NexPoint Real Estate Finance, Inc.

Hello, everyone. Thank you for joining us, and welcome to the NextPoint Real Estate Finance Quarter 2, 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Kristen Griffith, Investor Relations. Kristen, please go ahead.

Thank you. Good day, everyone, and welcome to NextPoint Real Estate Finance conference call to review the company results for the second quarter ended June 30th, 2026. On the call today are Paul Richards, Executive Vice President and Chief Financial Officer, and Matt McGraner, Executive Vice President and Chief Investment Officer. As a reminder, This call is being webcast through the company's website at nrep.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 Litigation Reform Act of 1995 that are based on the management's current expectations, assumptions, and beliefs. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's annual report on Form 10-K and the company's other filings with the SEC for a more complete discussion of risk 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, as required by law, NREF 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 Paul Richards. Please go ahead, Paul.

Thanks, Kristen, and good morning, everyone. I'll walk through our quarterly results, cover the balance sheet, and provide guidance for Q3 before turning it over to Matt for a deeper dive on the portfolio and macro lending environment. For the second quarter, we reported a net income of 29 cents per diluted share compared to 54 cents for Q2 2025. The earnings available for distribution was 46 cents per diluted share in Q2 compared to 43 cents per diluted share in the same period of 2025. Cash available for distribution was 58 cents per diluted share in Q2 compared to 46 cents per diluted share in the same period of 2025. We paid a regular dividend of $0.50 per share in the second quarter, which was 1.16 times covered by cash available for distribution. On July 27, 2026, the board declared a dividend of $0.50 per share payable for the third quarter of 2026. Book value per diluted share decreased by 1.9% from Q1 2026 to $18.60 per diluted share, primarily driven by a small unrealized loss on our stock portfolio, turning to new investments during the quarter. We have continued to originate new investments across our target asset classes, funded through a combination of retained operating cash flow, proceeds from our Series C preferred offering, and additional capacity under our secure financing facilities, reflecting our continued ability to identify and execute attractive opportunities that drive returns for our shareholders. We funded a $20.2 million preferred equity investment in a multifamily property that pays a monthly coupon of 14%, a $42.6 million mezzanine loan secured by Life Science Property at a 14% coupon, and funded an additional $31.9 million on other existing commitments in the quarter. I want to highlight what remains in our view the most important development year to date. We closed a $375 million drawable term loan facility with Mizuho Capital Markets, which we used to repay our $180 million, 5.75% senior unsecured notes after May 1st maturity. As of today, there are $362.2 million outstanding on the facility. Concurrently, we entered into a TRS or total return swap with Mizuho, which reduces the effect of our net interest costs to SOPR plus 245. The transaction removed the largest near-term liability overhang on our balance sheet and replaced fixed-rate unsecured debt with a floating-rate asset-based financing structure that better aligns with our preference to have additional balance sheet flexibility in terms of pre-payment ability and provides a back-leveraged solution to enhance returns on new investments. Combined with the $22.6 million we raised in our Series C preferred, we head into the back half of 2026 with what we believe to be one of the cleanest, most flexible capital structures in the commercial mortgage rate sector. Moving to the portfolio and balance sheet. Our portfolio is comprised of 85 investments with a total outstanding balance of $1.1 billion. Our investments are allocated across sectors are as follows. 39.4% life sciences, 37.6% multifamily, 15.1% single-family rental, 4.2% storage, 2.1% industrial, and 1.6% marina. Our fixed income portfolio is allocated across investments as follows. 27.8% preferred equity investments, 24.9% MES loans, 17.5% CMBSB pieces, 17.3% revolving credit facilities, 6.2% senior loans, 4% IO strips, and 2.2% promissory notes. The assets collateralizing our investments are allocated geographically as follows. 31.2% Massachusetts, 16% Texas, 6% Florida, 4.6% Georgia, 5.2% California, 4.7% Maryland, with the remainder across states with less than 4% exposure, reflecting our heavy preference to Sunbelt markets, with Massachusetts and California exposure heavily weighted towards life science. The collateral in our portfolio is 80.3% stabilized with a 63.4% loan to value and a weighted average DSCR of 1.39 times. We have $836.6 million of debt outstanding with a weighted average cost of 6.3% that has a weighted average maturity of 2.6 years. Our secure debt is collateralized by $1.4 billion of collateral with a weighted average maturity of 2.7 years and a debt to equity ratio of 0.88 times. Moving to guidance for the third quarter. Earnings available for distribution, $0.43 per diluted share at the midpoint with a range of $0.38 on the low end and $0.48 on the high end. Cash available for distribution, $0.55 per diluted share at the midpoint with a range of $0.50 on the low end and $0.60 on the high end. And with that, I'd like to turn it over to Matt for a detailed discussion of the portfolio and the current market environment. Matt.

