Q3 2023 NexPoint Residential Trust Inc Earnings Call

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Okay.

Speaker 1: Thank you for standing by and welcome to the next point residential press Q3 2023 car

Thank you for standing by and welcome to the next point residential Trust Q3, 2023 conference call.

Speaker 1: I would now like to welcome Kristen Thomas, investor relations to begin the call. Kristen Overkeep.

I would now like to welcome Kristin Thomas Investor Relations to begin the call Kristin oversees.

Speaker 2: Thank you. Good day, everyone, and welcome to next point Residential Trust conference call to review the company's results for the third quarter in its September 30th, 2023. On the call today, our Brian Mitz, executive vice president, and chief financial.

Thank you good day, everyone and welcome to the next point residential Trust's conference call to review the company's results for the third quarter ended September 32023 on the call today are Brian Mitts, Executive Vice President and Chief Financial Officer.

Speaker 2: Matt McGrater, Executive Vice President, and she's an investment officer. In Bono McDermott, Vice President, asset investment.

Matt Mcgrew, our executive Vice President and Chief investment Officer, and boundary Garrett Vice President asset investment management.

Speaker 2: As a reminder, this call of the webcast will come to the website at nxrt.nextpoint.com.

As a reminder, this call is being webcast through the company's website.

In ex Archie Dot next one dot com.

Speaker 2: Before it again, I would like to remind everyone that this conference hall contains four looking statements within the meaning of the Private Security's litigation reform act of 1995 that are based on management's current expectations, assumptions, and...

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.

Speaker 2: So there should not be undue reliance on any forward-looking statements in our incursion review, the company's most recent AO court, on Form 10K and the company's other filings with SEC for a more complete discussion of risk and other factors that could affect any forward-looking...

There should not place undue reliance on any forward looking statements and are encouraged to review the company's me she said.

Airport on Form 10-K, and the company's other filings with the US easy for a more complete discussion of risks and other factors that could affect any forward looking statements.

Speaker 2: The sentence made during this conference call to be only out of today's date and accept as required by law, an XRT does not undertake any obligation to publicly update or revise any forward looking.

We have made during this conference call speak only as of today's date and except as required by law and that <unk> does not undertake any obligation to publicly update or revise any forward looking statements. This conference call. Also includes analysis of non-GAAP financial measures for a more complete discussion.

Speaker 3: This conference call also includes an analysis of non- GAAP financial measures. Very 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 this all into the private. Please go ahead, Brian . Thank you, Kristen. Welcome to everyone. Join us this morning. I'm joined here by Matt LeGraner and Bonham McDermott.

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. Thanks.

Thanks, Chris and welcome to everyone joining us this morning.

I'm joined here with.

Massive writer.

And bottom Mcdermott.

Speaker 3: I'm going to kick off the call and cover our Q3 and year-to-date results. Walk through our updated nav calculation and then give our revised guidance. I'll then turn it over to Matt and Bonner to discuss specifics on the portfolio, leasing environment metrics and the items driving our...

To kick off the call to cover our Q3 and year to year to date results walk through our updated NAV calculation and then give our revised guidance I'll, then turn it over to Matt Bonner to discuss specifics on the portfolio, we see environment metrics.

And the other.

This is driving our performance and guidance.

Speaker 3: So StarQ3 results. And that didn't come to the third quarter. It was 33.7 million.

So let's start with Q3.

Results net income for the third quarter was $33 7 million.

Speaker 3: or $1.28 per diluted share on total revenue of $69.8 million as compared to net loss of $600,000 or $0.02 loss per diluted share in the same period in 2022 on total revenue of $68.1 million.

Or $1.28 per diluted share on total revenue of $69 8 million.

As compared to a net loss of 600000 or <unk> <unk> loss per diluted share in the same period in 2022 on total revenue of $68 1 million to.

Speaker 3: 2.5% increase in revenue on 39 properties versus 41 properties for the prior year.

The two 5% increase in revenue on 39 properties versus 41 properties for the prior year period.

Speaker 3: For third quarter, NOI was $42.1 million on 39 properties.

For the third quarter NOI was $42 1 million on 39 properties.

Speaker 3: a pair of two 40 million for the third quarter of 2022 and 41 properties, 5.3% increase in NOI.

Compared to $40 million for the third quarter of 2022, and 41 properties five 3% increase in NOI.

Speaker 3: For the quarter, same-store rent increased 3.1%, and same-store occupancy dropped 10 basis points to 93.9%.

For the quarter same store rent increased three 1% and same store occupancy dropped 10 basis points to 93, 9%.

Speaker 3: This coupled with a 7.7% increase in other income and a 0.3% decrease in same store expenses led to an increase in same store NOI of 8%. This compared to the third quarter of 2022.

This coupled with a seven 7% increase in other income and a 3% decrease in same store expenses led to an increase in same store NOI of 8% as compared to third quarter 2022.

Speaker 3: Compared to Q2 2023, rents for the third quarter on the same store portfolio were down 40 basis points to $1,529 per unit per month.

As compared to Q2 2023 rigs for the third quarter on a same store portfolio were down 40 basis points to $529 per unit per month.

Speaker 3: We reported Q3 core FFO of $17.1 million or $0.65 per diluted share compared to $0.84 per diluted share in the third quarter of 2022.

We reported Q3 core <unk> of $17 1 million or <unk> 65 cents per diluted share compared to 84 per diluted share in the third quarter of 2022.

Speaker 3: For the quarter, we completed 420 full and partial renovations and leased 330 renovated units, achieving an average monthly rent premium of $215 and a 23.6% ROI, which is slightly higher than our long-term average ROI on renovations.

For the quarter, we completed 420 park full and partial renovations at least 330 renovated units achieving an average monthly rent premium of $215 and 23, 6% ROI.

Slightly higher than our long term average ROI on renovations.

Speaker 3: The subject to date in the current portfolio, we've completed 8,671 full and partial upgrades to represent its approximately 60% of the total unit.

Inception to date in the current portfolio, we've completed 8671 full and partial upgrades, which represents approximately 6% of the total units.

