NexPoint Residential Trust Inc Aktie

Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Residential Trust Q1 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Kristen Griffith, Investor Relations. Please go ahead.

Thank you. Good day, everyone, and welcome to NexPoint Residential Trust conference call to review the company's results for the first quarter ended March 31, 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 McDermett, Vice President, Asset and Investment Management. As a reminder, this call is being webcast through the company's website at nxrp.nextpoint.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, NXRT 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. I would now like to turn the call over to Paul Richards. Please go ahead, Paul.

Thank you, Kristen, and welcome to everyone joining us this morning. We appreciate your time. I'll cover our Q1 2026 financial results and then walk through a refresher on our full year outlook. Matt will then discuss the operating environment, our technology platform and AI strategy as well as portfolio positioning. Q1 2026 results are as follows: Net loss for the first quarter was $6.8 million or $0.27 per diluted share on total revenue of $63.5 million. This compares to a net loss of $6.9 million or $0.27 per diluted share in Q1 2025 on total revenue of $63.2 million.

Total NOI was $37.6 million across 36 properties, including Sedona and Lone Mountain, which we acquired last December, this compares to $37.7 million on 35 properties for Q1 2025. On a same-store basis across our legacy -- 35 legacy properties and 12,984 units, total income was $61.4 million, down 2.2% year-over-year. Total operating expenses declined 1.6% to $24.8 million resulting in same-store NOI of $36.7 million, a 2.7% decrease and an NOI margin of 59.8%, and same-store occupancy closed the quarter at 93.6%. While the year-over-year comparison reflects the tail end of supply-driven pricing reset, our mostly trajectory is improving materially. And Matt will walk you through that cadence on the structural factors driving our confidence in the second half.

Reported Q1 core FFO of $17.3 million or $0.68 per diluted share, $0.03 better than consensus, compared to $0.75 per diluted share in Q1 2025. The year-over-year decline is primarily driven by interest expense, which I'll address now. We have always been transparent that 2026 carries a meaningful expense headwind as certain swap positions fall off. Q1 total interest expense was $15.4 million versus $14.4 million in Q1 with the swap benefit declining from $8.4 million to $5.5 million. Since we issued initial guidance in February, the forward store for curve has shifted 7 to 47 basis points higher across the remaining quarters of '26. This adds approximately $2.2 million or roughly $0.08 per diluted share of incremental interest expense versus our original assumptions.

Q1 came in essentially in line with our prior model. Q2 modestly higher, Q3 steps up as swap positions begin to expire, and Q4 reflects the full run rate impact. Full year '26 interest expense is now projected at $69.3 million versus $67.1 million in our in model. We do not attempt to forecast rates, we manage the risk. The same volatility that has moved the curve against us in recent weeks creates the entry points for our next swap execution. We have visibility into the maturity schedule, the optionality to execute forward starting hedges before September, and we will move when economics are compelling as we did with the $100 million GPM forward swap last April at 3.49% and we are not waiting for the September 1.

Interest rate swaps currently fixed the rate on $917.5 million or 62% of floating rate mortgage debt, we continue to evaluate opportunities to layer additional hedges and will act when risk-adjusted economics are compelling. Moving to expense detail. On the expense side, same-store operating expenses improved 1.6% year-over-year, payroll declined 4.3%, a direct output of centralized operating model and AI-enhanced leasing platform and Matt will discuss in detail.

Real estate tax decreased 11.2% and insurance declined 23.5% and partially offset by a 15.2% increase in repairs and maintenance, which included bulk fiber service contract costs offset by revenue gains and a 50.5% increase in marketing spend as we invested in lease-up velocity at properties below target occupancy. The R&M increase reflects 2 primary drivers. First, we accelerated deferred maintenance at several properties as part of a deliberate portfolio quality initiative. Second, we incurred elevated onetime costs associated with lender required CapEx at select Florida properties.

These are episodic expenses that position the affected units for improved performance and do not reflect a structural change in our cost base. Importantly, our expense outlook is steady relative to our original model. Operating expense is on track as is corporate G&A. On insurance specifically, we settled rates for our new policy renewal on April 1, achieving 13.3% reduction year-over-year better than the strongest end of our originally guided range of 0% to negative 10%.

