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Date
Tuesday, July 29, 2025 at 3:00 p.m. ET
Call participants
Executive Vice President and Chief Financial Officer — Paul Richards
Executive Vice President and Chief Investment Officer — Matt McGraner
Vice President, Asset Investment Management — Bonner McDermett
Investor Relations — Kristen Griffith
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Takeaways
Net loss: $7 million net loss, or $0.28 per diluted share, for Q2 2025, compared to net income of $10.6 million, or $0.40 per diluted share, for Q2 2024.
Total revenue: $63.1 million for Q2 2025, compared to $64.2 million for Q2 2024.
NOI (Net Operating Income): $38 million from 35 properties in Q2 2025, compared to $38.9 million from 36 properties in Q2 2024.
Core FFO: $18 million in core FFO for Q2 2025, or $0.71 per diluted share, up from $0.69 per share for Q2 2024.
Dividend: Paid $0.51 per share in Q2 2025, with a 72.2% payout ratio of core FFO and 1.39 times core FFO coverage.
Share repurchase: Repurchased 203,109 shares for $7.6 million at an average price of $34.29 per share during Q2 2025.
New hedging activity: Entered into a five-year, $100 million silver swap with JPMorgan Chase at a fixed rate of 3.489% during Q2 2025.
NAV per share estimate: Estimated non-GAAP NAV per share for Q2 2025 ranges from $43.90 to $56.73, with a midpoint of $50.31, calculated using cap rates from 5.25% to 5.75%.
Guidance for 2025 core FFO per diluted share: Guidance range tightened to $2.66 to $2.84, with the midpoint affirmed at $2.75 for 2025 core FFO per diluted share.
Guidance for 2025 loss per diluted share: 2025 guidance for loss per diluted share revised to a range of $1.40 to $1.22, with a midpoint of $1.31.
Credit facility: Secured a new $200 million revolving corporate facility, expandable to $400 million, with a 15-basis-point improved spread compared to the previous facility, for the new corporate revolving credit facility entered into on July 11, 2025, with maturity on June 30, 2028, and an additional one-year extension option.
Unit upgrades: Completed 555 full and partial upgrades, plus 381 leased upgraded units, in Q2 2025, achieving an average monthly rent premium of $73 and a 26% return on investment.
Same-store NOI: Decreased 1.1% in Q2 2025 compared to Q2 2024; same-store rent and occupancy declined 1.3% and 0.8%, respectively; same-store revenue fell 0.2% year over year.
Same-store expense growth: Moderated to 1.5% year over year; marketing and payroll expenses declined 4.7% and 2.8%, respectively, while insurance costs dropped 20%.
Same-store NOI margin: Reported at 60.9% in Q2 2025.
Market performance: Atlanta and South Florida posted same-store revenue growth of 3.6% and 2.3%, respectively; Raleigh and Atlanta achieved same-store NOI growth of 6.8% and 4.4%.
Occupancy outlook: The second half of 2025 is expected to average 94% occupancy, below 94.7% in the second half of 2024.
Insurance savings: Recent renewal to deliver $600,000 in annual savings, with full impact in the second half of 2025.
Renovation investment returns: Since inception, completed 9,113 full and partial upgrades producing an average monthly increase of $165 per unit, with a 20.8% return on investment since inception.
Acquisitions and dispositions guidance: Reaffirmed for the remainder of 2025.
Summary
NexPoint Residential Trust(NXRT -0.75%) reported a quarter marked by tighter full-year 2025 guidance, explicit cost moderation, and an improved expense profile. Management detailed the execution of value-add programs and clarified the positive impact of AI-driven operational efficiencies. Several key markets were identified as drivers of both top- and bottom-line performance, while headwinds from concentrated new supply and market-specific pressures were discussed in concrete terms. Company leadership also disclosed new capital markets activity and detailed direct financial outcomes, supporting current NAV and FFO guidance midpoints while projecting the continuation of efficiency initiatives across the portfolio.
Sequential rental rate improvement of 0.3% in Q2 2025 compared to Q1 2025 was indicated.
Paul Richards said the new credit facility secured a 15-basis-point spread improvement over the prior facility, implying lower borrowing costs going forward.
Management referenced moderating industry supply, specifically noting, "Q2 2025 marked the first quarterly drop of over 20 basis points in inventory growth in over fifteen years."
AI and centralization efforts were credited for "reductions in off-site staffing," with payroll outperforming initial forecasts by $500,000, or 9.7%, for the first half of 2025.
