Q2 2026 NexPoint Real Estate Finance, Inc. Earnings Call Transcript
Key Points
- Second quarter core FFO of $0.66 per diluted share beat consensus by a penny, with first-half results ahead of plan.
- Blended lease trade-outs improved from negative 1.7% in April to positive 30 basis points in July, marking the first positive print since early 2025.
- Same-store revenue year-over-year comp improved by 160 basis points between Q1 and Q2, from negative 2% to negative 0.6%.
- Expense discipline is broad-based, with full-year same-store expense growth guidance lowered by 140 basis points to 2.1%, driven by lower real estate taxes, insurance, and payroll.
- Value-add upgrades continue to generate strong returns, with 459 upgrades completed in Q2 at a 23% return and average monthly rent premium of $89.
- Supply outlook is favorable, with national deliveries at decade lows and two-thirds of submarkets having less than 2% active supply growth, supporting a late-2026/2027 inflection.
- Concession utilization was cut in half from 55.6% in Q1 to 27.7% in Q2, with South Florida dropping from 87.6% to 4.8%.
- The stock trades at a more than 40% discount to estimated NAV midpoint of $46.76 per share, providing a compelling buyback opportunity.
- No scheduled debt maturities until 2028, with total available liquidity of $133.5 million and net leverage at 57% of internal estimates.
- Sedona Mountain, a recent acquisition, is performing well with occupancy up 430 basis points sequentially and NOI beating budget by almost 5%.
- Full-year 2026 core FFO guidance was lowered to a midpoint of $2.45 per share, down $0.12 from the prior $2.57, primarily due to higher interest expense from an upward shift in the forward curve.
- Interest expense is projected to increase to approximately $71.2 million for 2026, up from $69 million previously, with $14.6 million fewer swap inflows expected in the second half.
- Same-store NOI guidance was reduced to a midpoint of negative 1%, from negative 0.5%, with Nashville accounting for about 85% of the reduction.
- Same-store revenue growth guidance was cut by 90 basis points to 0.2% at the midpoint, reflecting softer revenue production in certain markets.
- New lease trade-outs remained negative at negative 5% in Q2, with laggards in Orlando, Charlotte, Dallas, and Nashville due to remaining supply pressure.
- Repair and maintenance costs increased 13.9% year-over-year, driven by a fiber buildout in four markets, though partially offset by amenity fee income.
- Marketing expenses rose 38.2% as the company leaned into lead generation at properties below target occupancy.
- Occupancy gave back 30-40 basis points in June as the company prioritized pricing over occupancy, ending the quarter at 93.6%.
- The Federal Reserve held rates steady with some members dissenting in favor of a hike, indicating potential further rate pressure.
- The transaction market remains illiquid with wide bid-ask spreads, and most participants expect a clearer recovery only in 2027.
Hello everyone. Thank you for joining us and welcome to the NexPoint Residential Trust Q2 2026 earnings call. (Operator Instructions) I will now hand the conference over to Kristen Griffith, Investor Relations. Kristen, please go ahead.
Thank you. Good day, everyone, and welcome to Nexpoint Residential Trust's conference call to review the company's results for the second quarter ended June 30, 2026. 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 McDermott, Vice President, Asset and Investment Management.
As a reminder, this call is being webcast through the company website at nxrt.nexplain.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 1,995 that are based on management's current expectations,
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