section of the Company's website at www.nexpointliving.com.

Fourth Quarter Earnings Conference Call

NXRT will host a call on Tuesday, February 13, 2018 at 11:00 a.m. ET to discuss its fourth quarter and full year 2017 financial results and present 2018 earnings guidance. The conference call can be accessed live over the phone by dialing (888) 724-9513 or, for international callers, (719) 325-4857, and using passcode Conference ID: 1189856. A live audio webcast of the call will be available online at the Company's website, http://www.nexpointliving.com (under "Investor Relations"). An online replay will be available shortly after the call on the Company's website and continue to be available for 60 days.

A replay of the conference call will also be available through Tuesday, February 20, 2018, by dialing (888) 203-1112 or, for international callers, (719) 457-0820 and entering passcode 1189856.

About NXRT

NexPoint Residential Trust is a publicly traded REIT, with its shares listed on the New York Stock Exchange under the symbol "NXRT," primarily focused on acquiring, owning and operating well-located middle-income multifamily properties with "value-add" potential in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. NXRT is externally advised by NexPoint Real Estate Advisors, L.P., an affiliate of Highland Capital Management, L.P., a leading global alternative asset manager and an SEC-registered investment adviser. More information about NXRT is available at http://www.nexpointliving.com.

Cautionary Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions and beliefs. Forward-looking statements can often be identified by words such as "expect," "anticipate," "estimate," "may," "should," "intend" and similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding NXRT's guidance for financial results for the full year 2018 or expected dispositions or acquisitions. They are not guarantees of future results and are subject to risks, uncertainties, assumptions and anticipated sales of properties that could cause actual results to differ materially from those expressed in any forward-looking statement. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the Company's most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission (the "SEC") for a more complete discussion of the risks and other factors that could affect any forward-looking statements. Except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statements.

Contact:
Marilynn Meek
Financial Relations Board
212-827-3773

Definitions and Reconciliations

This press release includes analysis of funds from operations, or FFO, core funds from operations, or Core FFO, adjusted funds from operations, or AFFO, and net operating income, or NOI, all of which are non-GAAP financial measures of performance. These non-GAAP measures should be used as a supplement to, and not a substitute for, net income (loss) computed in accordance with GAAP. For a more complete discussion of FFO, Core FFO, AFFO, and NOI, see our most recent Annual Report on Form 10-K and our other filings with the SEC.

This press release also includes an analysis of our 2016-2017, 2015-2017 and Q4 Same Store properties, which are defined as those that are stabilized and comparable for both the current and the prior reporting periods. Same Store analysis for the full years 2016-2017 includes 26 properties totaling 8,871 units, or approximately 75% of our Portfolio; the full years 2015-2017 includes 17 properties totaling 5,546 units, or approximately 47% of our Portfolio; while the fourth quarters 2016-2017 includes 27 properties totaling 9,088 units, or approximately 77% of our Portfolio.

Net Operating Income

NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties to other comparable properties, to determine trends in earnings and to compute the fair value of our properties as NOI is not affected by (1) the cost of funds, (2) acquisition costs, (3) advisory and administrative fees, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (5) corporate general and administrative expenses, (6) other gains and losses that are specific to us, (7) casualty-related expenses/(recoveries), and (8) property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on behalf of NXRT at the property for expenses such as legal, professional and franchise tax fees.

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our 2016-2017 Same Store NOI for the years ended December 31, 2017 and 2016 to net income, the most directly comparable GAAP financial measure (in thousands):

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our 2015-2017 Same Store NOI for the years ended December 31, 2017, 2016 and 2015 to net income (loss), the most directly comparable GAAP financial measure (in thousands):