Speaker 3: 4,812 kitchen upgrades and washer and dryer installments, and 12,285 technology package installations, achieving an average monthly rent premium of $168, $49, and $44, respectively, and a return on investment of 21%, 65.3%, and 37.8%, respectively.

<unk> 4812 kitchen upgrades in Washington, dryer, install installments, and 12285 technology past installations, achieving an average monthly rent premium of $168 $49 and $44, respectively, and a return on investment of 21% six.

Five, 3% and 37, 8% respectively.

Speaker 3: Next, RT-Bate, a third quarter dividend of 42 cents per share on the common stock September 29th. On October 30th, the board approved a 10.1% increase to the dividend to 46.242 cents per share, payable beginning December 29th. Since our IPO in 2015, we've increased the dividend 124.5%.

<unk> paid a third quarter dividend of <unk> <unk> per share on the common stock on September 29th on October 30th The Board approved a 10, 1% increase to the dividend to <unk> 46.2 for tuition cents per share payable beginning December 29 since our.

IPO in 2015, we increased the dividend 124, 5%.

Speaker 3: Moving on to year-to-date results, net income year-to-date was 25.9 million, or 99 cents per diluted share on total revenue of 208.6 million. Just compare it to net loss of 13 million or 51 cents per diluted share in the same period. In 2022, on total revenue of 194.6 million, for an increase of 7.2% revenue.

Moving onto year to date results net income year to date was 20, sorry, $25 9 million or <unk> 99 cents per diluted share on total revenue of $208 6 million as compared to a net loss of $13 million or 51 cents per diluted share in the same period in 2022.

On a total revenue of $194 6 million for an increase of seven 2% revenue year.

Speaker 3: Year-to-date NOI was 125.2 million on 39 properties as compared to 115.7 million on 41 properties from the same period in 2022 for an increase of 8.2%.

Year to date, NOI was $125 2 million or 39 properties as compared to $115 7 million and 41 properties from the same period in 2022 for an increase of eight 2%.

Speaker 3: Year-to-date per-unit same-store rent increased 3% to $1,524 and same-store occupancy was down 10 basis points to 93.9.

Year to date per unit same store rent increased 3% to $524 and same store occupancy was down 10 basis points to 93, 9%.

Speaker 3: This coupled with an increase in same-store other income 4.7% and an increase in same-store expenses of 6.7% led to an increase in same-store NOI of 9.5% compared to the same period in 2022.

This coupled with an increase in same store other income four 7% and an increase in same store expenses of six 7% led to an increase in same store NOI of nine 5%.

For the same period in 2022.

Speaker 3: Reported year-to-date core FFO $56.1 million, or $2.14 per diluted share, compared to $2.38 per diluted share, and the nine months ended September 30, 2026.

We reported year to date core <unk> of $56 1 million or $2 14 per diluted share compared to $2 38 per diluted share in the nine months ended September 32022.

Speaker 3: Moving on to our balance sheet. As of 930, we had 1.58 billion mortgage debt of which 112 million was held for sale. And 41 million was outstanding on a credit facility, corporate credit facility.

Moving onto our balance sheet as of 930, you add 1.58 billion of mortgage debt of which $112 million was held for sale and $41 million outstanding on our credit facility and corporate credit facility.

Speaker 3: This compares to mortgage debt of $1.61 billion at 1231.22, of which $68.2 million was held for sale, and $74.5 million is outstanding in our corporate credit facility. This represents a 1.8% reduction in mortgage debt and a 45% reduction in our corporate debt year to date.

This compares to mortgage debt of $1 six 1 billion at 12, 31, 22 of which $68 2 million was held for sale and $74 $5 million outstanding on our corporate credit facility.

It represents a one 8% reduction in mortgage debt and a 45% reduction in our corporate debt year to date.

Speaker 3: Once you sell the four assets that we show as help for sale, we'll further reduce our mortgage debt by 112 million in our corporate debt by 41 million, representing a total 9.7% reduction in leverage. There's a 9.30 we have swaps with a national value of 1.17 billion.

Once you sell for assets that we show is held for sale will further reduce our mortgage debt by $112 million and our corporate debt by 41 million, representing a total of nine 7% reduction in leverage.

As of 930, we have swaps with a notional value of 1.1 dollars 7 billion with fixed rates ranging from 2% on high end to 57 basis points at the low end.

Speaker 3: fixed rates ranging from 2% on the high end to 57 basis points on the low end with a weighted average fixed rate of 1.07%. Our swaps have a liquidation value of 98.6 million as of 9-30.

With a weighted average fixed rate of 1.07% our swaps over liquidation value of $98 6 million as of 930.

Speaker 3: With a 930, we had interest rate caps on 1.39 billion in notional debt with the strike prices ranging from 6.82% on the high end to 2.7% on the low end with a weighted average strike of 5.83%. With a 930, we had 13 caps that were above the reference rate of 5.32% representing $408.4 million of notional value.

<unk> you have interest rate caps on 139 billion notional debt with the strike prices ranging from $6 eight 2% on the high end the two 7% on the low end with a weighted average strike of 583% as of 930, we had 13 caps.

Above the reference rate of 532%, representing four and $8 4 million of notional value.

Speaker 3: For third quarter, swaps and caps reduced our interest costs by approximately $13.5 million.

For third quarter, our swaps and caps reduced our interest cost by approximately $13 5 million.

Speaker 3: NXRT is 98.1% effectively fixed. We're considering our swaps, caps, and fixed debt being at current or higher rates, we're basically fully hedged.

And <unk> is 98, 1% effectively fix for considering our swaps caps the fixed debt.

And at current or higher rates are basically fully hedged.

Speaker 3: One interesting point to make regarding the capital structure in regards to caps and how that will impact interest expense in a rising rate environment, which is to say that our interest will remain flat to decrease as rates rise.

One interesting point to make regarding the capital structure.

With regards to the caps and how that will impact interest expense in a rising rate environment.

Which is to say that our interest will remain flat to decrease as rates rise.

