NexPoint Residential Trust, Inc.

Ladies and gentlemen, please stand by. Good day and welcome to the NextPoint Residential Trust, Inc., first quarter 2020 conference call. This call is being recorded. Now, at this time, I would like to turn the conference over to Jackie Graham. Please go ahead.

Thank you. Good day, everyone, and welcome to NextPoint Residential Trust's conference call to review the company's results for the first quarter ended March 31st. On the call today are Brian Mitz, 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 www.nextpointliving.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 these words. These forward-looking statements include, but are not limited to, statements regarding NXRT's strategy for the second quarter and full year 2020, NXRT's net asset value and its related components and assumptions, plans value-add programs, including the projected average change in rent return on investment, expected acquisitions and dispositions, and the COVID-19 crisis. 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 statement. Listeners 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 the company's other filings with the SEC for a more complete discussion of risks and other factors that could affect the forward-looking statements. Except as required by law, NSRP does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also 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 SFO, ASFO and NOI, see the company's earnings release that was filed earlier today. I would now like to turn the call over to Brian Mintz. Please go ahead, Brian.

Thank you, Jackie. First, I want to welcome everyone to our earnings call here for the first quarter of 2020. Obviously, we'll discuss the highlights of Q1. I think it's a really strong quarter. However, I suspect most people are more interested in what's happened past the quarter end. So, obviously, we'll spend some time on what we've done in light of the COVID-19 issue and the impacts it's had on us and what we see going forward. J.D. So, before I start, I think throughout our commentary, we'll touch on two major themes that have kind of been the underpinning of our entire strategy. One is the benefit and resiliency of the workforce housing segment that we focus on, and the second is the benefits of our markets and specific geographies. We think both of those are a very strong J.D.: : Let me start with some highlights from Q1 other than the COVID situation. We reported a net loss for the quarter of, or sorry, net gain, net income for the quarter of $28 million or $1.08 per diluted share, which compared to a net loss of $4.4 million or negative 19 cents per diluted share in first quarter 2019. We report a same-store NOI increase to 17.8 million or a 5.6% increase compared to last quarter or first quarter 2019. We're reporting a Q1 2020 core FFO of 13.6 million or 53 cents per diluted share which is generally in line with our guidance as well as consensus, which is an increase of 15% as compared to the same period in 2019. During the quarter, we sold three properties for total gross proceeds of $86.5 million in net proceeds after debt repayment closing costs of $43.4 million. On the transaction, we realized that 34.2% IRR and a 3.98 times multiple uninvested capital. Total revenue for QON was $52.6 million and total NOI was $30 million, which was an increase of 27% and 27% year-over-year respectively, which reflects the large net acquisition activity we had in 2019. In a lot of margins for the quarter, 57%, which were in line with the same period last year at 57%. We continue to execute the value-add business plan by completing 412 full and partial renovations during the quarter, with 215 of the upgraded units being leased, achieving an average monthly rent premium of $115 and a 23.6% return on the investments. During the quarter, exception to date, across the portfolio, as of March 31st, we've completed 6,914 full and partial upgrades, achieving an average monthly rent premium of $102 and a return on investment of 24.6%. Additionally, to date, we've completed smart home technology installs in 8,880 units across 23 properties. and we've completed 195 washer-dryer installs in the first quarter of 2020, all of which is included in the 412 full and partial rehabs for the quarter. Before we saw the COVID outbreak hit, we had utilized the ATM to raise gross proceeds of $28 million at an average price of $50 per share and used the net proceeds to pay down our revolver. and then just a few short weeks later we used our repurchase program to buy approximately 1.6 million shares of stock and that's through yesterday at an average repurchase price of $27.07 per share. We ended the quarter with almost $85 million of free cash available on the balance sheet. Given the unprecedented disruption we've seen in the economy over what has Certainly in an unprecedentedly short period of time, cap rates and values have become pretty difficult to judge. Nevertheless, we're updating our NAV based on our revised outlook of cap rates and NOI. Matt will discuss this in a little more detail, what our view of cap rates are and how we arrive at those in determining our NAV, but based on all that, our revised NAV is as follows. On the low end, it's $34.57. On the high end, $42.37 for a midpoint of $38.47. That compares to midpoint last quarter of $46.31, or approximately 17% decrease quarter over quarter. And the midpoint at March 31, 2019, at $36.41. for a 5.4% increase year-over-year. For the first quarter, we paid a dividend of 31.25 cents per share on March 31 to shareholders' record as of March 16. And Monday, our Board declared a dividend per share of 31.25 cents payable on June 30 to shareholders' record on June 15. Today at our dividend is 1.68 times covered by our core FFO or payout ratio of 60% of our core FFO. Just some brief comments on our COVID-19 response before I turn it over to Matt to go into much more detail on this. Q1 started off very strong for us and I think the sector in general. But then obviously as we came into March, things changed pretty dramatically. Our markets, like I think most of the markets around the country, went into a lockdown, a shelter-in-place, safer-at-home lockdown. We saw unprecedented downward movements in equity markets, interest rates, just real estate markets, really pretty much everything in a very short period of time and saw a Record unemployment claims over a six to eight week period. So with all of this, we obviously took drastic actions, as did everyone. We've previously disclosed these in some of our press releases, but just a summary is we, through our property manager, BH, implemented new safety protocols for residents' employees. We rolled out payment plans for residents that could verify a true hardship, and Matt will give some details on those. We increased communications with our residents with a goal of making sure we were out in front of any non-payment issues to make sure we were maximizing collections or helping residents that had a true need. We immediately drew the available capacity on our credit facility just to make sure we had plenty of liquidity on the balance sheet. and then we increased our stock repurchase plan and immediately began to use that as discussed a little bit earlier. And finally, before I turn it over to Matt, we previously disclosed this in a press release on April 16th, but we estimated that the expanded unemployment benefits provided by the CARES Act provides on average about 92% of our residents' prior income if they'd been laid off. Additionally, we estimated that 19% of our residents were eligible for 100% of the stimulus provided under the CARES Act. And as Matt goes through the April and then the May details around root collections, we think that those two things have certainly helped us maintain, given all things considered, a pretty strong collection across April and May. Just a quick highlight of the Q1 results. Total Revenue is $52.6 million for the quarter versus $41.5 million Q1 of 2019, 27% increase. NOI was $30 million versus $23.6 million, also a 27% increase. Core FFO is $13.6 million or $0.53 per diluted share compared to $11 million or $0.46 per diluted share for a 15% increase. The same store pool of 25 properties and 9,521 units. Same store rental income increased 5.8%. That was driven by a 90 basis point increase in occupancy from 93.6% to 94.5% as well as a 2.9% increase in effective rents. which drove a same-store NOI increase of 5.6% from $16.9 million last year to $17.8 million for this year. As far as guidance, I think it's pretty obvious there's a lot of uncertainty in the marketplace. So we are formally withdrawing guidance, I think in line with the entire sector. and our peers. However, we've done a lot of work and analysis around our rent rolls, what we see in our markets. And so Matt's run some stress scenarios that have produced what we think are some pretty compelling, relatively speaking, strong core FFO numbers. So he's going to go into some detail on that, but we are formally withdrawing our guidance for the year. With that, let me turn it over to Matt and get into some of the details around what we've seen since the COVID outbreak.