NexPoint Real Estate Finance, Inc.

Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the NextPoint Real Estate Finance fourth quarter 2023 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Kristen Thomas, Investor Relations. Please go ahead.

Thank you. Good day, everyone, and welcome to NextCurrent Real Estate Finance Conference Call to review the company's results for the fourth quarter ended December 31, 2023. On the call today are Brian Mintz, Executive Vice President and Chief Financial Officer, Matt McGrainer, Executive Vice President and Chief Investment Officer, and Paul Richards, Vice President, Originations and Investments. As a reminder, this call is being broadcast through the company's website at nref.nextpoint.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 Legation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs. Listeners should not place a new reliance on any forward-looking statements in our encouraged review of the Cummings Annual Report on Form 10-K and the Cummings' other filings of the SEC for more complete discussion of risks and other factors that could affect the forward-looking statements. The statements made during this conference call speak only as of today's date and accept as required by law, and REF does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company's presentation that was filed earlier today. I would now like to turn the call over to Brian. Please go ahead, Brian.

Thank you, Kristen. Appreciate everyone joining us this morning. I'm going to briefly discuss our quarterly and year-to-date results, and then we'll go through some portfolio metrics. talk about the balance sheet a little bit, and then provide guidance for the next quarter. But I'll turn it over to Matt and Paul to discuss the portfolio a little more depth in the macro lending environment. So starting with our fourth quarter results, they were as follows. We reported net income 74 cents per diluted share compared to net loss of 17 cents per diluted share for the fourth quarter of 2022. The increase was largely driven by mark-to-market adjustments on our common stock investments and changes in our net assets related to our consolidated CMBS VIEs. Net interest income increased to $3.8 million for the fourth quarter of 23 from $0.3 million in the fourth quarter of 22. The increase was driven primarily by more originations of preferred equity investments with higher yields. and partially offset by higher financing costs in 2023. Earnings available for distribution was $0.44 per diluted share in the fourth quarter compared to $0.42 per share per diluted share in the same period of 2022 and $0.43 per diluted share in the third quarter of 23. Cash available for distribution was $0.51 per diluted share in the fourth quarter compared to 45 cents per diluted share in the fourth quarter of 22. The increase in earnings available for distribution and cash available for distribution for the prior year is partially driven by originations of additional private preferred investments. We paid a dividend of 50 cents per share in the fourth quarter, and the Board has declared a dividend of 50 cents per share payable for the first quarter of 24. Our dividend in the first Fourth quarter was 0.88 times covered by earnings available for distribution and 1.02 times covered by cash available for distribution. Book value per share decreased 10.4% year-over-year and increased 0.7% quarter-over-quarter to $17.93 per dividend share, with the decrease year-over-year being primarily due to the 74 cents of special dividends paid out during the year. and the increase of prior quarter being primarily driven by mark-to-market increases. During the quarter, we contributed to five preferred equity investments with $16.5 million of outstanding principal, and originated one loan with $15.3 million of outstanding principal. These six investments had a blended all-in yield of 11.5%. We had three senior loans redeemed for $29.5 million of outstanding principal, and one for investment redeemed for $3.5 million of outstanding principal. So moving to year-to-date results, they are as follows. Reported net income of $0.60 per diluted share compared to net income of $0.22 per diluted share in 2022. The increase was largely driven by changes in net assets related to our consolidated CMBS VIEs as compared to 2022. Net interest income decreased 55.5% to $16.8 million, $37.7 million in 2022. The decrease was driven primarily by prepayments on our SFAR loans and CMBS portfolio and higher financing costs in 23. Earnings available for distribution was $1.51 per diluted share in 2023, compared to $2.50 per share in 2022. Cash available for distribution was $1.67 per diluted share compared to $2.97 per diluted share in 2022. The decrease in earnings available for distribution and cash available distribution for the year was partially driven by higher weighted average share counts, increased financing costs, as well as our prepayments on SFR loans in 2023. Moving to the portfolio, our portfolio is comprised of 87 investments with a total outstanding balance of $1.6 billion. Our investments are allocated across the following sectors, 47.2% multifamily, 46% single family, 5.2% life sciences, 1.5% storage. Our portfolio is allocated across the following investment categories, 41.4% senior loans, 30.8% CMBS B pieces, 12.5% preferred equity investments, 8.5% mezzanine loans, 3.5% IOS strips, and 3.3% MBS and MSCR nodes. The assets collateralizing our investments are allocated geographically as follows. 20% Georgia, 17% Florida, 15% Texas, 7% California, 4% Maryland, 5% Minnesota, and 3% North Carolina, with 29% across states with less than 2.5% exposure. All this reflecting our heavy preference for Sunbelt investments. The collateral in our portfolio is 89.9% stabilized with a 68.8% loan-to-value and a weighted average DSCR of 1.72 times. Moving to the balance sheet, we have $1.3 billion of debt outstanding, Of this, $304 million, or 24%, is short-term debt. Our weighted average cost of debt is 4.23%, and has a weighted average maturity of 3.1 years. Our debt is collateralized by $1.7 billion of collateral, with a weighted average maturity of 5.6 years. Our debt-to-equity ratio is 2.9 times. A couple other notes. In December, we launched a continuous offering of Series B 9% preferred equity. To date, through February, we raised $30 million in gross proceeds, which will be used to make accretive investments with low to mid-double-digit yields. In Q1 of 24, we received a prepayment on an SFR senior loan of $509 million of principal, of which $466 million was used to repay the debt associated with the loan. We also received a prepayment penalty of $9 million. The net proceeds of $52 million will be redeployed into accretive investments with much higher yields than the repaid senior loan. Moving to guidance, before I turn it over to the rest of the team, earnings available for distribution for the first quarter of 24 is negative 45 cents per diluted share at the midpoint, with a range of negative 50 cents on the low end and negative 40 cents on the high end. Earnings available for distribution will be negative for the quarter as a result of the $25 million reversal of the unamortized premium associated with the previously mentioned senior SFR loan that was prepaid in January. Cash available for distributions will be $0.58 per diluted share at the midpoint with a range of $0.53 on the low end and $0.63 on the high end. So with that, let me turn it over to Paul.