Speaker 3: For example, if our reference rate increases 50 basis points, cash interest expense net of swaps and caps will make flat. If the reference rate increases by 1%, our cash interest expense net of swaps and caps will decrease by 0.12%. As we defect, we would be 106.6% hedged as new caps come into the month.

For example for a reference rate increases 50 basis points cash interest expense net of swaps and caps will remain flat as the reference rate increased by 1% our cash interest expense net of swaps and caps will decrease by one 2% as we in fact would be 106, 6% hedged is new.

Caps come into the mine.

Speaker 3: Moving on to NAV for share based on our current estimates of cap rates in our markets and forward in Hawaii.

Moving onto NAV per share based on our current estimates of cap rates in our markets afford in Hawaii.

Speaker 3: We're reporting an NAV per share range as follows, $48.77 on the low end.

We reported NAV per share range as follows $48 70.

77, <unk> and the low end $60 14th on the high end and $54 45.

Speaker 3: $60.14 on the high end, and $54.45 at the midpoint. These are based on average cap rates ranging from 5.5% on the low end and 6% on the high end, which represents a 60 basis point increase over the prior quarter as compared to 1,700 basis point movements in the five and 10-year treasuries respectively.

At the midpoint. These are based on average cap rates ranging from five 5% and the low end and six points or.

6% on the high end, which represents a 60 basis point increase over the prior quarter as compared to 7100 basis point movements in five and 10 year treasuries respectively.

Speaker 3: for guidance for the full year, 2023, Revising Corp, FFO and same store NOI guidance as follows.

For guidance for the full year 2023 revising core.

<unk> and same store NOI guidance as follows.

Speaker 3: for core FFO per diluted share, $2.95 on the high end, $2.81 on the low end, with a midpoint of $2.88.

For core <unk> per diluted share.

$2 95, <unk> and $2 81 in the low end with a midpoint of $2 88.

Speaker 3: For same store numbers, we are guiding rental revenue to 7.7% on the high end. 7% on the low end was 7.3% in the midpoint. For same store expenses, we got into 4.8% on the high end, 5.7% on the low end, with the midpoint of 5.2%.

Core same store numbers.

We are guided rental revenue to seven 7% on high end, 7% on the low end was seven 3% in the midpoint for same store expenses regarding to four 8% from high end five 7% on the low end with a midpoint of five 2%.

Speaker 3: And this results in a guidance of same-store NOI of 9.5% on the high end, 7.8% on the low end, and 8.7% at the midpoint.

And this results in a guidance same store NOI of nine 5% on the high end seven 8% of the low end and eight 7% at the midpoint.

Speaker 4: So with that, that completes my prepared remarks. We'll turn it over to Matt. Thanks, Brian . Let me start by going over our third quarter same-store operational results. Same-store effective rents ended the quarter at $1,529 per unit per month, up 3.1%

So with that that completes my prepared remarks, I'll turn it over to Matt.

Thanks, Brian let.

Let me start by going over our third quarter same store operational results same store effective rents ended the quarter at $1529 per unit per month up three 1% year over year.

Unknown Executive: Thank you for standing by and welcome to the next point Residential Trust Q3 2023 conference call.

Kristen Thomas: I would now like to welcome Kristen Thomas, Investor Relations to begin the call. Kristen Overtio. Thank you.

Speaker 4: Seven out of our 10 markets average at least 3% growth, while our South Florida and Raleigh markets led the way at 8.1% and 5.5% growth, respectively.

Seven out of our 10 markets average at least three 3% growth, while our south, Florida and Raleigh markets led the way.

At eight 1% and five 5% growth respectively.

Kristen Thomas: Good day everyone and welcome to the next point Residential Trust conference call to review the company's results for the third quarter in September 30, 2023.

Speaker 4: Same store rental revenue growth was 4.6% for the period, with the Florida markets again facing the field at 10.3%, 8.2%, and 4.6% respectively for South Florida, Tampa, and Orlando.

Sure.

Same store rental revenue growth was four 6% for the period with the Florida markets again facing to field, a 10, 3% eight 2% and four 6%, respectively for South, Florida, Tampa and Orlando.

Kristen Thomas: On the call today, our Brian Mitts Executive Vice President and Chief Financial Officer, Matthew McGraner, Executive Vice President and Chief Investor Officer, and Bonner McDermott, Vice President, Asset Investment Management. As a reminder, this call is the welcome to the company's website at nxrt.nexpoint.com. Before we begin, I would like to remind everyone that this conference call contained four looking statements within the meaning of the Private Security's litigation reform act of 1995 that are based on management's current expectations, assumptions, and beliefs.

Speaker 4: Dallas-Fort Worth also had strong showing at 7.3% growth. Total same-store revenues were up 4.6% year-over-year. And we're also pleased to report some welcome moderation in expense growth for the quarter. Third quarter same-store operating expenses were down 40 basis points year-over-year.

Fort Worth also had strong showing at seven 3% growth total same store revenues were up four 6% year over year.

And we're also pleased to report some welcome moderation in expense growth for the quarter third quarter same store operating expenses were down 40 basis points year over year.

Kristen Thomas: What's there should not place undue reliance on any four looking statements in our encouraged review, the company's most recent AO court, on forms 10K and the company's other filings with SEC for a more complete discussion of risk and other factors that could affect any four looking statements. The statements made during this conference call seek only as of today's date and, except as required by law, nxrt does not undertake any obligation to publicly update or advise any four looking statements. This conference call also includes an analysis of non-gas financial measures.

Speaker 4: Parallel growth was a mere 60 basis points in Q3 down from 15.3% and 6.9% in Q1 and Q2 respectively. Arnemic spends growth was 6.6% lower than the prior period off of an elevated post-COVID 22?

Payroll growth was a mere 60 basis points in Q3 down from 15, 3% and six 9% in Q1 and Q2, respectively.

R&M expense growth was six 6% lower than the prior period off of an elevated post COVID-19 comp in 2022.

Speaker 4: Real estate taxes have also moderated and true ups booked in Q3 reflect a reduction to our overall real estate tax forecast for the year. Your today same-store tax growth was down to 6% year by year.