Moving to value-add update. During the first quarter, NXRT completed 252 floor and partial upgrades leased 225 upgraded units, achieving an average monthly rent premium of $69 and a 19% ROI. Since inception, NXRT has completed over 10,100 full and partial interior upgrades across the portfolio, generating average monthly premiums of 13.3% and inception-to-date ROIs of 20.7%. In addition, we have completed 5,027 kitchen and laundry appliance upgrades and 11,199 tech packages, generating ROIs of 63.5% and 37.2%, respectively.

For Q1, we declared a dividend of $0.53 per share paid March 31, 2026. Since inception, we have increased our dividend 157.3%. We remain fully committed to current distribution level, and our core FFO guidance midpoint coverage stands at approximately 1.21x and we expect coverage to improve as revenue trends strengthen through peak season into 2027. On the balance sheet and liquidity. On January 30, 2026, the company entered into a 55% LTV million mortgage loan secured by Sedona at Lone Mountain with Newmark.

The loan matures on February 1, 2033, with all principal due at maturity and bears interest rate based on 30-day average silver plus a margin of 1.23%. As of March 31, 2026, total indebtedness was approximately $1.6 billion at an adjusted weighted average interest rate of 3.3% and with $18.5 million of unrestricted cash and $143 million of undrawn capacity on our credit facility, providing approximately $161.5 million of available liquidity.

We have no scheduled debt maturities until 2028 when our $33.8 million 4.24% fixed-rate loan matures at residences at West Place. That loan should be easily refinanced with a new agency see when the time comes.

NAV per share. Our estimated net asset value per quarter, at quarter end is $47.70 per diluted share at the midpoint using a blended cap rate of 5.5% across the portfolio. The range spans $40.56 at a 5.75% cap rate to $54.74 at 5.25% and based on approximately 25.6 million diluted shares outstanding, the closing stock price as of yesterday at $26.36 represents a 44.7% discount to point NAV. Even at the most conservative end of our range, stock trades at a 27% discount to estimated liquidation value. We believe the disconnect between public market pricing and the underlying real estate value is significant, and the capital recycling initiatives we will discuss providing a path to validating these values through third-party transactions.

2026 guidance reaffirmed, we are reaffirming our full year 2026 core FFO guidance range of $2.42 to $2.71 per diluted share as well as our same-store NOI range of negative 0.5% at the midpoint. Two months ago, we issued initial guidance. Since then, we have absorbed 2 distinct headwinds and realize meaningful offsets that, in aggregate, fully neutralize the pressure. On the headwind side. a 7 to 47 basis point shift in the forward silver curve adds approximately $0.08 per share of incremental interest expense and a slightly lower than model Q1 leasing environment.

On the offset side, a stronger insurance renewal, expense discipline and strategic fee income from our adviser private capital platform, which Matt will address in a moment, together fully absorb those pressures. Our core FFO and same-store guidance range is unchanged. We're also reaffirming our same-store submetric ranges for the year. To reiterate, our full year targets, we see the range are as follows: Same-store rental income growth of 0% to positive 1.9% with a midpoint of 0.9%. Same-store revenue growth of positive 0.1% to positive 2% with a midpoint of 1.1%. Same-store expense growth of positive 2.8% to positive 4.2% with a midpoint of 3.5%. And lastly, our same-store NOI growth of negative 2.5% to positive 1.5% and with a midpoint of negative 0.5%. With that financial overview, let me turn it over to Matt.

Thank you, Paul. Let me start with the macro backdrop because the structural setup for our portfolio has become increasingly compelling. And even the largest real estate investors in the world are now publicly validating the thesis we have been articulating. Last week, John Gray described real estate as a sleeping giant at Blackstone and signaled conviction that an acceleration is approaching particularly around sectors with favorable supply-demand fundamentals.

Reinforcing this point, they highlighted the collapse of new supply will be very supportive of fundamentals over time across major sectors, including multifamily where industry forecasts call for deliveries this year to be at their lowest level in 12 years. That's the headline that multifamily deliveries in 2026 will be at their lowest level since 2014. That is precisely the supply backdrop we are operating in, and it is the primary structural driver of our confidence in the second half of the year and into 2027.