Thanks, Paul. Another great quarter of consistent, solid execution, so appreciate it. The underlying recurring earnings power of the portfolio is continuing to tick up while we operate at the top of the commercial mortgage rate peer group on credit. Now on to our verticals. As Paul noted, residential remains our largest exposure between SFR and multifamily. We believe residential fundamentals are turning and remain constructive. Blended lease tradeouts across our owned residential assets progressed from negative 1.7% in April to negative 1.2% in May to negative 50 basis points in June and turned positive 30 basis points in July. That's the first positive blended print since early 2025. And new lease tradeouts remain the drag, but renewals have been holding up well. The 2021 and 2022 vintage loans are where the compression risk still sits. And as you know, we did very little originations during this period. Net deliveries peaked at approximately 695,000 units in the trailing 12 months ending Q4 2024 against roughly 282,000 units of average annual delivery since 2001. CoStar forecasts 2026 deliveries down approximately 49% from 2025 with another 20% decline in 2027 and starts are running approximately 70% below the 2022 peak. Supply is what broke pricing power in 2024 and 2025, and supply is what is going to return it. The structural backdrop has not changed. The cost to own in our markets remains roughly three times the cost to rent, and there's no reasonable mortgage rate path that closes that gap quickly. Now on to life science. Elwife is now tracking to be 85% leased up from 71% leased, anchored by Lila Sciences on a long-term lease for 245,000 square feet with expansion options. while indeed does keep expanding their plan and programming at the asset, obviously a great sign and accretive to our collateral. The demand funnel for our life science collateral has widened materially because of AI and not in spite of it. AI companies need the same purpose-built infrastructure traditional lab tenants need, that is power density, cooling capacity, structural floor loads, ventilation, vibration, and vibration tolerances. They cannot retrofit older converted assets at any rent. AYF has the bones. It's in the right submarket adjacent to MIT and the broader Cambridge cluster. Our exposure here is not a generic bet on the sector. It's a concentrated bet on first-to-fill infrastructure-grade assets in elite educational districts that are now also AI corridors. The credit profile is improving as the tenant universe widens. On to self-storage. Our NSP portfolio continues to outperform with occupancy in the low 90s and with rent growth and NOI materially ahead of the sector. On the upcoming pipeline, in April, we walked through 190 million plus of in-ref investment across 11 active deals and 225 million plus of structured product credit opportunities. As Paul mentioned, we successfully closed in excess of 70 million of this pipeline during the quarter. The pipeline's blended return profile remains well in excess of our cost of capital on the TRS facility, and even with the move higher in the forward curve, pricing power remains with disciplined solution capital providers. To close and summarize, earnings are ahead of guidance we gave in April, credit continues to hold well, The April pipeline converted into funded assets at double-digit coupons, a residential supply trough that is now visible in operating data rather than forecast, life science collateral that keeps de-risking, storage is bottoming, and a balance sheet purpose-built for exactly the rate environment we are in. As always, I want to thank the team for their hard work, and now we'd like to turn the call over to take your questions.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Crispin Love with Piper Sandler. Your line is now open. Please go ahead.

could trend directionally, especially with the AI theme, but also kind of positive themes across multi as well as you look at the next several quarters and years.

Yeah, that's a great question, Crispin, and one that we talk about often. I think in a normalized environment, we'd probably like to keep life sciences to be about a third, or I'd say life science and advanced manufacturing, you know, kind of biomanufacturing, those type of assets. in around a third of the pie chart. Obviously, in the recent kind of 12 to 18 months, the AOI is a one-off, pretty special opportunity that we were able to take advantage of. But going forward, I think we'd like to have it be a third and have residential kind of be 50%. One thing I would say about the exposure on life sciences We are expecting probably to get some of that capital back. The sponsor on Alewife is out running a refi process to recap Alewife whole campus. And we would get a substantial amount of capital back to then go redeploy. And our goal would be to probably redeploy most of those proceeds into residential assets.

