NexPoint Real Estate Finance, Inc.

Good day and welcome to the NextPoint Real Estate Finance third quarter 2020 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jackie Graham. Please go ahead, ma'am.

Thank you. Good day, everyone, and welcome to NextPoint Real Estate Finance's conference call to review the company's results for the third quarter ended September 30th. On the call today are Brian Mith, Executive Vice President and Chief Financial Officer, and Matt McGraner, Executive Vice President and Chief Investment Officer. Matt Goetz, Senior Vice President, Investments and Asset Management, and Paul Richards, Vice President, Originations and Investments. As a reminder, this call is being webcast through the company's website at www.nextpointfinance.com. Before we begin, I would like to remind everyone that this conference call 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, intend, and similar expressions and variations or negatives of those words. These forward-looking statements include, but are not limited to, statements regarding the company's business and industry in general, investment activity, including unlevered IRRs, LTDs, and yields, pro forma capitalization and guidance for financial results for the fourth quarter of 2020, including the comfort Company's estimated core earnings, dividend per common share, and dividend coverage ratio for the fourth quarter of 2020. They are not guarantees of future results and are subject to risks, uncertainties, assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's registration statement on Form S-11 and the company's other filings to the SEC for a more complete discussion of risks and other factors that could affect the forward-looking statements. Except as required by law, NRF does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes an analysis of core earnings, which is a non-GAAP financial measure. This non-GAAP measure 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 core earnings, see the company's presentation that was filed earlier today. I would now like to turn the call over to Brian. Go ahead.

Thank you, Jackie, and welcome to everyone joining us for the third quarter 2020 NextPoint Real Estate Finance earnings call. Today, we'll cover highlights for the third quarter of 2020 and year-to-date. I'll give some quick highlights of our financial performance, capitalization, recent activity and guidance, and then turn the call over to Matt Goetz and Paul Richards to discuss the portfolio and acquisition pipeline. We'll conclude our prepared remarks with some comments from Matt McGraner on the real estate credit markets, the strategy, and an update on the journey to capital transaction we announced on our second quarter earnings call. I'll start with the highlights in the third quarter. Overall, it was a busy quarter where we again found a way to raise capital and take advantage of opportunities in the market. On July 30th, we purchased the Freddie Mac KF81B series for $67 million. On August 6th, we closed the Freddie Mac K113B piece for $36 million on $109 million par value. And we also closed the X2A, X2B, and X3IO strips for $36 million. As of October 28, our capital stack consisted of $787 million facility on the SFR loans, a $60 million facility on the mezzanine pool, which we purchased subsequent to the third quarter, $159 million of repurchase agreements, $36.5 million of unsecured notes that we placed subsequent to the third quarter, $46 million of preferred equity, $86 million of common equity, and $265 million of redeemable non-controlling interest. Also, as of October 28th, only 15.3% of our financing is subject to mark-to-market, and our repo lines are levered at 49.7%, loan-to-value, providing plenty of cushion for mark-to-market down with movement before a margin call. Overall, we're low-levered at a 2.6 times debt-to-equity. The weighted average cost of our debt is 2.44%, with a weighted average term of 6.5 years. We also have ample liquidity with $12 million of unrestricted cash on the balance sheet as of October 28th. Subsequent to the end of the third quarter, we continue to find ways to raise capital and put it to work creatively by sourcing opportunistic investments. Thus far in the fourth quarter, we've closed the following transactions. As previously mentioned, we closed the $36.5 million, 7.5% five-year unsecured note that was priced at 98.9% of PARP. The net proceeds from that offering were used to purchase pooled mezzanine loans originated by Freddie Mac for $99 million. In conjunction with that purchase, Freddie Mac extended a credit facility at 60% loaned value for approximately $60 million. The portfolio was priced to achieve a target internal rate of return of 17.3%. Let me move to the results for the third quarter and year to date. Net income attributable to common shareholders for the third quarter was $2.9 million, or $0.52 per diluted share. Year-to-date, 2020, net income attributable to common shareholders is $1.8 million, or $0.33 per diluted share. Core earnings for the third quarter was $2.3 million, or $0.42 per diluted share. Year-to-date is $5.4 million, or $1 per diluted share. We have increased our book value from $18.33 a share to $18.48 per share. For the third quarter and year to date, we recorded a loan loss provision of a $14,000 gain in the third quarter and a $279,000 reserve for the year. As of October 28th, we had repurchased 237,000 shares approximately at an average price of $14.72 per share representing a discount to the current book value of $18.48 of 20%. We paid a dividend of 40 cents per share in the third quarter, and Monday the board declared a dividend of 40 cents per share payable on December 31st to shareholders of record as of December 15th. We are issuing core earnings guidance for the fourth quarter of 2020 as follows. On the high end, 53 cents per diluted share. On the low end, 49 cents per diluted share. for a midpoint $0.51 per diluted share. So with that, let me turn the call over to Matt Goetz and Paul Richards to discuss details of the portfolio and our acquisition pipeline.