Q1 2020 Earnings Call
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Good day and welcome to the next Point residential trust Inc. First quarter 2020 conference call. They close be recorded now at this time, I would like to turn the conference over to Jackie Graham, please go ahead. Good day everyone and welcome to next Point residential trust conference calls to review the company's results for the first quarter ended March 31st on the call today are Brian minutes Executive Vice President and Chief Financial Officer and my boss not in The Greener Executive Vice President and chief investment officer. As a reminder. This call is being webcast through the company's website at ww.w. Before we begin with I would like to remind everyone of 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 off the lease 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 includes the Dead.
Not limited to statements regarding NX.
Q strategy for a second quarter and full-year twenty-twenty and expertise net asset value and its related components and assumptions plans value-add program including the projected average rent money on changing rent return-on-investment expected Acquisitions and dispositions and the covid-19 prices. They are not guarantees of future results and are subject to risks on certain functions 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 in are encouraged to review the company's most recent annual report on form 10-K and the companies other filings with the SEC for a more complete discussion of risks and other factors that could affect the forward-looking statements off except as required by law and after he does not undertake any obligation to publicly update or revise any forward-looking statements this conference call also includes analysis of central operations dead.
Corp runs from operation or core ffo adjusted funds from operations or a SFO and net operating income or NOS all of which are non-gaap financial 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 f f o m a s s o n n y c the company's earnings release that was filed earlier today. I would now like to turn the call over to Brian, please. Go ahead Brian. Thank you. Jackie. First one welcome everyone to our orange called here for the first quarter 2020. Obviously, we'll discuss the highlights of key one I think is a really strong quarter. However, I suspect most people are more interested in what's happened past the quarter and so obviously we'll spend some time on what we've done in a lot of the covid-19 issue.
In the impact it's had on us and and what we see going forward based on that. So, uh before I start we're going to make throughout our commentary. I will touch on two two major themes. Um, it's kind of been the underpinning of our entire strategy one is the benefit and resiliency of the work horse bath houses 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 asset that we have jobs particularly in this unprecedented time that we find ourselves in. Let me start with some highlights from Key one other than the covid-19 and we report that loss of the quarter of or sorry net gain net income for the quarter of $20 million or $1.08 per diluted share which compared to a net loss.
4.4 million or
-19 cents per diluted share in fourth quarter 2019. We reported same store noi increase to $17 billion or 85.6% increase compared to last quarter or fourth quarter 2019 reporting a q 12020 core ffo of 13.6 million or $0.53 per diluted share which is generally line with our guidance as well as consensus, which is an increase of 15% which compared to same period in 2019 during the quarter sold three properties for a total gross proceeds of 86.5 million and net proceeds after debt repayment closing costs forty three point four million on the transaction. We realize the 34.2% irr and a three point nine eight times multiple on invested capital.
Total revenue for you on this is 52.6 million until I was Thirty million which was an increase of 27% and 27% year-over-year wage, which reflects the the large net acquisition actually do you had in 2019 and a lot of margins for the quarter of 57% which were in line with same thing. Last year at 57% We continue to execute execute the value adds business plans by completing four and twelve full and partial reservations during the quarter with 815 of the upgraded units be least achieving an average monthly premium of $115 and a 23.6% return on investments during the quarter exception Thursday across the portfolio as of March 31st, it completed 6914 full and partial upgrades achieving an average monthly rent premium of $102 and a dog.
Investment at 24.6% additionally to date we've completed smart gun technology installed in 8818 units across twenty-three properties off completed a hundred ninety-five washer dryer installed in the first quarter of 2020 all which is included in the 412 full parts that we have for the quarter of 4:00. We we saw the Coco. Brakes hit and utilize the ATM to raise the gross proceeds and twenty eight million in an average price of $50 per share and use the net price to pay down a 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 an average repurchase price of $27.07 per share. We ended the quarter with almost $85 in free cash.
Available on the balance sheet given that precedent A disruption we've seen an economy. Um over what is certainly an unprecedentedly short period of time like Half-Life values become pretty difficult to judge never the last update in our nav based on our revised Outlook a cap rates and in a wide now we'll discuss this in more detail on what are your cap rates are and how we arrived with those in determining our nav but based on all that are revised nav is as follows on the low end. It's $34.57 on the high end $42.30 for midpoint of $38 and $48.47 off that comparison midpoint last quarter of $46.31 or approximately 17% decrease quarter-over-quarter and the midpoint it March 31st, 2019 Thursday.
