NexPoint Real Estate Finance Q2 Earnings Call Highlights

NexPoint Real Estate Finance Q2 Earnings Call Highlights

NexPoint Real Estate Finance NYSE: NREF reported second-quarter earnings available for distribution of $0.46 per diluted share and cash available for distribution of $0.58 per diluted share, as the commercial mortgage REIT expanded its investment portfolio and refinanced a maturing unsecured debt obligation. Net income was $0.29 per diluted share for the quarter ended June 30, compared with $0.54 per diluted share in the year-earlier period. Earnings available for distribution increased from $0.43 per diluted share a year earlier, while cash available for distribution rose from $0.46 per diluted share.

The company paid a regular quarterly dividend of $0.50 per share, which Chief Financial Officer Paul Richards said was covered 1.16 times by cash available for distribution. The board also declared a $0.50-per-share dividend for the third quarter, payable following its July 27 declaration.

Debt Refinancing and Capital Structure Richards highlighted the closing of a $375 million drawable term loan facility with Mizuho Capital Markets as the quarter’s most significant development. NexPoint used the facility to repay $180 million of 5.75% senior unsecured notes that matured May 1. As of the earnings call, $362.2 million was outstanding under the facility. The company also entered a total return swap with Mizuho that Richards said reduced the impact of its net interest cost to SOFR plus 245 basis points. Richards said the transaction removed the company’s largest near-term liability overhang and replaced fixed-rate unsecured debt with floating-rate, asset-based financing. He said the structure provides greater prepayment flexibility and a leverage solution for new investments. The company also raised $22.6 million through its Series C preferred offering. Richards said retained operating cash flow, preferred-offering proceeds and additional secured financing capacity supported new investments during the quarter. $20.2 million preferred equity investment in a multifamily property paying a 14% monthly coupon. $42.6 million mezzanine loan secured by a life science property with a 14% coupon. $31.9 million of additional funding on existing commitments.

Book value per diluted share declined 1.9% from the first quarter to $18.60, primarily because of a small unrealized loss in the company’s stock loan portfolio. Portfolio Composition and Outlook NexPoint reported 85 investments with a total outstanding balance of $1.1 billion. Life sciences represented 39.4% of the portfolio, followed by multifamily at 37.6%, single-family rental at 15.1%, storage at 4.2%, industrial at 2.1% and marina assets at 1.6%. The portfolio was 80.3% stabilized, with a 63.4% loan...