NexPoint Residential Trust, Inc.

Good day and welcome to the Next Point Residential Trust Incorporated 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 Next Point Residential Trust's conference call to review the company's results for the third quarter ended September 30th. On the call today are Brian Mitts, Executive Vice President and Chief Financial Officer and Matt McGrainer, 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, 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 business and industry in general, the COVID-19 pandemic and its effects on the company, NXRT's 2020 adjusted NOI estimate and the related assumptions, NXRT's strategy for the fourth quarter and full year 2020, NXRT's net asset value and its related components and assumptions, planned value-add programs, including projected average rent, rent change and return on investment, and expected acquisitions and dispositions. They are not guarantees of future results, and forward-looking statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. including the ultimate geographic spread duration and severity of the COVID-19 pandemic and the effectiveness of actions taken or actions that may be taken by governmental authorities to contain the outbreak or treat its impact, as well as those described in greater detail in our filings with the Securities and Exchange Commission, particularly those specifically described in the company's annual report on Form 10-K and quarterly reports on Form 10-Q. 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 of the SEC for a more complete discussion of risks and other factors that could affect any forward-looking statements. The statements made during this conference call speak only as of today's date and accept as required by law. NXRP 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, net operating income or NOI, and net debt, all of which are non-GAAP financial measures of performance or total debt. These non-GAAP measures should be used as a supplement to and not a substitute for net income loss and total debt computed in accordance with GAAP. For a more complete discussion of FFO, core FFO, AFFO, NOI, and net debt, see the company's earnings release that was filed earlier today. I would now like to turn the call over to Brian Mix. Please go ahead, Brian.

Thank you, Jackie, and welcome to everyone joining us for the NXRT 2020 third quarter conference call. I'm joined by Matt McGrainer. I'll get us started with highlights from the third quarter year to date. Net income for the quarter was $29.6 million. or $1.19 per diluted share, as compared to $119.1 million, or $4.84 per diluted share, for the third quarter of 2019. Same story, an OI increase was $800,000, or an increase of 4.5% as compared to Q3 2019. In year-to-date 2020, Same-store NOI was 51.5 million as compared to 49.2 million for the same period last year, or a 4.7 percent year-over-year increase. Reported Q3 2020 core FFO of 13.3 million, or 53 cents per diluted share, which is an increase of 12.8 percent as compared to Q3 2019. Total revenue for Q3 was 51 million. Total NOI was 28.8 million. which was an increase of 9% and 10.3% year-over-year, respectively. NOI margins of 57% for the nine months ended 9-30-20 was an improvement over the same period in 2019 of 56.4%. We continue to execute our value-add business plan by completing 425 full and partial renovations during the quarter, with 276 upgraded units leased, achieving an average monthly rent premium of $141.00 and a 22.5% return on investment during the quarter. Inception to date in the portfolio as of September 30th, we've completed 7,584 full and partial upgrades, achieving an average monthly rent premium of $97 and a return on investment of 24.4%. During the nine months ended September, we issued 800,000 shares for approximately 38.1 million gross proceeds on our ATM, Through our equity repurchase program for the year, or sorry, inception to date, we've repurchased approximately 2.4 million shares of stock through the third quarter of 2020 at an average repurchase price of $25.70 per share. For our NAV per share, despite an unprecedented disruption in the economy as a result of COVID, cap rates appear to be stable across most of our markets. This is highlighted by the sale of the Eagle Crest property that we'll discuss for a sub-5% cap rate. Based on this additional data, we are updating our NAV based on our revised outlook for NOI and cap rates. And Matt will discuss in more detail during his remarks our view of cap rates and how that informed our ranges that we used in determining NAV. Based on that, we are revising our NAV per share range upward as follows. on the low end, $38.19, on the high end, $46.22, for a midpoint of $42.20. And that compares to a midpoint of $38.34 prior quarter, or a 10% quarter-over-quarter increase, and a midpoint of $37.51 at September 30, 2019, or a 12.9% year-over-year