Let me put some numbers around it. National multifamily deliveries peaked near 700,000 units in 2024 and are declining sharply. New construction starts have fallen 70% from their peak and units under construction nationally had declined 29% from their Q1 2024 high of 760,000 units. By Q4 of this year, net deliveries are projected to fall to roughly 69,000 units nationally, the lowest level in a decade.

In our Sunbelt markets, this deceleration is even more pronounced. In NXRT specific submarkets, the demand picture is compelling. Q1 net absorption was positive 1,307 units against supply of 2,426 units with total demand of 3,733 units. For the full year, our submarkets are projected to see 10,158 units of supply against 10,239 units of demand, effectively a balanced market with demand now outpacing the remaining supply wave.

On the demand side, homeownership remains increasingly out of reach. Today, average monthly mortgage payments run 36.7% above average multifamily rent nationally. Move-outs to purchase a home fell to 7.9% for the quarter, down from 10.6% a year ago. The longer-term demographic picture remains favorable as I covered last quarter. The bottom line here, while near-term fundamentals are weaker than initially expected in select markets, the structural setup is improving quarter-by-quarter. The supply cliff, the construction starts collapse, the demand supply convergence, these are all intact and accelerating.

The recovery is asymmetric rather than synchronize with roughly 35% of our NOI already at or near equilibrium and another 44% reaching that threshold through the balance of the year. We expect fundamentals to stabilize and then accelerate as the back half of 2026 unfolds.

On to operating performance. Let me walk through the leasing cadence because the monthly trajectory tells the story. Across 1,388 new leases signed in Q1, our new lease rate out was a negative 6.6% or $97 per unit decrease. On 1,500 renewal transactions, we achieved positive 2.3% or $33 per unit increase. The blended rate across 2,916 total transactions was negative 1.9%. The monthly progression is what matters.

New lease trade-outs improved from negative 7% in January to negative 5.6% in March. Blended trade-offs narrowed from negative 1.9% in January to negative 1.7% in March. And the momentum has continued into April. New lease trade-outs have improved to approximately negative 4% a month to date a 300 basis point improvement from January to April. Blended trade-outs approximately negative 1.2%. At the market level, Las Vegas renewals led the portfolio at positive 12.2% or $164 per unit increase.

Raleigh renewals grew 2.2% with new lease trade-outs at a negative 3.8% and the shallowest decline in the portfolio. Dallas even generated $181 renew at a positive 1.9%. On the occupancy front, the same-store portfolio closed Q1 at 93.6% fiscal occupancy up from 92.6% at the start of the quarter and 92.7% at the end of Q4. April month-to-date has improved to 93.9% and our lease percentage reached 95.9%, the highest since Q3 of 2025.

Per apartment IQ data, our portfolio is outperforming market comps by 136 basis points in occupancy, which validates both our pricing discipline and the effectiveness of our central leasing program. Resident turnover was 44.4%, essentially flat sequentially, but down from 46.3% a year ago. Resident retention improved to 55.6% with March reaching 57.2%. Same-store total income was $61.4 million, down 2.2% year-over-year. Rental revenue declined 3.1%, partially offset by a 39% increase in other income, driven primarily by resident amenity fee programs, which added $469,000 of incremental revenue versus the prior year.

The standout within revenue is bad debt. We achieved 55 basis points of gross potential rent in Q1, down 45.7% year-over-year from 1.02% of GPR. This is a structural improvement driven by AI enhanced screening and centralized credit evaluation, not a 1-quarter anomaly. On to concessions, let me address concessions directly because I know this is in the front of mind of -- for our investors. First, the context. Our portfolio level concession rate is 1.9% of gross potential rent. Per apartment, the competitive set in our submarkets is running 5.7%. That is a 380 basis point advantage, and it reflects a deliberate operating philosophy. We compete on occupancy through operational execution and technology not through concession givebacks. Our revenue per available unit exceeded comps by 3.77% in Q1.

Second, the concentration. Total concessions were approximately $1.15 million in the quarter up from $271,000 in Q1 of 2025. However, a 39% of the year-over-year increase, or $342,000 was driven by a single asset of one timer lines where a concentrated competitive supply wave entered the submarket in Q4 of 2025. Concessions were deployed proactively to the fill occupancy and market position, and that strategy has worked. We closed Q1 at 94.1% occupancy at Penbrook and have continued to build, reaching 94.9% quarter-to-date.