Real estate taxes have also moderated and true ups booked in Q3 reflect a reduction to our overall real estate tax forecast for the year.

Year to date same store tax growth was down to 6% year over year.

Speaker 4: Insurance expense growth stabilized at 6% in Q3 after a successful Q2 renewal negotiation as well.

<unk> expense growth stabilized at 6% in Q3 after a successful Q2 renewal negotiation as well.

Speaker 4: On the NOI side, the portfolio achieved strong third quarter same-store NOI growth of 9.5%, while our NOI margin improved to 61.4%.

On the NOI side, the portfolio achieved strong third quarter same store NOI growth of nine 5%, while our NOI margin improved to 61, 4%.

Kristen Thomas: A very more complete discussion of these non-gas financial measures see the company's earnings release that was filed earlier today.

Speaker 4: Domino and O.I. Quarter over quarter also increased as Brian mentioned as our teams continued to operate more efficiently.

Nominal NOI quarter over quarter also increase as Brian mentioned as our teams continue to operate more efficiently.

Kristen Thomas: I would now like to turn this ball into the brine bit. Please go ahead, brine.

Speaker 4: In 6 of 10, same-store markets achieved year-over-year NOI growth of 8.7% or greater, with South Florida again setting the tone at a healthy 18.4%.

And six of 10 same store markets achieved year over year NOI growth of eight 7% or greater with South, Florida again, setting the tone at a healthy 18, 4%.

Brian Mitts: Thank you, Kristen. Welcome to everyone joining us this morning. I'm joined here with by Matt McRainer and Bonham McDermott.

Brian Mitts: I'm going to kick off the call and cover our Q3 year-to-date results. Walk through our updated nav calculation and then give our revised guidance. I'll then turn it over to Matt and Bonham to discuss specifics on the portfolio, leasing, environment metrics and the items driving our performance and guidance. So start with Q3 results. That income for the third quarter was $33.7 million or $1.28 per diluted share on total revenue of $69.8 million.

Speaker 4: Turning to operating performance in the go-forward strategy, while our average effective monthly rents per unit ended Q3 at $1,497 per unit, a 3.5% increase year-over-year, new leases did turn negative for the quarter by $60 per unit, or 4.6% on a lease-over-lease basis.

Turning to operating performance in the go forward strategy.

While our average effective monthly rent per unit ended Q3 at $1497 per unit, a three 5% increase year over year, new leases did turned negative for the quarter by $60 per unit or four 6% on a lease over lease basis.

Speaker 4: As other Sun Belt peers reported, new supply, skips, and evictions in fraud are putting downward pressure on total financial occupancy for now.

As other sunbelt peers reported new supply skips and evictions and fraud are putting downward pressure on total financial occupancy for now.

Speaker 4: On the new supply front, given the strong job market and heavy concessions for merchant-billed product, consumers are expecting and demanding concessions across the board, even for Class B product as Class B renters migrate to Class A products.

On the new supply front, given the strong job market and heavy concessions for merchant build product consumers are expecting and demanding concessions across the board even for class B products as class B renters migrate to class a product.

Brian Mitts: It's compared to net loss of $600,000 or $2 cents loss per diluted share in the same period in 2022. On total revenue of $68.1 million, the 2.5% increase in revenue on 39 properties versus 41 properties for the prior year period. With third quarter, NOI was 42.1 million on 39 properties compared to 40 million for the third quarter of 2022 on 41 properties. 5.3% increase in NOI. For the quarter, same-store rent increased 3.1% and same-store occupancy drop 10 basis points to 93.9%.

Speaker 4: And given the interest rate environment, even Class B owners are being more defensive in their operating strategies, prioritizing occupancy over revenues.

Given the interest rate environment, even class b owners or being more defensive in their operating strategies prioritizing occupancy over revenues.

And awaiting the interest rate hikes.

Speaker 4: We do expect this to abate by the end of the first half of next year as Class C renters use their wage gains to upgrade their housing options, and both inflation and delivery start to moderate. We expect to see pricing power return to Class B assets, sustained by continued net migration into the Sunbelt, and the fact that 67.5% of total U.S. households can afford to live in an NXRT community.

We do expect this to abate by the end of the first half of next year as class C renters, who use their wage gains to upgrade their housing options in both inflation and deliveries start to moderate we expect to see pricing power return to class B assets sustained by continued net migration into the sunbelt and the fact that 67, 5% of total U S households can afford to.

Brian Mitts: This coupled with a 7.7% increase in other income and a 0.3% decrease in same-store expenses less than increase in same-store NOI of 8% is compared to the third quarter of 2022. It's compared to Q2 2023 rents for the third quarter on the same-store portfolio where down 40 basis points to $1,529 per unit per month reported Q3 core FFO of 17.1 million or 65 cents per deleted share compared to 84 cents per deleted share in the third quarter of 2022.

And in <unk> community.

Speaker 4: Perhaps most importantly on the supply front, in 20 of NXRT's 39 submarkets, supply growth over the next three years is less than 6%.

Perhaps most importantly on the supply front and 20 or <unk> 39, Submarkets supply growth over the next three years is less than 6%.

Speaker 4: While deliveries have been notable in 2023, the forecasted full year 2023 total is down 17% from RealPages' projection earlier in the year, most likely due to difficult financing environments.

While deliveries have been notable in 2023, the forecasted full year 2023 total is down 17% from real pages projection earlier in the year, most likely due to difficult financing environment.

Speaker 4: In addition, we'll be exiting two of the few supply-heavy markets, sub-markets, after the two planned Charlotte dispositions I'll get to in a minute.

In addition, we'll be exiting two of the few supply heavy markets Submarkets. After the two planned Charlotte dispositions I'll get to in a minute.

Speaker 4: As we noted last quarter, it is broadly reported by other Sunbelt focus reads, skips and evictions remain a problem in a few key markets, most notably for us, Atlanta, Charlotte, and Las Vegas. The good news here is that Atlanta has started to work through their court backlogs as has Las Vegas. And as for Charlotte, over 70% of the evictions are attributable to one asset, Timber Creek, which is under contract to sell with $1.5 million of nonrefundable earnest money deposits.

