NexPoint Residential Trust, Inc. Completes Refinancings of 17 Properties With 17 Additional Refinancings Expected to Close on November 29th, Sale of Stone Creek at Old Farm, and Announces 3Q 2024 Earnings Call on October 29, 2024, at 11:00 a.m. ET

Rhea-AI Summary

NexPoint Residential Trust (NXRT) announced several key developments:

• Completion of 17 property mortgage refinancings with JP Morgan and Freddie Mac, with 17 more expected to close on November 29th
• Total gross proceeds of $1.466 billion, representing ~97.7% of NXRT's total outstanding debt
• Improved interest rate pricing at SOFR + 109 bps
• Extension of weighted average debt maturity to ~7.0 years from ~5.69 years
• Reduction of weighted average interest rate on total debt by 48 bps to 6.21%
• Sale of Stone Creek at Old Farm property in Houston for net proceeds of $23.7M
• Announcement of Q3 2024 earnings call on October 29, 2024

These refinancings are expected to strengthen NXRT's balance sheet and improve its financial position.

Positive

• Refinancing of 97.7% of total outstanding debt with improved interest rate pricing
• Extension of weighted average debt maturity from 5.69 to 7.0 years
• Reduction of weighted average interest rate on total debt by 48 bps to 6.21%
• Sale of Stone Creek at Old Farm property for $23.7M net proceeds
• No meaningful debt maturities until 2028 after refinancing

Negative

• Increase in total outstanding debt to $1.50 billion

Insights

Financial Analyst

This refinancing activity is a significant positive development for NXRT. The company has successfully refinanced 97.7% of its total outstanding debt, extending the weighted average debt maturity from 5.69 years to 7.0 years. This extension provides NXRT with greater financial flexibility and reduces near-term refinancing risk.

Key highlights:

• Improved interest rate pricing at SOFR + 109 bps
• Reduction in weighted average interest rate by 48 bps to 6.21%
• Adjusted weighted average interest rate reduced from 3.64% to 3.16% (accounting for interest rate swaps)
• No meaningful debt maturities until 2028

The sale of Stone Creek at Old Farm for $23.7 million with a 2.19x multiple on invested capital demonstrates NXRT's ability to generate solid returns from its portfolio. This sale also aligns with the company's strategy to exit the Houston market.

Overall, these actions strengthen NXRT's balance sheet, improve its debt profile and position the company for potentially improved financial performance in the coming years.

Real Estate Investment Analyst

NXRT's refinancing strategy showcases astute capital management in a challenging interest rate environment. By capitalizing on the slowdown in 'Mission Driven' agency debt production, NXRT leveraged its relationships and Select Sponsor status with Freddie Mac to secure favorable terms.

The refinancing's impact:

• Reduced debt maturing through 2028 from ~33% to just ~2.3% of total debt
• Improved interest rate hedging with 72.8% of floating rate debt covered by interest rate swaps
• Weighted average fixed rate of 0.9807% on $1.1 billion notional amount of interest rate swaps

The sale of Stone Creek at Old Farm property at a 5.25% cap rate indicates a solid return on investment and efficient capital recycling. This transaction aligns with NXRT's portfolio optimization strategy, focusing on higher-growth markets.

These moves demonstrate NXRT's proactive approach to managing its debt profile and portfolio composition, potentially leading to improved NAV and FFO growth in the future.

DALLAS, Oct. 3, 2024 /PRNewswire/ -- NexPoint Residential Trust, Inc. ("NXRT" or the "Company") (NYSE: NXRT) announced today the closing of 17-property mortgage refinancings through J.P. Morgan Chase Bank ("JP Morgan") and The Federal Home Loan Mortgage Corporation ("Freddie Mac"), the sale of Stone Creek at Old Farm, and the Company is scheduled to host a conference call on Tuesday, October 29, 2024, at 11:00 a.m. ET (10:00 a.m. CT), to discuss third quarter 2024 financial results.  

The Company entered into 17 loan agreements and expects to enter into 17 additional loan agreements on November 29, 2024, for total gross proceeds of $1.466 billion, which, in the aggregate, will represent ~ 97.7% of the Company's total outstanding debt. Notably, NXRT agreed to refinance at interest rate pricing improved (SOFR + 109 bps) from prior terms. This refinancing activity extends the Company's weighted average debt maturity schedule to ~7.0 years (from ~5.69 years) – after this refinancing activity, debt maturing through 2028 equates to ~2.3% of total debt (down from ~33% previously).

Holistically, these refinancings are expected to reduce NXRT's weighted average interest rate on total debt by 48 bps to 6.21% before the impact of interest rate swap contracts. Accounting for the hedging impact of the swaps, NXRT's adjusted weighted average interest rate is expected to be reduced from 3.64% to 3.16%. With the completion of these refinancings, the Company has no meaningful debt maturities until 2028.

The Company also closed on the sale of Stone Creek at Old Farm in Houston, TX, a 190-unit property built in 1998. The property was acquired for $23.3 million on December 29, 2016, and has provided consistent operational and cash flow performance for the portfolio for the last 7+ years.  As of September 30, 2024, the property was 96.31% leased with a weighted average effective monthly rent of approximately $1,322.  Net proceeds from the sale were approximately $23.7M, delivering a trailing nominal tax and insurance adjusted cap rate of 5.25% and a 2.19x multiple on invested capital.