Concessions at Pembrook have already been reduced from 1 month free to a $500 incentive which is a 75% reduction. Excluding Avon, the portfolio concession increase was approximately $535,000 or roughly 2x the prior year. Elevated, but a fundamentally different story than the headline. Third and most importantly, the forward trajectory. Our full year 2026 operating forecast projects cushion utilization declined 75% and from Q1 levels by the second half of the year. Q1 again ran at 2% of GPR, Q2 at 1% of GPR, Q3 at 50 basis points in Q4 of 40 basis points. Simultaneously, financial occupancy improves from 92.8% in Q1 to 94% in Q2, and 94.1% in Q3. 6 of our 10 markets showed improving concession environments sequentially in Q1 versus Q4 of 2025. Those are Atlanta, Las Vegas, Nashville, Orlando, Raleigh and South Florida. Even the 4 markets still facing supply-driven pressure, the rate of deterioration has stopped.

As 1 month free concessions roll off, we realized an approximately 8% pop in effective rents without raising prices. This embedded tailwind begins to materialize through the balance of the year as supply deliveries decelerate and seasonal demand strengthens. We believe Q1 was the trough for concession deployment in this cycle.

Let me spend a few minutes on the technology platform, as Paul alluded to, because Q1 results are a direct product of the investments we have been making. We are deploying a 2-layer architecture model for technology. Layer one is property operations, BH Management and their funnel leasing AI CRM platform handling day-to-day leasing, maintenance and resident services under their centralized operating model. Layer 2 is what we are building at the adviser level. NexPoint Intelligence and asset management platform that drives better decisions at the portfolio, market and unit level. We are literally building agents per property across the portfolio to enhance predictive analytics.

This architecture is delivering. Self-managed peers investing in AI must spend across both layers simultaneously. Our model delivers a disproportionate share of the AI impact at a fraction of the capital outlay. The management's funnel AI platform gives us the property operations layer as a managed service, and we focus our investment on the intelligence layer for the highest value judgment happen. We will provide the full AI product road map and financial impact thesis at REIT Week in early June.

Q1 results from the platform, our AI-powered leasing platform processed $31,882 a leads and converted them into 1,571 signed leases during the quarter, a 4.9% lead-to-lease conversion rate versus the industry benchmark of 3.2%. The year-over-year, leads were up 26% and applications were up 34% with move-ins up 53%. Our total application conversion hit 36.8% for the quarter, the best of the 4 quarters since we launched our new AI-enabled CRM system.

So aditoring technology enabled 24.7 of our leases to be executed after business hours, demand that would have been lost entirely without technology-enabled engagement. We hosted nearly 800 self-guided tours during the quarter and expect to surpass 1,000 per quarter as we move into peak leasing season. 59% of self-guided visitors submit a lease application and extraordinary conversion rate that speaks to the quality of the funnel.

A 4.3% payroll reduction, the 45.7% improvement in bad debt, the 136 basis point occupancy advantage over comps and concessions at point GPR versus 5.7% for the comps. These are all outputs of the centralized data-driven model.

Turning to Sedona Lone Mountain as a quick update on our latest acquisition. As a reminder, we acquired this 321-unit community in North Las Vegas in December for $73.25 million. Occupancy closed Q1 at 87.9% and as of April 28, the property is approximately 90.3% with a projected 30-day trend of 92.2%. The rent roll cleanup and operating recovery is ahead of our underwriting and tracking well ahead of budget. Q1 rental income beat budget by 6.7% or approximately $88,000 driven by lower-than-expected bad debt write-offs.

Total expenses be budgeted by 13.4% or $71,000. All in, NOI is leading budget by 13.4% or $130,000 through Q1. We continue to target a 7.2% NOI CAGR through 2029 and taking this asset from a high 5 cap acquisition to a 7.5% stabilized yield.

On to the transaction market, capital recycling and other earnings opportunities. For Walker & Dunlop. Q1 2026 institutional multifamily sales volume was $15.1 billion across 213 deals at a weighted average cap rate of 5.9% and $260,000 per unit. Full year 2025 volume reached $161.6 billion, up 9.1% year-over-year. Institutional capital is returning selectively with institutions and REITs comprising 36.6% of multifamily acquisitions in 2025, the highest share since 2019.