As we noted last quarter. It was broadly reported by other sunbelt focus greets skips and evictions remain a problem in a few key markets, most notably for Us Atlanta, Charlotte and Las Vegas. The good news here is that Atlanta has started to work through their court backlogs as is Las Vegas.

Brian Mitts: For the quarter we completed 420 full and partial renovations and leased 330 renovated units achieving an average monthly rent premium of $215 and 23.6% ROI which is slightly higher than our long-term average ROI on renovations. In subject to date in the current portfolio we've completed 8,671 full and partial upgrades to represents approximately 60% of the total units. 4,812 kitchen upgrades and washer and dryer installments. In 12,285 technology-packed installations achieving an average monthly rent premium of $168, $49 and $44 respectively and a return on investment of 21% 65.3% and 37.8% respectively.

As for Charlotte over 70% of the evictions are attributable to one asset timber Creek, which is under contract to sell with $1 $5 million of non refundable earnest money deposit.

Speaker 4: Given these momentary cross-currents, we will continue to focus on prioritizing occupancy, closing the back door on skips and evictions, and targeting qualified traffic.

Given these momentary crosscurrents, we will continue to focus on prioritizing occupancy closing the back door on skips and evictions and targeting qualified traffic.

Speaker 4: The portfolio had registered 94% occupancy as of the close of the quarter, and as of this morning, is 96.24% leased with a healthy 60-day trend of 93%, the highest it's been in a couple of quarters as we enter the winter months.

Our portfolio registered 94% occupancy as of the close of the quarter and as of this morning is 96, 4% leased with a healthy 60 days to 93% the highest it's been in a couple of quarters as we enter the winter months.

Speaker 4: The good news also is our three-year same-store effective rent growth is now cagering at 9.6% and same-store and OI growth will end the year in the high single digit.

The good news also is our three year same store effective rent growth is now CAGR at nine 6% and same store NOI growth within the year in the high single digits.

Brian Mitts: NexRT paid a third quarter dividend of 42 cents per share on the common stock September 29th. On October 30th the board approved a 10.1 percent increase to the dividend Q46.242 cents per share payable beginning December 29th. Since our IPO in 2015 we've increased the dividend 124.5%. Moving on to year-to-date results, net income year-to-date was 25.9 million or 99 cents per deleted share on total revenue of 208.6 million. Just compare it to a net loss of 13 million or 51 cents per deleted share in the same period in 2022 on total revenue of 194.6 million or an increase of 7.2% in revenue.

Speaker 4: This growth, coupled with our continued focus on deleveraging, informed our view to recommend an eighth consecutive dividend increase to the board.

This growth coupled with our continued focus on deleveraging and formed our view to recommend an eighth consecutive dividend increase to the board.

Speaker 4: If we are successful with these maneuvers, and we do believe we will be, we think earnings growth re-accelerates in 2024, painting our core FFO payout ratio at 64% for 2023 and sub-60% on preliminary 2024 estimates.

If we are successful with these maneuvers and we do believe we will be we think earnings growth Reaccelerate in 2024 pending our core <unk> payout ratio of 64% for 2023 and sub 60% on preliminary 24 estimates.

Speaker 4: Our confidence in our strategy also stems from our ability to still find liquidity at a time when there's not a lot of it.

Our confidence in our strategy also stems from our ability to still find liquidity at a time when there's not a lot of it.

Speaker 4: Given our debt is fully prepayable and our NOIs are growing, these assets are still very liquid.

Our debt is fully pre payable at our NOI is a growing these assets are still very liquid or.

Speaker 4: Our job as management and large shareholders is to maintain our focus on increasing NOI through our targeted value-add campaigns, preserving those gains and maintaining a maximum liquidity profile. So when liquidity does return to the market, we can take advantage of it.

Our job as management and large shareholders is to maintain our focus on increasing NOI through our targeted value ad campaigns.

Serving those gains and maintaining a maximum liquidity profile. So when liquidity does return to the market. We can take advantage of it.

Speaker 4: For example, during the quarter, we were able to liquidate Silverbrook, one of the company's first acquisitions, for a 4.6% cap rate. The Silverbrook sale generated $19.5 million of net proceeds, a 34% levered IRR, and a 6.14 times multiple uninvested capital.

For example, during the quarter, we were able to liquidate silver growth one of the company's first acquisitions for four 6% cap rate with silver book sale generated $19 5 million in net proceeds of 34% Levered IRR and a 614 times multiple on invested capital.

Brian Mitts: Year-to-date was 125.2 million on 39 properties. It's compared to 115.7 million on 41 properties from the same period in 2022 for an increase of 8.2%. Year-to-date per unit, same-store rent increased 3% to $1524 and same-store occupancy was down 10 basis points to 93.9%. This coupled with an increase in same-store other income 4.7% and an increase in same-store expenses of 6.7% led to an increase in same-store NOI of 9.5% compared to the same period in 2022. Reported year-to-date core FFF of 56.1 million or $2.14 per deleted share compared to $2.38 per deleted share in the 9 months and September 30, 2020. 22.

Speaker 4: We use $16 million of net sales proceeds to reduce the drawn balance on the credit facility to $41 million.

We used $16 million of the net proceeds of net sales proceeds to reduce the drawn balance on the credit facilities $41 million.

Speaker 4: As I alluded to earlier, Timber Creek in Charlotte is also under contract for sale at $49 million with a $1.5 million non-refundable earnest money deposit.

As I alluded to earlier timber Creek in Charlotte is also under contract for sale at $49 million with a $1 5 million non refundable earnest money deposit.

Speaker 4: Estimated net proceeds from this sale are $23.8 million, which would generate a 25% levered IRR and a 4.3 times multiple uninvested capital. We expect this sale to occur in Q4.

Estimated net proceeds from this sale are $23 $8 million, which will generate a 25% levered IRR and a $4 three times multiple on invested capital. We expect this sale to occur in Q4.