Matt McGraner noted that Phoenix experienced "negative eight to negative ten percent" new lease rate pressure in Q2 2025, tied mainly to three properties adjacent to lease-up activity, and projected stabilization by late 2025 or early 2026.
Industry glossary
NOI (Net Operating Income): Total property revenue minus property-level operating expenses, a core REIT profitability metric.
Core FFO (Funds From Operations): A REIT performance measure adjusting net income for non-cash gains or losses and certain recurring capital expenditures, signifying cash-generating ability.
Cap rate: The expected annual return on a real estate investment property, calculated as the ratio of NOI to property value.
Same-store: Refers to property metrics comparing only properties owned throughout both comparison periods, indicating true operational performance.
Full Conference Call Transcript
Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Residential Trust 2025Q2 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Kristen Griffith, Investor Relations. So please go ahead.
Kristen Griffith: Thank you. Good day, everyone, and welcome to NexPoint Residential Trust conference call to review the company's results for the second quarter ended June 30, 2025. On the call today are Paul Richards, Executive Vice President and Chief Financial Officer, Matt McGraner, Executive Vice President and Chief Investment Officer, and Bonner McDermett, Vice President, Asset Investment Management. As a reminder, this call is being webcast through the company's website at nsrte.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 except as required by law, NexPoint Residential Trust 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.
Now, let's turn the call over to Paul Richards. Please go ahead, Paul.
Paul Richards: Thank you, Kristen, and welcome everyone joining us this morning. We appreciate your time. I'll kick off the call and cover our Q2 results, updated NAV, and guidance outlook for the year and briefly touch on a few subsequent events. I will then turn it over to Matt to discuss specifics on the leasing environment and metrics driving our performance and guidance. Results for Q2 are as follows. Net loss for the first quarter was $7 million or a loss of $0.28 per diluted share, on total revenue of $63.1 million.
The $7 million net loss for the quarter compares to net income of $10.6 million or $0.40 earnings per diluted share for the same period in 2024 on total revenue of $64.2 million. For the second quarter of 2025, NOI was $38 million on 35 properties, compared to $38.9 million for the second quarter of 2024 on 36 properties. For the quarter, same-store rent and occupancy decreased 1.3% and 0.8%, respectively. This coupled with a decrease in same-store revenues of 0.2% led to a decrease in same-store NOI of 1.1% as compared to Q2 2024. As compared to Q1 2025, rents for Q2 2025 on the same-store portfolio were up 0.3% or $4.
We reported Q2 core FFO of $18 million or $0.71 per diluted share compared to $0.69 per diluted share in Q2 2024. We upgraded the second quarter for the properties in the portfolio, we completed 555 full and partial leased 381 upgraded units, achieving an average monthly rent premium of $73 and a 26% return on investment. Since inception, NexPoint Residential Trust has completed installation of 9,113 full and partial upgrades, 4,870 kitchen and laundry appliances, and 11,199 tech packages, resulting in $165, $50, and $43 average monthly rental increase per unit, and 20.8%, 64.2%, and 37.2% return on investment respectively. NexPoint Residential Trust paid a second-quarter dividend of $0.51 per share of common stock on June 30, 2025.
Since inception, we've increased our dividend 147.6%. For Q2, our dividend will be 1.39 times covered by core FFO with a 72.2% payout ratio of Core FFO. During the second quarter, the company repurchased 203,109 shares of its common stock totaling approximately $7.6 million at an average price of $34.29 per share. During the second quarter, the company entered into a new five-year $100 million silver swap at JPMorgan Chase with a fixed rate of 3.489%. Turning to the details, our updated NAV estimate.
Based on our current estimate of cap rates in our markets and forward NOI, we are reporting NAV per share range as follows: $43.90 on the low end, $56.73 on the high end, and $50.31 at the midpoint. These are based on average cap rates ranging from 5.25% at the low end to 5.75% at the high end, which remains stable quarter over quarter. Turning to full-year 2025 guidance. NexPoint Residential Trust is tightening 2025 guidance ranges for core FFO per diluted share and same-store NOI while affirming the midpoint. NexPoint Residential Trust is revising 2025 guidance ranges for earnings of loss per diluted share, same-store rental income, same-store total revenue, and same-store total expenses.