The Company is scheduled to host a conference call on Tuesday, October 29, 2024, at 11:00 a.m. ET (10:00 a.m. CT), to discuss third quarter 2024 financial results. The conference call can be accessed live over the phone by dialing 888-660-4430 or, for international callers, +1 646-960-0537 and using passcode Conference ID: 5001576.  A live audio webcast of the call will be available online at the Company's website, https://nxrt.nexpoint.com (under "Resources").  An online replay will be available shortly after the call on the Company's website and continue to be available for 60 days.

A replay of the conference call will also be available through Tuesday, November 12, 2024, by dialing 800- 770- 2030 or, for international callers, +1 609- 800- 9909 and entering passcode 5001576. 

The Company plans to issue a press release with third quarter 2024 financial results before market open on Tuesday, October 29, 2024.

"NXRT is delighted to announce the completion of this significant refinancing initiative, fortifying our balance sheet and growing our relationship with JP Morgan and Freddie Mac. We identified an opportunity to capitalize on the slowdown in 'Mission Driven' agency debt production heading into the second half of 2024, leveraging our deep relationships and Select Sponsor status with Freddie Mac to drive the best execution and deliver an excellent result for shareholders. The sale of Stone Creek completes our stated goal of exiting the Houston market. We look forward to talking about the impact of the refinance and sale of Stone Creek on a 3Q earnings call on October 29^th." said Matt McGraner, Chief Investment Officer.

Outstanding Debt Details
Mortgage Debt
The following table contains summary information concerning the mortgage debt of the Company as of October 1, 2024 assuming the expected closing of the 17 additional property refinancings occurred on October 1, 2024 ($ in 000s):
Operating Properties		Type		Term  (months)		Outstanding Principal (1)		Interest Rate (2)		Maturity Date
Arbors on Forest Ridge		Floating		84		$              16,630		6.25 %		10/31/2031			(3)
Cutter's Point		Floating		84		18,228		6.25 %		10/31/2031			(3)
The Summit at Sabal Park		Floating		84		25,681		6.25 %		10/31/2031			(3)
Courtney Cove		Floating		84		31,401		6.25 %		10/31/2031			(3)
The Preserve at Terrell Mill		Floating		84		71,835		6.25 %		10/31/2031			(3)
Versailles		Floating		84		26,611		6.25 %		10/31/2031			(3)
Seasons 704 Apartments		Floating		84		33,745		6.25 %		10/31/2031			(3)
Madera Point		Floating		84		30,669		6.25 %		10/31/2031			(3)
Venue at 8651		Floating		84		24,622		6.25 %		10/31/2031			(3)
Parc500		Floating		84		28,646		6.25 %		10/31/2031			(3)
Rockledge Apartments		Floating		84		77,271		6.25 %		10/31/2031			(3)
Atera Apartments		Floating		84		38,796		6.25 %		10/31/2031			(3)
Torreyana Apartments		Floating		84		43,442		6.25 %		10/31/2031			(3)
Bloom		Floating		84		61,017		6.25 %		10/31/2031			(3)
Bella Solara		Floating		84		39,546		6.25 %		10/31/2031			(3)
Fairways at San Marcos		Floating		84		54,590		6.25 %		10/31/2031			(3)
Creekside at Matthews		Floating		84		29,815		6.25 %		10/31/2031			(3)
The Venue on Camelback		Floating		84		36,465		6.25 %		9/30/2031			(4)
Sabal Palm at Lake Buena Vista		Floating		84		56,220		6.25 %		9/30/2031			(4)
Cornerstone		Floating		84		45,815		6.25 %		9/30/2031			(4)
Versailles II		Floating		84		15,706		6.25 %		9/30/2031			(4)
Brandywine I & II		Floating		84		59,526		6.25 %		9/30/2031			(4)
Bella Vista		Floating		84		37,400		6.25 %		9/30/2031			(4)
The Enclave		Floating		84		33,440		6.25 %		9/30/2031			(4)
The Heritage		Floating		84		29,810		6.25 %		9/30/2031			(4)
Summers Landing		Floating		84		14,135		6.25 %		9/30/2031			(4)
Residences at Glenview Reserve		Floating		84		33,271		6.25 %		9/30/2031			(4)
Avant at Pembroke Pines		Floating		84		248,185		6.25 %		9/30/2031			(4)
Arbors of Brentwood		Floating		84		39,977		6.25 %		9/30/2031			(4)
The Verandas at Lake Norman		Floating		84		30,113		6.25 %		9/30/2031			(4)
Six Forks Station		Floating		84		30,430		6.25 %		9/30/2031			(4)
High House at Cary		Floating		84		32,478		6.25 %		9/30/2031			(4)
The Adair		Floating		84		33,229		6.25 %		9/30/2031			(4)
Estates on Maryland		Floating		84		37,345		6.25 %		9/30/2031			(4)
Residences at West Place		Fixed		120		33,817		4.24 %		10/1/2028
						$         1,499,907
(1) Mortgage debt that is non-recourse to the Company and encumbers the multifamily properties.
(2) Interest rate is based on a reference rate plus an applicable margin, except for fixed-rate mortgage debt. 30-Day Average SOFR was 5.16% as of October 1, 2024. (3) The Company is finalizing a 7-year term refinance on 17 properties at SOFR plus a 1.09% margin. The refinance is expected to close on November 29, 2024. Final loan amounts are subject to change based on final commitment at closing.
(4) The Company finalized a 7-year term refinance on 17 properties at SOFR plus a 1.09% margin. The refinance closed on October 1, 2024.