Speaker 4: Finally, we also expect to sell Old Farm in Houston this year. As you may recall, this asset fell out of contract in April .

Finally, we also expect to sell all farm in Houston. This year as you may recall this asset fell out of contract in April April.

Speaker 4: We have found a replacement buyer who is now under contract to purchase the asset for $103 million. The sales forecasted to generate $47 million of net proceeds at a 22% levered IRR and a 2.9 times multiple uninvested capital.

We have found a replacement buyer who is now under contract to purchase the asset for $103 million, a sales forecasted to generate $47 million of net proceeds at a 22% Levered IRR and a two nine times multiple on invested capital.

Brian Mitts: Moving on to our balance sheet. As of 930, we had 1.58 billion mortgage debt of which 112 million was held for sale and 41 million was outstanding on a credit facility, a corporate credit facility. Let's compare as the mortgage debt of 1.61 billion at 1231-22 of which 68.2 million was held for sale and 74.5 million was outstanding on our corporate credit facility. It represents a 1.8% reduction mortgage debt and a 45% reduction in our corporate debt year today.

Speaker 4: The old farm and Timber Creek dispositions will retire the remaining balance on the credit facility and allow us to further de-lever the balance sheet, positioning us, as Brian mentioned, as fully hedged going into 2024.

The old farm in timber Creek dispositions will retire the remaining balance on the credit facility or allow us to further delever the balance sheet positioning us as Brian mentioned is fully hedged going into 2024.

Speaker 4: That's all I have for prepared remarks. I'd like to thank our teams for continuing to execute through this challenging environment.

That's all I have for prepared remarks, I'd like to thank our teams for continuing to execute through this challenging environment.

Hey, Brian.

Brian Mitts: Once you saw the four assets that we show as held for sale will further reduce our mortgage debt by 112 million in our corporate debt by 41 million, representing a total 9.7% reduction in leverage. There's a 930 we have swaps with the initial value of 1.17 billion with fixed rates ranging from 2% on the high end to 57 basis points in the low end with a weighted average of fixed rate at 1.07%.

Speaker 3: That's it, we got, we'll open up for questions.

That said we get.

We will open up for questions.

Speaker 1: And at this time I'd like to remind everyone, in order to ask a question, press star then the number 1 on your telephone keypad.

And at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile any questions.

Speaker 1: Again, if you'd like to ask a question, please press star 1 on your telephone keypad.

Again, if you'd like to ask a question. Please press star one on your telephone keypad now.

Brian Mitts: Our swaps have a liquidation value of 98.6 million is a 930. There's a 930 we have interest rate caps on 1.39 billion in the mutual debt with the strike prices ranging from 6.82% on the high end the 2.7% on the low end with a weighted average strike of 5.83%. There's a 930 we have 13 caps that are above the reference rate of 5.3%, representing 4 and 8.4 million of the initial value.

Speaker 1: We have a question from the line of Kyle Katarinek with Danny Montgomery Scott.

We have a question from the line of Kyle <unk>.

With Janney Montgomery Scott. Please go ahead.

Speaker 5: Good morning, guys. What's your decision to raise the dividend by 10% versus buying back stock or paying down additional debt at this time?

Hey, good morning, guys, what drove the decision to raise the dividend by 10% versus buying back stock or paying down additional debt at this time.

Speaker 4: Hey Kyle, the incremental dividend on just a nominal dollar basis is $4 million roughly, and at a current share price of

Take out the incremental dividend.

A nominal dollar basis is $4 million.

Brian Mitts: For third quarter our swaps and caps reduced our interest cost by approximately 13.5 million. NXRT is 98.1% effectively fixed considering our swaps, caps, fixed debt, being at current or higher rates we're basically fully hedge. And one interesting point to make regarding the capital structure, in regards to the caps and how that will impact interest expense in a rising rate environment which is to say that our interest score may flat to decrease as rates rise.

Roughly.

<unk>.

Yes.

Current share price.

Speaker 4: $25, $26, $130,000-ish, or 130,000 shares of stock to repurchase.

25, 26 Bucks a 130.

30000 ish dollars of our 130 <unk>.

Shares of stock to repurchase.

<unk>.

Speaker 4: Our strategy has always been to generate high single digits, same store and ROI growth, earnings growth, and dividend growth, and we think that's an important aspect of our strategy.

Our strategy has always been to.

Generate high single digit same store NOI growth earnings growth and dividend growth and we think thats an important aspect.

Aspect of our strategy.

Speaker 4: And given that we have these dispositions on tap for the Q4 and early Q1 to retire all the remaining unhedged debt and enter the 24-year with the ability to reaccelerate earnings, we just thought that was the better use of capital and just an effective...

And given that we have these dispositions on tap for the.

Brian Mitts: For example, if our reference rate increases 50 basis points, cash interest expense, net of swaps and caps were made flat. If the reference rate increases by 1%, our cash interest expense net of swaps and caps will decrease by 0.12%, as we effectively be 106.6% hedge as new caps come into the money.

The Q4 and early Q1 two.

To retire all of the remaining unhedged debt and entered the 24.

Here with the ability to Reaccelerate earnings.

We were.

We just thought that was the better use of use of capital.

Just an effective.

Yes, tenet of our strategy for the last eight years.

Brian Mitts: Moving on to now for share based on our current estimates of cap rates and our markets and forward in a while, we're reporting an NAV per share range as follows. $48.70, $0.70 on the low end, $60.14 on the high end, and $54.45 at the midpoint. These are based on average cap rates ranging from 5.5% on the low end and 6% on the high end which represents a 60 basis point increase of the prior quarter. This compared to 70 and 100 basis point movements of the 5 and 10 year treasuries respectively.

Speaker 5: Okay, thank you. And then related to the Atlanta slash Las Vegas markets, you had mentioned last quarter that Atlanta courts opened in 2-2. So, where do those backlogs stand today versus where they were at last quarter?

Okay. Thank you and then related to the Atlanta Flash Las Vegas markets.