Related to our capital recycling and transaction activity, I wanted to address proactively one element of our potential earnings growth that Paul touched on. The role of strategic fee and interest income generated through our advisers DST platform. Some context. Our adviser NexPoint is one of the largest sponsors of Delaware Statutory Trust in the United States, distributing through the NexPoint Securities broker-dealer network.

Since 2017, NexPoint has sponsored over $4 billion of DSTs across a variety of property types, including core and core+ multifamily. The DST market itself reached a record of $8.4 billion of equity raised in 2025, a 49% year-over-year and multifamily is the largest category within it. Each DST transaction generates fee opportunities for sponsors financing, acquisition, asset management fees and creates lending and bridge capital opportunities where our balance sheet partners needed.

Looking forward, we meaningfully -- a meaningful potential for additional activity of this type within NXRT. The DST platform is active, the multifamily category within it continues to grow and in NXRT's balance sheet positioning is well suited to participate selectively. While we are not embedding additional transactions in our 2026 guidance, we believe the platform represents a credible source of income earnings optionality, potentially in the range of $0.10 to $0.20 of core FFO over the next 12 months under favorable conditions, balanced against our risk-adjusted return discipline and capital availability.

More broadly, this reflects a deliberate strategy to diversify NXRT's earnings streams. Larger peers like Prologis, Welltower, Realty Income, into, Equinix of all built private capital platforms in response to capital markets dynamics publicly where public equity costs can be prohibited. NXRT through its external adviser possesses the core infrastructure to pursue a similar appropriately scaled strategy. We will be outlining about our vision at this at NARI in early June.

Let me close with this. We are entering the most favorable supply backdrop in over a decade. Again, Blackstone is calling multifamily of sleeping giant. New construction starts are down 70% from the peak. Deliveries are projected at their lowest level in 12 years, and demand is absorbing the remaining supply wave in our submarkets. The setup is asymmetric. 2026 absorbs the swap repricing in the supply tail. 2027 captures the supply cliff and earn-in to put numbers around that earn-in.

If new lease growth returns 2% by Q4 of this year, consistent with the deliveries cliff, the carryover earning alone delivers 150 to 200 basis points of 2027 same-store revenue growth before a single new 2027 leases signed. We're not providing 2027 guidance today, obviously, but the structural drivers are clear and they compound in our favor.

Against that backdrop, our operating platform is performing. Bad debt is at a multiyear low, payroll is declining, insurance renewed significantly better than expected. Leasing conversion rates are at record levels, concessions at 1.9% of gross potential rent versus 5.7% for the competitive set, occupancy is building again, 93.9% in April and rising.

Potential for DST transactions generate incremental fee and interest income to diversify our earnings streams, but the operating thesis still stands on its own. The monthly trajectory is encouraging. New lease trade-outs improved 300 basis points from January to April, and we're entering the peak leasing season with strong conversion metrics, declining supply and really tepid expectations.

Indeed, the trends and trajectories give us reason for optimism. We appreciate everyone continued hard work here at NexPoint and BH, and with that, we'll turn the call over to the operator for questions.

[Operator Instructions] There are no questions at this time -- sorry, we do have a question from Michael Lewis with Truist Securities.

My first question, I wanted to ask, you talked about it a little bit, this 200 basis point difference between the occupied and lease percentages I was just wondering if there's any opportunity to narrow that. And likewise, the resident retention in the mid-50% range looks like it was going up the last couple of months. do you see upside there through operational efficiencies as well.

Yes, thanks Michael. Yes, we definitely see an opportunity to continue to drive renewals and also retention particularly as you get to the summer months, folks don't want to move in our Southeastern southeastern markets. So that's always been a core focus and any incremental improvement there, just obviously, it allows us to do a lease growth as the supply wave captures. Paul, I don't know if you have anything to add to the first point.

Yes. I think on that spread, I mean, here we are in April, right? The start of kind of peak leasing season, the properties are looking great, traffic flows. I think in the highlight section, you can kind of see last year traffic patterns, right? This is where we -- our demand funnel is the widest getting out these percentage higher -- that helps us with pricing power, right? Fewer units available. We're able to push pricing dynamics a little bit more, try to continue to narrow that gap on the new lease pricing side. So that's the focus, pushing as Matt alluded to, going into the back half of the year, continuing to hopefully start to inflect positively on rates. So the more leases we can sign, I think the better pricing dynamics we have.