increase. For our dividend, we paid a third-quarter dividend of 31.25 cents per share on September 30th to shareholders' record as of September 15th. Yesterday, the Board declared a dividend per share of 34 cents payable on December 31st to shareholders' record on December 15th. This represents a 9.2% increase in the dividend from the prior quarter and a 65.7% total increase in our dividend since inception. Year-to-date, our dividend is 1.71 times covered by Core FFO which equates to a payout ratio on core FFO of 58%. Overall, we feel we have come through COVID very well. We're well positioned for the future. Rent collections remain strong in the third quarter. Class B rent collections continue to outpace Class A and C collections in general, and NXRT is outpacing the Class B segment overall. The biggest detractor to higher collections at this point is our inability to fully process evictions on the same basis we had pre-COVID. The moratorium on evictions under the CARES Act ended July 7th. However, we're still under restrictions from fully processing evictions based on the President's Executive Order barring evictions through December 31st. The lack of second-round stimulus seemed to have had a material impact on our collection's revenue or occupancy. We continue to see strong demand for our product in most markets, as evidenced by our new lease and renewal rent growth. which Matt will cover in more detail in his remarks. Demand for renovated units has remained strong. One reason that we continue to see is the trade-down effect, where tenants in a Class A product decide to trade down to one of our renovated, more affordable units, saving money while sacrificing little in the way of quality or amenities. This is an underappreciated part of the B value-add story and explains the outperformance of the B class. Net-net, this has resulted in strong same-store NOI growth, new lease rent growth, renewal growth, and occupancy compared to our public company peers focused on Class A markets, sorry, Class A assets and coastal markets. We feel we're well positioned with our focus on the major Sunbelt markets. Growth of core FFO, 19% year-over-year on a per-share basis through COVID-19. shows the resiliency of our business, durability of the Class B product and residence, and the quality of the performance by BH and our asset and revenue management teams at NextPoint. On the capital allocation front, we were able to aggressively buy back stock in March and April during the height of the downturn of the market and COVID prices that were in the mid-20s and have now been able to reissue stock in the mid-40s, creating permanent value for shareholders. Sale of Eagle Crest, which is one of the first properties we purchased, highlights the value creation power of our strategy. In just over six years, we've created tremendous value. It's shown from the 45.14% levered IRR and 5.96 times multiple invested capital. Yesterday, as mentioned, the board approved a approximately 9% increase in the dividend, which is in line with our strategy of maintaining a 65% payout Core FFO, which grew almost 19% year over year. We think that this projects strength and confidence in the company. Additionally, our only debt, near-term debt maturities are credit facility, which was set to mature in January 21. We've extended that for a year to January of 2022. So let me go through some of the results for Q3 in detail. Total revenues are $51 million versus $46.8 million in Q3 of 2019 for a 9% increase. Net operating income was $28.8 million for the quarter versus $26.1 million the same quarter of 2019 for a 10.3% increase. Core FFO is $13.3 million or $0.53 per diluted share as compared to $11.5 million or $0.47 per diluted share for an increase of 12.8%. On the same store, pool of 28 properties and 9,926 units for the quarter ended 2020, the Q3 quarter. Same store occupancy was 95.1% as compared to 93.4% for the prior quarter, or an increase of 170 basis points. Same store revenue increased to 34.1 million versus 33 million in the prior year for an increase of 3.3%. And same-store NOI was, for the quarter, $19.4 million versus $18.6 million last year for a same-store increase of 4.5%. For year-to-date, our revenues through September 30, 2020, were $154.3 million as compared to $131.4 million in the prior quarter, a 17.4% increase. Net income was $88 million versus $74.3 million last year for an 18.6% increase. Core FFO was $41.3 million or $1.64 per diluted share versus $33.5 million or $1.38 per diluted share for an increase of 18.8% year-over-year. Same store occupancy in our pool for the year of 24 properties and 9,074 units. was 94.9% versus 93.3% or 160 basis point increase. And same-store NOI was 51.5 million versus 49.2 million for a 4.7% increase. So with that, let me turn it over to Matt to discuss leasing occupancy collections and markets and some other comments.