NexPoint Residential Trust, Inc.

Good day and welcome to the NextPoint Residential Trust second quarter conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jackie Graham, Director of Investor Relations and Capital Markets. Please go ahead.

Thank you. Good day, everyone, and welcome to NextPoint Residential Trust conference call to review the company's results for the second quarter ended June 30th, 2021. On the call today are Brian Mitch, Executive Vice President and Chief Financial Officer, Matt McGrainer, Executive Vice President and Chief Investment Officer, and Bonner McDermott, Vice President, Asset Management. As a reminder, this call is being webcast through the company's website at nxrt.nexpoint.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. 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 any forward-looking statements. The statements made during this conference call speak only as of today's date and accept as required by law NXRT 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 earnings report that was filed earlier today. I would now like to turn the call over to Brian Mitts. Please go ahead, Brian.

Thank you, Jackie, and welcome to everyone joining us this morning. Appreciate your time. I'm Brian Mitz, and I'm joined by Matt McGrainer. I will kick off the call with some highlights from the quarter, then cover our numbers for the quarter and year, and wrap up with guidance, which we are revising upward. Then I'll turn it over to Matt, who will discuss our portfolio and some of the metrics driving our performance and leading us to revise our guidance upward. As Matt will discuss in his prepared remarks, the acquisition environment is challenging, I think, as everyone knows. Although we've been able to find some opportunities, we closed on the acquisition of two properties in the quarter. And Matt will provide some details on that during his remarks. But regardless of acquisitions or the environment, as we have said many times, our growth and value creation strategies are not predicated on new acquisitions. We have the ability to significantly increase value through our organic rehab program, which has continued in earnest during the second quarter and for all of 2021. So let me go to just a couple of the highlights here real quick for the second quarter and year to date. Net loss the second quarter was negative 3.4 million or negative 14 cents per diluted share as compared to a loss of 9.3 million or a loss of 38 cents per diluted share in 2020. Same story in OI increased by 107,900 or 0.6% as compared to the second quarter of 2020. We reported second quarter core FFO of $14.2 million or $0.56 per diluted share, which compares to $0.59 per diluted share in the second quarter of 2020. We continue to execute our value-add business plan this quarter by completing 336 full and partial renovations during the quarter, at least 408 renovated units, achieving an average monthly rent premium of $170 and a 20.5% return on investment during the quarter. Inception to date in the current portfolio is June 30th. We've completed 5,784 full and partial upgrades, 4,459 kitchen upgrades and washer-dryer installments, and 9,782 technology package installs, achieving an average monthly rent premium of $132, $48, and $43, respectively. and an ROI of 21.4%, 74%, and 33.8% respectively. Four to six months into June 30th, net loss was 10.3 million or a 41 cent loss per diluted share as compared to an $18.7 million gain or a 74 cent gain per diluted share in 2020. Same store NOI for the year through June increased by 86,000 or increased 0.2% as compared to 2020 over the same period. And we reported year-to-date core FFO of 28.3 million, which is $1.13 per diluted share, which compares to $1.11 per diluted share over the same period of 2020. For our NAV, based on the current cap rates and NOI, We are reporting now per share range as follows, $55.66 on the low end, $66.62 on the high end, with a midpoint of $61.14. These are based on cap rates ranging from 4% on the low end to 4.3% on the high end. For the second quarter, we paid a dividend of $34.125 per share on June 30th to shareholders' record as of June 15th. The Board has declared a dividend per share of 34.125 cents payable on September 30th to shareholders of record on September 15th. Year-to-date, our dividend is covered 1.65 times by Core FFO, which is a payout ratio of approximately 61% of Core FFO. Just a couple of big picture items before we get to the numbers and then guidance. With net migration continuing into our core Sunbelt markets and with our affordable high quality product, we believe NXRT is still well positioned to continue delivering high returns to investors. The net migration markets continues unabated. This has sent cap rates to historic lows in our markets as reflected in our revised NAV calculation. With the increases in population and jobs in these markets, competition for desirable product has increased. Since going public, we built the cost of capital advantage over many of our competitors. These markets allows us to bid aggressively for the best assets. You'll see that as Matt talks about the two properties we closed in Q2. And we believe we could find more good quality assets in our core markets. As mentioned, our growth prospects are not dependent on acquisitions. We continue to achieve significant returns for our value add strategy. where we can move cap rates 75 to 150 basis points over three to five years from acquisition, which makes us less sensitive to absolute cap rate levels. The ongoing and widening shortage of affordable housing in the US, which is more acute in our Sunbelt markets and getting worse as new household formation outpaces new housing deliveries, gives us plenty of runway to continue implementing our value-add strategy across our existing portfolio and new acquisitions. Increased net migration coupled with the shortage of housing has allowed our portfolio to achieve all-time high occupancy and sets us up to aggressively push rates for the remainder of the year, as we did in Q2, which Matt will cover in some detail. The current environment also allows us to sell assets that we have fully renovated at premium and recycle that capital into new value-add products where we can achieve higher rates of return. Let me quickly go through just the high-level numbers for the second quarter of the first half of 2021. Total revenues were $52.6 million compared to $50.7 million for 2020 second quarter. It's a 3.7% increase. Net income was, or sorry, net loss was $3.4 million for the second quarter versus $9.3 million loss in second quarter 2020. Core FFO was $14.2 million for the second quarter. which is 56 cents per diluted share. It's compared to 14.5 million second quarter of 2020, which was a 3 cent decrease. Our same store pool consists of 35 properties with 13,544 units. Our same store rent is increased 3.6% on average. Same store occupancy was 96%. The second quarter of 2021 versus 95.3%. in 2020 or 70 basis point increase. Safe store NOI is 28.7 versus 28.5 million versus Q2 last year, which is a 0.6% increase. For the year ended June 30th, revenues were 104.4 million in 2021 versus 103.3 million in 2020 for a 1.1% increase. We had a net loss in 2021 for the first six months of 10.3 million versus a net gain in 2020 of $18.7 million. Core FFO for second quarter 2021 is $28.3 million, or $1.13 per share, as compared to $28.1 million for 2020, which is up two cents per share. Our same-store pool for the year is also 35 properties, consisting of 13,544 units. Same-store rent increase, 3.6%. Our occupancy is up 70 basis points to 96%. And our same store NOI was up 0.2% to 56.9 million for the first six months. For the remainder of 2021, we're revising guidance as follows. Core FFO on a diluted share basis, $2.30 on the low end, $2.41 on the high end, and $2.35 at the midpoint. as compared to $2.29 previously or 2.6% increase. Same-store revenue, 4.2% increase in the low end, 5% on the high end for a midpoint of 4.6% increase in revenue. Our same-store expenses, 6.4% on the low end, 4.8% on the high end with an increase of 5.6% in the midpoint. Same-store NOI, projecting to be 2.7% on the low end, 5.2% on the high end, with 4% at the midpoint, which is an increase of 40 basis points over our prior guidance of 3.6%, same story on the wide growth. So with that, let me turn it over to Matt.