Loss for earnings, loss per diluted share, $1.22 at the high end, $1.40 at the low end, with a midpoint of $1.31. And core FFO per diluted share $2.84 at the high end, $2.66 at the low end, with affirming the midpoint of $2.75. NexPoint Residential Trust is also reaffirming acquisitions and disposition guidance. Lastly, I would like to take the time to discuss a few subsequent events which have occurred over the past few weeks. On July 11, 2025, the company entered into a $200 million corporate revolving credit facility with JPMorgan Chase Bank, Raymond James Bank, RBC, and Synovus. The credit facility may be increased by up to an additional $200 million upon lender consent.
The credit facility will mature on June 30, 2028, unless the company exercises this option to extend for an additional one-year term. The new credit facility spread has improved by 15 basis points compared to the prior corporate credit facility. On July 28, 2025, the company's board approved a quarterly dividend of $0.51 per share payable on September 30, 2025, to stockholders of record on September 15, 2025. This completes my prepared remarks. I'll now turn it over to Matt for commentary on the portfolio.
Matt McGraner: Thank you, Paul. Let me start by going over our second-quarter same-store operational results. Same-store total revenue was down 20 basis points with four out of our ten markets averaging at least 1% growth. While our Atlanta and South Florida markets led the way at 3.6% and 2.3% growth respectively. Notably, Atlanta's positive results were driven in part by 1% bad debt expense versus the second quarter of 2024 bad debt expense of 4%. We're also pleased to report some continued moderation in expense growth for the quarter. Second-quarter same-store operating expenses were up just 1.5% year over year. Marketing and payroll declined 4.7% and 2.8% respectively year over year, and total controllable expenses are up just 50 basis points.
Insurance is down 20% driven by a favorable market environment on the property casualty side. Second-quarter same-store NOI growth continues to improve in our markets with the portfolio averaging a negative 1.1%. A marketable improvement from negative 3.8% in the first quarter. Five out of our ten markets achieved year-over-year NOI growth of 1% or greater, with Raleigh and Atlanta leading the way with 6.8% and 4.4% growth respectively. Our Q2 same-store NOI margin registered a healthy 60.9%. The portfolio experienced improved revenue growth in Q2 2025 with four out of our ten markets achieving growth of at least 1.2% or better.
Our top four markets were Atlanta at 3.6%, South Florida at 2.3%, Raleigh at 1.5%, and Charlotte at 1.2%. were 54.2% for the quarter, seven out of our ten markets executing renewal rate growth of at least 2.75%. Again, on the expense front, they continue to moderate to finish the quarter up only 1.5%. Payroll declined 2.8% for this quarter continues to trend downward as we implement centralized teams and AI technology. Our centralized platforms for renewals, screening, and call centers alongside AI applications deployed across various aspects of the resident experience, are driving greater efficiency and enabling reductions in off-site staffing particularly within leasing offices.
As mentioned previously, we are now focused on optimizing our maintenance operations to drive similar efficiencies across our markets. Again, marketing and insurance were the other categories that saw negative growth in the quarter. Turning to 2025 second-half guidance. Supply pressures have eased somewhat but continue to present concentrated challenges in some of our submarkets. According to RealPage, 2025Q2 marked the first quarterly drop of over 20 basis points in inventory growth in over fifteen years. As new deliveries tapered after peaking in late 2024. Despite the slowdown, over 400,000 units were delivered in the trailing twelve months sustaining elevated competition in leads us.
The upshot here is that after one more quarter of significant deliveries in 3Q of 2025, the national delivery outlook contracts to a GFC level output of just 77,000 units per quarter. Which supports our thesis on accelerating fundamentals in 2026, 2027, and 2028. More positive news, demand outperformed expectations in the first half of the year. Net absorption surged, the national stabilized occupancy rate improved to 94.6% in July.
NexPoint Residential Trust started the year off with occupancy at 94.7% and saw an opportunity to take advantage of our historically higher occupancy by upgrading units to market standards, completing 765 units to date with an average ROI of 20.2% and pushing rent growth, which has increased 1% on average since the end of 2024. Driven by stronger retention and renewal leasing activity. Front-end pricing has improved from negative 4.73% in Q1 to negative 1.5% in Q2. And in late June and July, we have seen new lease growth slow modestly as operators remain defensive amid economic uncertainty. Soft consumer sentiment.