Perfect. That makes sense. I know there's definitely a unique situation there. And then just on the dividend and the outlook, CAD has been ahead of the dividend for some time, but earnings available for distribution has been below for several quarters. So curious if you have a line of sight where you think, when you think both EAD and CAD could Are you comfortable with the current level given the CAD coverage?

Another great question, Kristen. We're definitely comfortable with the CAD coverage, which is our gold standard when it comes to distributions and when we discuss with the board those opportunities for quarterly distributions. Over time, we do think both EAD and CAD will converge. And what you've seen, too, is the increase in CAD over the past few quarters, as we discussed in prior calls, due to the redeployment accretively into investments via using proceeds from our Series B and now Series C preferred raising. So I hope that answers your question.

Perfect. Thank you. I appreciate you taking the question.

Thanks, Chris.

Your next question comes from the line of Jade Romani with KBW. Your line is now open. Please go ahead.

Thank you very much. What are you seeing in terms of underlying credit performance in the multifamily book? Maybe you could touch on both the preferred equity exposure and also the BP exposure.

Yeah. Thanks, Jay. Good morning. I think as it relates to our multifamily exposure, you know, I think we benefited from largely investing and focusing on assets that were agency quality. So Fannie and Freddie underwritten assets that were first screened, you know, by a JLL, Walker, etc., and then, you know, underwritten by our team. So we did very little of sort of the non-bank, you know, floating rate bridge loans that, you know, I think some of our peers have done and gotten in trouble with. Most of our collateral, you know, on the PREF book does sit behind agency loans, you know, to the extent that we've had to take over, you know, projects like in Alexandria or Alexander at the district, for example, I think now about a year ago. That deal is now leased up and healthy. But the underlying kind of, I guess, credit profile of our assets, both on the BPs and preferred qualitatively, I think, are of a higher standard than our peer group. Number one. Number two, most of that exposure was originated in, you know, kind of 2018 to 2020. And then, you know, some COVID era lean-ins on the B pieces where we got some outstanding collateral and terms and got paid for it. Didn't do much in 22, 23. And now we're, you know, kind of back in the market. The higher for longer rate environment, I think, helps us a little bit on the multifamily because you can see some cracks forming for folks that need to find cash in collateral to refi on the extension test. But so far, so good. On the BP's collateral, I don't think we took any provisions or saw any credit Thank you for joining us. on the transaction market going forward. I think in Q4, as new leasing, we believe new leasing, as I said in my prepared comments, will inflect higher in Q4. That should attract capital providers, both on the debt and the equity side, and we're starting to see that in the transaction market. So long-winded answer, but I think that we like our credit exposure and certainly like the setup for supply and demand in the next two, three, four quarters.

Thanks very much. Alewife seems like a great asset, so definitely produced very high returns. But outside of that exposure, life science still remains quite challenged. What are you seeing in the rest of the life science exposure?

Yeah, our life is doing extremely well. And unfortunately, unfortunately, I think we'll probably get that capital back sometime in the fourth quarter. And it'll be a great result. The broader exposure, you know, and on our life science book continues to sequentially get better. TORs and our TIMs, the attendance in the market list, sequentially over Q1 into Q2, we're up 30%. And we're already seeing in July, even with the holiday soaking up the first two weeks, that the third quarter is tracking to be ahead in terms of TOR activity. So we like our kind of broader exposure beyond TORs. and Ale Weiss and some of our investors and analysts toward those assets and I think would agree they're first to fill. Great, well located. I'd say that beyond our exposure, the other important point to make is, again, when we originated it, most of it was done Thanks. Thanks, Jed.

There are no further questions at this time. I will now turn the call back to management team for closing remarks.

All right. Well, thanks very much for everyone's participation and interest today. Thanks to the teams here at NextPoint. And I look forward to speaking after the Q3 call. So have a good day. Thank you. Bye-bye.

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