$6.41
Or 5.4% increase every year for the first quarter. You paid a dividend of $0.31 31.25 cents per share on March thirty. First two shuttles r m as in Mark sixteen and Monday our board declared a dividend per share of $31.95 payable on June 30th to shareholders of record on June 15th today at our dividend is 1.68 times covered by our core ffo or a payout ratio of 60% of our core ffo.
Just some brief comments on our covid-19 response for a turned over to Matt to go into much more detail on this key won't start it off very strong for us. And I think the Secretary General but then obviously is we came into March things changed pretty dramatically our markets. Like I think most of them around the country went into a walk down a shelter-in-place safer home walk down. We saw I'm pressing it down and movements and Equity markets interest rates. Am just real estate market has really pretty much everything in a very short period of time and saw record unemployment claims over six six eight weeks. So with all of this, we we obviously took drastic actions as did everyone we've previously disclosed these and some of our press releases dead.
Just a summary is we've through our property manager VH implemented new safety protocols for residents employees rolled out payment plans for employees, or sorry rep that can verify true hardship and not give some details on those increased communication with our residents with a goal of making sure we were out in front of any down payment issues. Let's make sure we're maximizing collections or helping residents that had a true need we immediately drew the available capacity on our credit facility off to make sure we had plenty of liquidity in the balance sheet, and then we increased our our stock repurchase plan and immediately began to use that you just discussed a little bit earlier fine for a turn over to Matt. We previously disclosed this to press release on April 16th, but
We estimated that the expanded unemployment benefits provided by the cares act provides on average about 90% of our residents prior income if they've been laid off but Thursday, we estimate of 90% of our residents were eligible for 100% of the stimulus provider. Who cares act and it's Matt goes through the April and then the the Meg details around took actions. We think that those two things are sort of like hold us maintain given all things considered a pretty strong collection across Thursday April 9th. Just a quick highlight of the qq1 results total revenues 15.6 million for the quarter vs. 41.5 million to nineteen twenty 7% increase in a while. I was 30 million vs. 23.6 million. Also a 27% increase core ffo is 13.6 million.
or $0.53
Per diluted share. C 11 million or 46 cents per diluted share for a 15% increase on the same store pull a 25 properties in 9521 units changed or rental income increased $5 20% that was driven by a 90 basis and point ninety basis point increase occupancy from 93.6% to 94.5% as well as a 2.9% increase in effective rents wage, which drove a seem sorta know an 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 were formerly withdrawing guidance, I think about line with the entire sector in our peers. However, we've done a lot of work and Analysis around our rent rolls what we we see in our market and so now it's run some some stress scenarios that we produce what we think are some pretty compelling relatively speaking strong core ffo number. So he's going to go into some detail on that. But we we are four-wheel drive. I've got it in for the year without let me throw it over to Matt and get into some of the details wrong what we've seen since the code out there.
Thanks, Brian some of the hottest. I'm on chemo and results but they weren't strong as Brian mentioned growing things like 5.6% We saw strength across the entire portfolio during the first quarter as usual with sticks out of our ten markets growing in a Wi-Fi five and a half percent including strength in Houston Nashville, Charlotte Phoenix landed Orlando and Tampa notable same story line growth markets for the first quarter. We're Phoenix and Tampa at 15.7% and 14.3% respectively.
On the q1 operational front leasing activity and revenue growth relatively strong and Blended new lease and renewal growth rates of 1.6 and three and a half percent overall for the portfolio with our town. It's being Tampa South Florida to Phoenix in Atlanta posting 3% or better retro overall. I can see if it'll portfolio improve 90 basis points year-over-year and finished q14 of historically high 94.2% first-quarter rent collections were in line with historical Norms at 99.2% of Bill Trent.
