NexPoint Residential Trust, Inc.

Hello and welcome to the Nextpoint Residential Trust Q3 2022 conference call. My name is Laura and I will be a coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Kristen Thomas, to begin today's conference. Thank you. Thank you.

Good day, everyone, and welcome to NextPoint Residential Trust conference call to review the company's results for the third quarter, September 30, 2022. On the call today are Brian Mitts, Executive Vice President and Chief Financial Officer and Matt McGranner, Executive Vice President and Chief Investment Officer. As a reminder, this call is being webcast through the company's website at nsrt.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 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 forward-looking statements. The statements made during this conference call speak only as of today's date and expect as required by law. An XRT 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 release that was filed earlier today. I would now like to turn the call over to Brian Mitts. Please go ahead, Brian.

Thank you, Kristen. Welcome to everyone joining us this morning. Really appreciate your time. I apologize for the technical issues you may have had dialing in. I'll kick off the call and cover our Q3 year-to-date results, update our NAV calculation, and then provide revised guidance. I'll then turn it over to Matt to discuss specifics on the leasing environment and metrics driving our performance and guidance. Results for Q3 are as follows. Net loss for the third quarter was $0.6 million, or $0.02 per diluted share, on total revenue of $68.1 million. That's compared to the net loss of $5.4 million, or a $0.21 loss per diluted share in the same period in 2021, on total revenue of $56.4 million, which represents a 21% increase in revenue. For the third quarter, NOI was $39.9 million on 41 properties compared to $33.6 million for the third quarter of 2021 on 40 properties, a 19% increase in NOI. For the quarter, year-over-year rent growth on renewals averaged 12% across the portfolio, and year-over-year rent growth on new lease is averaged 14.5%. Given where rental rates are in our markets for Class B apartments and equivalent single-family rental product, we believe there's ample room for future outsized room growth. The quarter, same-store rent increased 19.4%, and same-store occupancy was down 130 basis points to 94% as we continue to focus more on rate and occupancy during the quarter. This coupled with an increase in same-store expenses of 16.9%, which was accentuated by higher year-over-year R&M and turn costs, led to an increase in same-store NOI of 13.1% as compared to Q3 2021. Rents in the third quarter of 2022 on the same-store portfolio were up 4.5% quarter-over-quarter. We reported Q3 core FFO of $21.8 million, or $0.85 per deleted share, compared to $0.65 per deleted share in the same quarter of 2021 for an increase of 31% on a per-share basis. For the quarter, we completed 649 full and partial interior renovations and leased 592 upgraded units, achieving an average monthly rent premium of $163 and a 24.3% ROI, which is two to three basis points higher than our long-term average ROI on renovations. Inception to date in the current portfolio, we've completed 7,354 full or partial upgrades, or 48% of the total units, 4,853 kitchen upgrades and washer-dryer installs, and 10,451 technology package installations, achieving an average monthly rent premium of $146, $49, and $44, respectively. and an ROI of 22%, 69.3%, and 37.3% respectively, each of which helped to drive our NOI year-over-year higher by 19%. Results for the year are as follows. Our net loss of the year was $13 million, or $0.51 loss per diluted share, a total revenue of $194.6 million. That's compared to a net loss of $15.7 million, or $0.62 loss per diluted share in the same period in 2021, a total revenue of $160.7 million, or an increase in revenue of 21%. Year-to-date, NOI was $115.3 million on 41 properties. That's compared to $93.6 million on 40 properties for the same period in 2021, or an increase of 23%. For the year, same-store rent increased 19.9%, same-store occupancy was down 140 basis points to 94%. This, coupled with an increase in same-store expenses of 10.3%, led to an increase in same-store NOI of 15.8% as compared to the same period in 2021. To report a year-to-date core FFO of $62.3 million, or $2.43 per diluted share, compared to $1.78 per diluted share in the nine months ended September 30, 2021, or an increase of 37%. For the year, we completed 1,830 full and partial renovations, an increase of 101% from the prior period in 2021. Moving to NAV per share, based on our current estimate of cap rates in our markets at Ford and NOI, we're reporting NAV per share range as follows. $70.04 per share on the low end, $83.47 per share on the high end, and $76.75 per share at the midpoint. These are based on average cap rates ranging from 4.3% on the low end to 4.7% on the high end, which has increased approximately 44 basis points last quarter and 92 basis points year to date to reflect a rise in interest rates and observable increases in cap rates in our markets. For the quarter, we paid a dividend of 38 cents per share on September 30th. And this morning, we announced that the Board of Directors has approved an increase in the quarterly dividend of 4 cents per share for a 10.5% increase to 42 cents per share. This marks the company's seventh consecutive annual increase. Since inception, we've increased our dividend by 103.9%. Year-to-date, our dividend was 2.13 times covered by core FFO, a payout ratio of 47% of core FFO. Finally, before we discuss guidance, today we are pleased to announce some favorable improvements we are undertaking to de-risk our balance sheet, increase liquidity, and improve our financial outlook. First, we've executed a loan application and are in the process of refinancing 19 property-level mortgages through KeyBank and Freddie Mac. In aggregate, this transaction will refinance 46.7% of the company's total outstanding debt and improve spread pricing of 150 basis points over one month so far, and push these maturities out to 2032. Additionally, NXRT has executed a 12-month extension option on the Revolving Credit Facility, extending that maturity to June 30th, 2025. The company expects to use approximately $217 million of cash-out mortgage refinancing proceeds to pay down an outstanding principal balance on the credit facility, the most expensive debt on our balance sheet today. These maneuvers will increase the company's weighted average maturity to 6.4 years, up from 3.3 years as of September 30th. Additionally, this refinancing is expected to reduce NXRT's weighted average interest rate on total debt by 39 basis points to 4.33%, four-factor in the impact of interest rate swap contracts. Accounting for the hedging impact of the swaps and caps, NXRT's adjusted weighted average interest rate is expected to be reduced from 3.29% to 2.78%. With the completion of this refinancing, the company has no meaningful debt maturities until 2025, which is the revolving credit facility, but as mentioned, we're using excess proceeds to pay down 65% of that facility this year, reducing that maturity obligation. Through this guidance, we're revising guidance as follows. Same store NOI, we're estimating 14.9% on the low end, 16.1% on the high end, with a midpoint at 15.5%, which is a 30 basis point reduction from the prior guidance of 15.8% due to higher term costs. For our core FFO guidance, we're estimating $3.05 per share on the low end, $3.11 per share on the high end, with a midpoint of $3.08. which is a 7% per share increase of the prior midpoint at $3.08 per share that represents a 27% increase over 2021 core FFO of $2.43 per share. So with that, let me turn it over to Matt for his comments here.