Interest Rate Swap Agreements

As of October 1, 2024, the Company had the following outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk (dollars in thousands):

Effective Date		Termination Date		Counterparty		Notional Amount				Fixed Rate (1)
September 1, 2019		September 1, 2026		KeyBank			100,000				1.4620	%
September 1, 2019		September 1, 2026		KeyBank			125,000				1.3020	%
January 3, 2020		September 1, 2026		KeyBank			92,500				1.6090	%
March 4, 2020		June 1, 2026		Truist			100,000				0.8200	%
June 1, 2021		September 1, 2026		KeyBank			200,000				0.8450	%
June 1, 2021		September 1, 2026		KeyBank			200,000				0.9530	%
March 1, 2022		March 1, 2025		Truist			145,000				0.5730	%
March 1, 2022		March 1, 2025		Truist			105,000				0.6140	%
							1,067,500				0.9807	%	(2)

(1)  The floating rate option for the interest rate swaps is daily compounded average of SOFR plus 0.11448% adjustment ("Adjusted SOFR"). As of October 1, 2024, Adjusted SOFR was 5.07%.
(2)  Represents the weighted average fixed rate of the interest rate swaps.

As of October 1, 2024 and after giving effect to the closing of the additional 17-property mortgage refinancing, we had total indebtedness of $1.50 billion at an adjusted weighted average interest rate of 6.21%, of which $1.466 billion was debt with a floating interest rate. As of October 1, 2024 and after giving effect to the closing of the additional 17-property mortgage refinancing, interest rate swap agreements effectively covered 72.8% of our $1.466 billion of floating rate mortgage debt outstanding. For purposes of calculating the adjusted weighted average interest rate of the total indebtedness, we have included the weighted average fixed rate of 0.9807% for Adjusted SOFR on the $1.1 billion notional amount of interest rate swap agreements that we have entered into as of October 1, 2024.

About NXRT

NexPoint Residential Trust is a publicly traded REIT, with its shares listed on the New York Stock Exchange under the symbol "NXRT," primarily focused on acquiring, owning and operating well-located middle-income multifamily properties with "value-add" potential in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. NXRT is externally advised by NexPoint Real Estate Advisors, L.P., an affiliate of NexPoint Advisors, L.P., an SEC-registered investment advisor, which has extensive real estate experience.

Cautionary Statement Regarding Forward-Looking Statements

This press release 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. Forward-looking statements can often be identified by words such as "expect,"  "will,"  "plan" and similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding the Company's debt profile following the refinancings, including total debt, adjusted average weighted interest rate and interest swap coverage, the expected closing of additional property refinancings on November 29, 2024, the refinanced debt as a percentage of the Company's total outstanding debt after the expected closing of the refinancings on November 29, 2024, the expected total gross proceeds from the refinancings, expected debt maturity schedule, the expected reduction in NXRT's weighted average interest rate before and after the effect of interest rate swaps, the expected term, principal, interest rate and maturity date for additional refinancings and the issuance of a press release with third quarter 2024 results before market open on Tuesday, October 29, 2024. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement, including that the 17-property refinancing doesn't close on November 29, 2024 or is delayed and those described in our filings with the Securities and Exchange Commission (the "SEC"), particularly those described in our Annual Report on Form 10-K. Readers 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 other filings with the SEC for a more complete discussion of the risks and other factors that could affect any forward-looking statements. The statements made herein speak only as of the date of this release and except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statements.

Contact: 
Kristen Thomas
Investor Relations
IR@nexpoint.com

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SOURCE NexPoint Residential Trust, Inc.

FAQ

What is the total gross proceeds from NXRT's refinancing activity?

NXRT's refinancing activity resulted in total gross proceeds of $1.466 billion, representing approximately 97.7% of the company's total outstanding debt.

How did the refinancing affect NXRT's weighted average debt maturity?

The refinancing extended NXRT's weighted average debt maturity from approximately 5.69 years to 7.0 years.

What is NXRT's new weighted average interest rate after the refinancing?

After the refinancing, NXRT's weighted average interest rate on total debt is expected to be reduced by 48 basis points to 6.21%.

When is NXRT's Q3 2024 earnings call scheduled?

NXRT's Q3 2024 earnings call is scheduled for Tuesday, October 29, 2024, at 11:00 a.m. ET (10:00 a.m. CT).

What property did NXRT sell and for how much?

NXRT sold Stone Creek at Old Farm in Houston, TX, a 190-unit property, for net proceeds of approximately $23.7 million.