For April our preliminary operating performance metrics are as follows April opting to finish the month and 94% rent collections for the month total just over 95% If we find a total of 1085 lease is in the month of April 564 new leases down 1.65% and 521 renewals at 2.9% growth renewal retention for April was up 5% from q1 57.2% for coil wide and 65.6% for the same store portfolio took your record for our company our preliminary preliminary data for May as of the close of business yesterday is as follows physical occupancy today's hits at 94% off with 30 and 60 day trends at 93.4% and 91.7% respectively.
recollections
For this month to 87% up 4% from the same time last month. So far in may we have signed a total of 151 leases at a blended rate of 47% wage increase we expect renewal retention for May to increase and remain north of sixty percent.
Like you to rehab pipeliner new base case is to complete 225 upgrades almost exclusively exclusively for upgrades as we are temporarily halting partials and incremental additions to be returned and expect to continue to turn classic units that makes nasal sense to rehab too full upgrade status for April. We completed 87 upgrades and at least fifty six of these for a 15.3% rental premium and our allies were approximately 20%
For Maeve you're scheduled to still complete 63 upgrades and in June our base-case as soon as we renovate 75 minutes slightly better than May.
There is reason to believe that we could do as many as two hundred and seventy-five units and total for the second quarter under more bullish reopening scenario.
On the Bears side. We make Grill do 185 upgrades. Assuming an additional $35 in June.
For the rest of my prepared remarks. I'd like to walk walking through our house view of the apartment market and some stress test is Brian mentioned. We've conducted on our Market to portfolio line.
Here's some observations number one to be sure we expect a challenging leasing an operating environment over the near-term. But we also have a house for you on a range of worst-case scenarios which all unpack in a moment so I can from a macro view our view is we are fortunate to have constructed as a portfolio of high quality yet affordable residential assets located in the Sunbelt. All of our markets have Brian said is Brian said Page open already or on the process of reopening by the end of May. This means economic activity in our markets will resume earlier than most of the apartment Reit universe and perhaps be more amused to underlying government regulation that may be enacted to curtail my landlord's ability to collect rent and satisfy our own economic obligations.
For LaGuardia use that number one pre-code the beneficiaries of outward migration from Gateway and Coastal markets are the lower tax warmer temperature in business climates of Texas, Florida, Georgia, North Carolina and Tennessee and Arizona and number to affordable housing will always be in demand.
I believe is it coded does not reverse these trends that may in fact accelerate them making an xrt portfolio even more relevant to investors who are trying to get access to positive demographic wage was an asset pricing power and otherwise near-term deflationary environment. And I said, we stressed our portfolios resilient to using the GFC as a Baseline and added a few more jerky options to provide a downside case scenario to certain operational metrics.
give me the stock performance is the accelerated so
Often February and March underperformed sung even some celery to an asset early closed and have negative negative Eva. We wanted to provide some color on our underlying tenant-based and the resiliency of our apartment portfolio. You conducted a deep dive on a portfolio literally asset by assets a market-by-market down to each tenant income job history current status. It's just the portfolio the results were encouraging we finish 2019 with 57 basis points as bad debt expense roughly $900,000 in portfolio wide berth or like deal with stress bad that over eight fold increase bad debt over eight hold for the year two to four percent of revenues or nearly seven and a half million dollars, which is what basis points wires and Green Street estimates.
For the year and two hundred fifty basis points wide of the GST trial.
We're particularly gruesome on Las Vegas Orlando in Nashville for the hospitality and Leisure exposure in Houston, as it relates to the energy sector, even though our portfolios underlined tenant base has the following exposure to codes quote unquote hardest hit sectors in Houston. We identified just 51 residents within our portfolio that have direct exposure to the broad oil and gas industry off or 4.31% of our rent roll in Orlando. We identified two hundred residents with exposure to hospitality and service industry or 17% of our Orlando. Roll.
In Las Vegas, just 6.4% of our resident days were 74 residents have direct exposure to the strip.
You have any information related to approve payment plans within our portfolio. BH is operating history that goes back to 1993 on his B&C access dating back to the GFC. We feel this is just rest and hopefully too Draconian approach to delinquency and bad debt particularly given collection activity a day and not forgetting that our average rent roll pre-coated of of rent to income ratio in our portfolio was approximately 24%
On the revenue side. We also assume race go mostly negative in April through September and flat for the remainder of the year physical occupancy is assumed to be 92.9% collectively fog Easter eggs scenarios economic occupancy with decline of 88.7% for the year implying Revenue reductions off of our prior projected Market rent of almost twenty million dollars off on the expense side you seen approximately 1.2 million in savings and controllable defenses through April this scenario. We will apply these Trends across the portfolio and the scenario. We're all supposed to lock in trouble spot with our prior assumptions, which remember include a 9.25% real estate tax increase for 2019.