And last quarter that Atlanta courts opened in <unk>, So where does the backlog stand today versus where they were at last quarter.

Speaker 6: I think the Atlanta backlog was 70,000-ish skips and evictions. Is that right, Barney? Across the Atlanta market for the first seven months this year, they've done about 70,000 evictions. When you look at our...

I think.

I think the Atlanta backlog was 70000.

Skips and evictions, sorry, Bonnie across across the land market for the first seven months of shares.

70000 convictions.

When you look at our AR balances in our actual net bank debt of <unk>.

Speaker 6: our AR balances and our actual net bad debt. We've seen, I think, the peak for net bad debt is about June of this year. We think that that continues to moderate, and we close the year sub-3% bad debt there. So it's getting better. It's also getting better in Vegas.

I think the peak peak for net debt as of June of this year, we think that that continues to moderate and we close and closed the year sub sub 3% bad debt. There. So it's going to be getting better. It's also getting better in Vegas.

Brian Mitts: For guidance, for the full year, 2023, we're advising core FFO and same store NOI guidance as follows. For core FFO, per diluted share, $2.95 on the high end, $2.81 on the low end with a midpoint of $2.88. For a same-store numbers, we are guiding rental revenue to 7.7% on the high end, 7% on the low end, with 7.3% in the midpoint. For same-store expenses, we're guiding to 4.8% on the high end, 5.7% on the low end, with the midpoint of 5.2% and this results in a guidance of same-store NOI. 9.5% on the high end, 7.8% on the low end, and 8.7% at the midpoint.

Speaker 6: well we've seen you know I think a healthier healthier air balance there as well so getting getting better you know it's been a bit of a struggle but we see some positive momentum you know heading into the end of the year in 24

As well we've seen.

I think a healthier and healthier balance there as well so getting getting better.

Been a bit of a struggle, but we see some positive momentum heading into the end of the year and 'twenty four.

And then one last one.

Speaker 5: What is unit turnover been for this quarter and last quarter? And where does that compare to historical levels?

One is unit turnover been for this quarter and last quarter, and where is that compared to historical levels.

Speaker 4: Yes, it's been pretty consistent in the low 50% or I guess turnover in the mid to high 40s retention in the low 50s and that's been pretty consistent. Our strategy going into key four and key one will continue to prioritize renewals and as I mentioned in prepare remarks, keep the PEP factor close.

Yes, it's been pretty consistent in the low 50%.

Or I guess turnover in the.

Mid to high <unk> retention in the low fifties and thats been pretty consistent.

Our strategy going into Q4, and Q1, we will continue to prioritize renewals.

And as I said as I mentioned in prepared remarks keep the back door closed.

Brian Mitts: So with that, that completes my prepared remarks.

Matthew McGraner: I'll turn it over to Matt. Thanks, Brian. Let me start by going over our third quarter same-store operational results. Same-store effective rinse ended the quarter at $1,529 per unit per month, up 3.1% year-over-year. 7 out of our 10 markets average at least 3% growth while our South Florida and Marley markets led the way at 8.1% and 5.5% growth respectively. Same-store rental revenue growth was 4.6% for the period, with the Florida markets again facing the field at 10.3%, 8.2% and 4.6% respectively for South Florida, Tampa and Orlando.

Okay. Thanks, guys I appreciate it.

Got it.

Speaker 1: There are no further questions at this time. I would now like to turn it over to the management team for closing remarks.

There are no further questions at this time I would now like to turn it over to the management team for closing remarks.

Great. Thank you I appreciate everyone's time.

Pricing some of you at NAREIT in a few weeks. Thank you.

Speaker 1: I would like to thank our speakers for today's presentation and thank you all for joining us. This now concludes today's call. You may now disconnect.

I would like to thank our speakers for today's presentation and thank you all for joining US. This now concludes today's call you may now disconnect.

[music].

Matthew McGraner: Dallas Fort Worth also had strong showing at 7.3% growth. Total same-store revenues were up 4.6% year-over-year, and we're also pleased to report some welcome moderation and expense growth for the quarter. Third quarter same-store operating expenses were down 40 basis points year-over-year. Parallel growth was a mere 60 basis points in Q3 down from 15.3% and 6.9% in Q1 and Q2 respectively. R&M expense growth was 6.6% lower than the prior period, off of an elevated post-COVID-Comp in 2022.

Okay.

[music].

Yeah.

Yes.

Matthew McGraner: Real estate taxes have also moderated and true-ups booked in Q3 reflect a reduction to our overall real estate tax forecast for the year. Your today same-store tax growth was down to 6% year-over-year. Insurance expense growth stabilized at 6% in Q3 after a successful Q2 renewal negotiation as well. On the NOI side, the portfolio achieved the strong third quarter same-store and OI growth of 9.5% while our NOI margin improved to 61.4%. Nominal NOI quarter-over-quarter also increased as Brian mentioned as our teams continued to operate more efficiently.

[music].

Matthew McGraner: In 6 of 10 same-store markets achieved year-over-year in OI growth of 8.7% or greater, with South Florida again setting the tone at a healthy 18.4%. Turning to operating performance in the GoFords strategy, while our average effective monthly rents per unit ended Q3 at $1,497 per unit, a 3.5% increased year-rear. New leases did turn negative for the quarter by $60 per unit or 4.6% on a lease or release basis. As other Sunbelt peers reported, new supply, skips, and evictions and fraud are putting downward pressure on total financial occupancy for now.

Matthew McGraner: On the new supply front, given the strong job market and heavy concessions for merchant-vill product, consumers are expecting and demanding concessions across the board, even for class B product as class B renters migrate to class A product. And given the interest rate environment, even class B owners are being more defensive in their operating strategies, prioritizing occupancy over revenues and awaiting the interest rate heights. Yes, we do expect this to abate by the end of the first half of next year as class C renters use their wage gains to upgrade their housing options, and both inflation and delivery start to moderate.