Renewal work growth has been the strongest we've seen over the past twelve months and will remain a focus for the second half of the year. We see several markets continuing to see top-line growth in the second half of this year. And think Tampa, Dallas, Charlotte, and Las Vegas will all exceed our revenue expectations by anywhere from 80 basis points on the low end to 130 basis points on the high end. On the flip side, we think South Florida, Orlando, and Atlanta will be modestly weaker in the second half of the year. South Florida is projected to finish the year at 1.8% top-line growth versus our prior forecast of 2.6% growth.
This remains our strongest market overall for rent growth, but our most optimistic expectations for growth have been temporary for now. Orlando, we expect to finish the year at negative 1% versus prior forecast of being flat. In Atlanta, to finish the year, negative 70 basis points versus our prior forecast is flat. And while bad debt has improved significantly, we are feeling the pressure of new supply here particularly in Cobb County. Due to supply pressures in these submarkets, we anticipate many of these headwinds to be short-term as many of the lease-ups are expected to achieve stabilization in the later part of 2025. Bad debt performance has continued to exceed expectations driven by a decline in evictions.
The portfolio finished Q2 with only 50 basis points of net debt. Continue to see bad debt stabilize and expect to hold bad debt between 50 and 75 basis points for the remainder of the year. We expect that the growth benefit of reduced bad debt to stabilize in the fourth quarter of this year and remain flat at pre-COVID run rates going into 2026. Some of our revenue outlook, even though rents are decelerating from the first half of 2025 modestly, we still expect to see some growth when compared to the trough that occurred in the second half of 2024.
Occupancy will remain the focus, but our expectation is to average 94% in the second half of 2025 versus 94.7%, which was achieved in the second half of 2024. For this reason, we expect second-half 2025 revenue to be more muted than we initially thought. On the expense front, controllable operating expenses have improved. Supported by ongoing efficiencies through centralized operations and implementation of AI-driven technologies. Payroll has improved from our initial forecast, and we expect that will lock in better performance in the second half of the year as we beat our first-half forecast by just about $500,000 or 9.7%. We see salaries remaining stable in the second half of the year with an expectation that they remain flat.
Repairs and maintenance costs have also moderated. Particularly turn costs, which are trending down we expect to finish the year 3% below 2024 totals. Again, on our insurance renewal, it was very favorable and the impact will be fully recognized in the second half of 2025. To the tune of $600,000 a year in savings year over year. Collectively, these trends support maintaining our current same-store NOI guidance at the midpoint of negative 1.5% slightly softer revenue growth expectations fully offset by efficient expense management. While rent growth has underperformed historical Q2 expectations, tightening supply-demand fundamentals, stabilizing occupancy, improving collections, and continued expense discipline support maintaining the NOI outlook. The latest RealPage summary echoes the sentiment.
Momentum trails expectations, but fundamentals are firming. And that's what we're seeing as well. Brief update on the transaction markets. We continue to actively monitor the sales markets for opportunities and stay close to many movements on cap rates. Several recent portfolio processes in our markets were recently awarded in the 5 to 5.25 cap rate range again, supporting our NAV guide. We too are optimistic we'll be able to recycle capital in the second half of the year with targeted acquisitions and dispositions to continue to replenish our rehab pipeline. In closing, in the near term, we will continue to prioritize the balanced approach.
Again driving occupancy, maintaining discipline, risk strategies, and managing controllable expenses to support steady NOI growth despite the transitional operating environment. That's all I have for prepared remarks. Thanks to our teams here at NexPoint and BH for continuing to execute. Now I would like to turn the call over to the operator to take your questions.
Operator: At this time, I would like to remind everyone in order to ask a question, We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Kyle Katorincek with Janney Montgomery Scott. Your line is open.
Kyle Katorincek: Hey, guys. How much of the $8 million in recurring capitalized maintenance expenditures year to date are non-revenue producing? Good question. As part of the refinancing activity last year, the agencies looked at, you know, required CapEx, parking, pavement, siding, things like that. So we have a little bit of elevated spend this quarter over the normal. We also have some more significant projects, particularly in Nashville. We're doing two roof replacement projects in Nashville. Some other chunkier spend. So I would say it's elevated certainly over run rate and skewed a little bit more towards that non-revenue generating today.
I think as we work through that and the third quarter, we'll get to a more normalized run rate in Q4. And I know Matt touched on, you know, the increase in output of renovations. That's really more focused on kind of the spoke you know, one to three thousand dollar opportunities. So it's not been an acceleration and all that much been there. That's helpful.