I told Easter County assumption still yield amazingly a positive core ffo cost compared to 2019 of approximately $2.01 per share thoughts on the now slide you applied greenstreets revised assumptions that they put out on April 19th on the broader apartment sector and their coverage Universe in which by the way they believe is we do the class be compatible modestly outperform by state communities are cutting in a lot for twenty twenty-five hundred fifty basis points wider than Green Street does and their assumptions and increase in cap rates particularly in Houston, Las Vegas. We still arrive at a midpoint in a v a $38.47 per share of the midpoint implying we traded 25 discount 25% discount today.
Holy I just want to take our teams would be H and Export for all the hard work during this difficult. He turned back over to Brian and look forward to answering your questions.
Yeah appreciated math. Let's let's go ahead and turn it over to questions asked a question about using a speaker phone. Please pick up your handset before making your selection. Once again star one. If you have a question, we'll hear first from Buckhorn with Raymond James.
Hey, thanks gud morning guys regulations on the encouraging results so far to start with I think one of your different variations in your strategies, they need to renewals and pricing knowing that it seems like your incoming demand is still holding up. How do you want to approach or how are you seeing renewal in terms of what you're asking for going out to whether it's June July or August. How do you how do you want to handle that pricing strategy? How do you think that'll Modern Life going forward?
Yeah, we can see that I think is you've seen it mentioned. Most of the universe has just taken a broad approach of not increasing any any rates. Just just keeping everyone flat, you know, our view given our price point roughly $1,000 is the you know, we can wage so you'll grow rents particularly when there's demand in our markets and so we've taken the site by site approach, um halted it's sort of you know in April but have resumed that that approach depending upon the trend at the site the health of you know, the the resident base so obviously in Las Vegas in Orlando in Houston were taking a different approach but markets where there is underlying strength such as a phoenix and the Tampa we're still trying to you know, modestly increase rents dead.
To 4% while maintaining a resident retention that we think is going to 60% for certainly for May and and possibly in GA Thursday. We we run scenarios where we think we can have a mid-sixties to almost 70% retention ratio. So it's not a one-size-fits-all approach. Um, and it it really is side-by-side.
Okay, great and maybe drill down on or at least a little extra color on these markets where you you think they're you know, whether topicality or oil and gas mean talking about Phoenix Orlando Houston Nashville where there could be some some greater degree of sensitivity where you able to discern any major differential and rent clubs and patterns in those markets where we're you know employing it may have been disproportionately impacted. How are they more Diversified Market holding up versus these, you know towards and sensitive markets.
Yes, no great question we have.
Something we focused on dramatically so bear with me but I'll give you some a lot of detail April collections the the worst quote unquote works perfect markets where Las Vegas and 90% Orlando 90.4% Houston to 91.2% and then uh, well, that's that's wrong. So those those kind of three work on low 90s with payment plans and and payments made through today. All those are kind of ninety-two to ninety-four percent. So they are you know that we all should increase in May, you know, as Brian mentioned as we stated the collections have been really good but those same Markets Houston, Texas eighty-six 86% which is by the way up dramatically from from the same time in April by almost 5% Orlando 83.4 per month.
Vegas right at right at 80% and Nashville's, you know a little bit better at 85% So those are those are kind of where the collection stood for for April and May and and that's where that's where the week is the strongest or Phoenix Tampa Atlanta DFW really every other Market is good. So, you know, it's it's helpful. So it's a diversity as you know.
Great. Thank you. I'll hop back to you. Thank you guys.
thanks but
I'll hear from Alex could you check with Derek
morning guys real helpful color on your exposure to those Hospitality an oil industry markets do you believe there could be some attractively priced opportunities that drop out of Las Vegas is in Orlando over the world you know what the sewage feels like it's a pain there's really temporary could be an opportune time to acquire some things