Matthew McGraner: We expect to see pricing power return to class B assets, sustained by continued net migration into the Sun Belt, and the fact that 67.5% of total US households can afford to live in an NXRT community. Perhaps most importantly on the supply front, in 20 of NXRT's 39 submarkets, supply growth over the next three years is less than 6%. While deliveries have been notable in 2023, the forecasted four-year 2023 total is down 17% from real pages projection earlier in the year, most likely due to difficult financing environment.

Matthew McGraner: In addition, we'll be exiting two of the few supply-heavy markets submarkets after the two-plane Charlotte Dispositions, I'll get to in a minute. As we know the last quarter and is broadly reported by other Sun Belt-focused REITs, Skips and evictions remain a problem in a few key markets, most notably for us in Atlanta, Charlotte, and Las Vegas. The good news here is that Atlanta has started to work through their court backlogs as has Las Vegas.

Matthew McGraner: And as for Charlotte, over 70% of the evictions are attributable to one asset, Timber Creek, which is under contract to sell, with one and a half million dollar of non-refundable or its money deposit. Given these momentary cross-currence, we will continue to focus on prioritizing occupancy, closing the back door on Skips and evictions and targeting qualified traffic. The portfolio and registered 94% occupancy as the closes of the quarter and as of this morning is 96.24% leased with the healthy 60 to 80% to 93%, the highest it's been in a couple of quarters as we enter the winter months. The good news also is our three-year same-store effective rent growth is now cagering at 9.6% in same-store and eye growth when the year in the high single digits.

Matthew McGraner: This growth coupled with our continued focus on de-leveraging informed our view to recommend an eighth consecutive dividend increase to the board. If we are successful with these maneuvers, and we do believe we will be, we thank earnings growth re-accelerates in 2024, painting our core FFO payout ratio at 64% for 2023 and sub 60% on pre-eleminary 24 estimates. Our confidence in our strategy also stems from our ability to still find liquidity at a time when there's not a lot of it.

Matthew McGraner: Given our debt is fully prefable and our NOIs are growing, these assets are still very liquid. Our job as management and large shareholders is to maintain our focus on increasing NOIs after our targeted value ad campaigns, preserving those gains and maintaining a maximum liquidity profile. So when liquidity does return to the market, we can take advantage of it. For example, during the quarter we were able to liquidate Silverbrook, one of the company's first acquisitions for 4.6% cap rate.

Matthew McGraner: The Silverbrook sale generated 19.5 million dollars of net proceeds, a 34% levered IRR, and a 6.14 times multiple uninvested capital. We use 16 million of the net sales proceeds to reduce the draw on balance on the credit facility to 41 million. Violeted through earlier, Timber Creek in Charlotte is also in a contract for sale at $49 million with a $1.5 million non-refundable earnest money deposit. Estimated net proceeds from this sale are $23.8 million, which would generate a 25% levered IRR in a 4.3 times multiple uninvested capital.

Matthew McGraner: We expect this sale to occur in Q4. Finally, we also expect to sell old farming used in this year, as you may recall, this asset fell out of contract in April. We have found a replacement buyer who is now under contract to purchase the asset for $103 million. The sale is forecasted to generate $47 million of net proceeds at a 22% levered IRR and a 2.9 times multiple uninvested capital. The old farming Timber Creek Dispositions will retire the remaining balance on the credit facility and allow us to further deliver the balance sheet positioning us as Brian mentioned as fully hedge going into 2024.

Matthew McGraner: That's all I have for prepared remarks. I'd like to thank our teams for continuing to execute through this challenging environment. Thank you, Brian.

Unknown Executive: That's it. We got to open up for questions. And at this time, I'd like to remind everyone in order to ask a question, press star than the number one on your telephone keypad. We'll pause for just a moment to compile any questions. Again, if you'd like to ask a question, please press star one on your telephone keypad now.

Kyle Katorincek: We have a question from the line of Kyle Kata-Reneck with Jenny Montgomery Scott. Please go ahead. Thank you.

Matthew McGraner: Good morning, guys. What's your decision to raise a dividend by 10% versus buying back stock or paying down additional debt at this time? The incremental dividend on just a nominal dollar basis is $4 million roughly. And at a current share price of $25, $26, $130,000 of shares of stock to repurchase. Our strategy has always been to generate high single-digit, same-store-no-I growth, earnings growth, and dividend growth. And we think that's an important aspect of our strategy.

Matthew McGraner: And given that we have these dispositions on tap for the Q4 and early Q1 to retire all the remaining unhedged debt and enter the 24-year with the ability to re-accelerate earnings, we just thought that was the better use of capital and just an effective tenet of our strategy for the last eight years.

Bonner McDermott: Okay, thank you. And then related to the Atlanta-slash-lost biggest markets, you'd mention last quarter that Atlanta courts opened in 2Q. So where did those backlogs stand today versus where they were at last quarter? I think the Atlanta backlog was 70,000 isch gifts and evictions. Is that right, Bonner? Across the Atlanta market for seven months this year is on about 70,000 evictions. When you look at our AR balances and our actual net bet, we've seen I think the peak for net that is on June of this year, we think that that continues to moderate and we close the year, so 73% that that there.

Bonner McDermott: So it's getting getting better, it's also getting better in Vegas as well. I think a healthier AR balance there as well. So getting getting better, it's been a bit of a struggle, but we see some positive momentum heading into the end of the year in 24.

Bonner McDermott: And then one last one. What does unit turnover been for this quarter and last quarter and where is that compared to historical levels? It's been pretty consistent in the low 50% or I guess turnover in the mid to high 40s retention in the low 50s, and that's been pretty consistent. Our strategy going into key four and key one will continue to prioritize renewals. And as I mentioned, the prepared remarks keep the people's factor close.

Kyle Katorincek: Okay, thanks guys, I appreciate it. Got it.

Unknown Executive: There are no further questions at this time. I would now like to turn it over to the management team for closing remarks. Great, thank you. I appreciate everyone's time. I'll probably see some of you at the next few weeks. Thank you. I would like to thank our speakers for today's presentation and thank you all for joining us.

Unknown Executive: This now concludes today's call. You may now disconnect.

Unknown Executive: Thank you.