Kyle Katorincek: Okay. And then on the rehab program, last quarter's call, you guys mentioned it would take probably a few quarters to get back to four hundred units a quarter target. So what drove such a large increase that allowed you guys to ramp up to the five hundred units in the second quarter versus what we were thinking last quarter.
Matt McGraner: Yeah. It's certainly been a focus of ours. Going into the year. We recognize, you know, there's an opportunity. It's probably not the ten to fifteen thousand a unit full upgrade that we've been doing, but where we've seen opportunity, we've been able to I think, deploy a little bit faster than we expected. Credit to the BH Construction team and the asset management folks here. We identified an opportunity, and we're attacking it in full on.
Kyle Katorincek: And then last one on that, for the ROI on your post-rehab units, what, like, is the use of life or tenure you usually use to calculate your ROI? On those? And is there any difference between full and partial units?
Matt McGraner: No difference. And I think, historically, it's been seven years.
Kyle Katorincek: Alright. Thanks, guys. Appreciate it. Got it.
Operator: Your next question comes from the line of Linda Tarrid, Jefferies. Your line is open.
Linda Tarrid: Hi. Good morning. Phoenix and Vegas saw a bigger drop in Q2 occupancy of down 340 and 250 basis points respectively. Could you just provide some color on what's happening there? Does that have to do with value add? Then you also mentioned that Vegas should exceed expectations by year-end. It seems like in Q3 or Q4?
Matt McGraner: Yeah. Hey, Linda. It's Matt. Take Phoenix first. Phoenix is perhaps the most supply-constrained supply-driven market that we are seeing right now. Really, it's three properties in the second quarter that were surrounding lease-up deals, Enclave Heritage, and Venue at Camelback. That's where we saw the most new lease rate pressure of kinda negative eight to negative ten percent in terms of new leases. Again, as I mentioned in my prepared remarks, we expect this to subside. In the third probably not the third quarter, but fourth quarter and first quarter of 2026. So we're doing all we can to be defensive there. And that makes up some of the occupancy loss.
On the Vegas front and Bonner, correct me if you see anything different, but really it's targeted to one asset. Bella Solara, which had a little bit more weaker traffic than we thought. So that makes up most of the loss. Wondering if you have anything to add to that.
Bonner McDermett: Yeah. I would say for Phoenix, obviously, large geographic towns concentration there. That market being one of the more recent peaks since supply. Yeah. You've got more concession utilization in that market than we've been accustomed to. We've had to adjust to that in the second going into the third quarter. Overall, we think we'll finish the year there, actually, low ninety-three to high ninety-two's occupancy. I think we'll be alright. We need to use a little bit more concession to buy some occupancy there, but feel okay. In Vegas, you know, in Vegas, we've been seeing negative trade-outs now for a period of time.
Our revenue, our gross potential rent is actually better on the outlook for the rest of the year than we had originally envisioned for it. But we do see a little bit of softness in occupancy that we're working through to match point. El Solara in particular saw a decrease in traffic. It only resulted in about eight fewer leases for the second quarter, but it's something we're monitoring and something we can do better upon. That's another midpoint of our guidance there to finish the year at ninety-two eight. I occupancy. We certainly think we could do better and we can hope to, but you know, I think we're, you know, being appropriately defensive at this point.
Linda Tarrid: Thanks. And then just one follow-up. What's driving the lower churn cost?
Matt McGraner: I think the first and foremost thing was higher retention. You know, we're trying to close the back door and have focused on renewals. I'm really, you know, kinda proud of the second quarter and into the third quarter. You know, renewal rates, and so that'll continue to be a focus. But we're also prioritizing in those market updates that we're doing, you know, the increase and kind of partial renovations is targeted towards those potential heavy turns where, you know, maybe a unit we've already touched before and they have, you know, the majority of kind of a modern update package.
But we have an opportunity to go in, you know, add a hard surface counter, add a stainless steel appliance package, lighting package. We're doing smaller upgrades, trying to get, you know, a twenty dollar premium there, and then that goes into the capital bucket. So the increase in value add is offset some of that churn cost.
Linda Tarrid: Thanks. Appreciate the color.
Matt McGraner: Thanks, Will. I will now turn the call back to the management team for closing remarks.
Paul Richards: Yeah. Well, thank you for everyone's time this morning, and I look forward to talking to you again next quarter. Thanks.
Operator: Ladies and gentlemen, that concludes today's call. You can now disconnect. Thank you, and have a great day.