And then you talked about the core portfolio like it was essentially in line. You kept the full year same-store guidance. But occupancy was up quite a bit. In almost all the markets, Vegas was up a lot sequentially. I was wondering if the occupancy increase surprised you at all? And is it fair that 1Q kind of ran in line with your expectations? Or are you running a little bit ahead to start the year? How would you kind of frame that? .

I think Q1 to me and Bonner, you can give your thoughts. But to me, Q1 felt better. I wouldn't say we hit our -- in fact, we missed -- I think we missed our NOI budget by $0.25 million or $300,000, but it did feel better from a demand perspective in that we saw the rent rolls continue to firm. We saw trends build, and we didn't particularly give up that much or at least give up that much relative to the prior quarters.

And so I personally was pleased with -- and as you can tell from my prepared remarks, I think it's firming out there, and I'm pleased with the trajectory and the trends and occupancy. Bonner, if you have anything to add to that?

Yes, I think, look, on our aggressive forecast internally. I think we put the squeeze 10, 20 basis points higher in occupancy. It is improving, and that's structurally where we're looking to go in the peak leasing season, I would say that the major wins and Matt described in the call, the ability to squeeze that debt back down to 50 basis points. I mean that that's lateral in. And I think that we utilize a software technology called 2 dots. We're getting to a point now where we can get to a credit screening approval on app in a 15-minute interaction and being able to close those leads same day, same interaction where some of our prospects may be applying here and across the street, that time to decision is really important to us.

So that's helping some of the occupancy of the operating platform that we're building is really helping. So I would say we're happy with occupancy. We'd love to continue to build it. we described a little bit of an uptick in concession utilization, hoping to see that moderate. But overall, revenue expectations within $0.01 of kind of our optimistic goal for the quarter.

And then lastly for me, this seems like the most interesting question. I don't know exactly how to frame it or if you can answer it. But -- so the interest expense is going to be higher because rates are higher. It sounds like the offset is the fee income that you talked about. Is there anything -- you said you're going to give more details at a -- is there anything more to say about how that's kind of offsetting this year? What you need to -- what you're investing or what you're earning or what exactly you're going to be doing to earn, I think you said $0.10 to $0.20 over the next 12 months. Is there any more detail you could share on that? .

Yes, happy to. So the one thing we know is that we're going to be wrong on the curve. It's bouncing around. It has bounced around. And I think unfortunately, for us, the sell side tends to model max rate pain and we get fundamentals out there possibly. So that's the backdrop. As our as the NexPoint platform, we manage about $20 billion or so across a variety of property types and have built out broker-dealer and infrastructure across those property types. .

And that allows NXRT to utilize that broker-dealer infrastructure. And what I mean by that is NXRT would sponsor the DST program. And so basically utilizing the balance sheet, we could be a lender to the transaction and make a spread above our credit line, you have 300 to 400 basis point spread there. The sponsor typically takes acquisition fees. We could be 1% to 2% of the gross purchase price of the deal.

So you can estimate that fee income to be typically $1 million to $2.5 million per transaction. And so it adds up. And given the fact that we -- I think we've been an aligned shareholder here since inception when we took public with fee deferrals, fee waivers, extraordinary side-by-side alignment and ownership. This is just another tool in our toolkit to help earnings and diversify earnings. And so we think it's the right thing to do for the business.

And look, I hope is we don't need it. The curve comes our way. We're able to swap appropriately and opportunistically and I just add this extra earnings layer on top of it. So we see it as a good thing. You bet.

Your next question comes from Buck Horne with Raymond James.

I was just wondering if you could give us a little bit more detail on the real estate taxes line. And I guess, what were the good guys and kind of how that year-over-year comps are looking as you peer into the back half in terms of appraisals or potential recoveries? Or just kind of what's going on with taxes this quarter and the outlook for the remainder of the year.

Yes, I'll be happy to help you that. So Q1, we were still fighting last year's taxes, right? We've got a couple of wins on the board. I think, in particular, a Dallas County. DFW had a number of favorable protests from last year roll into the Q1 booking. In terms of kind of the overall, I would say, we've been working with our tax consultants, right? We've gotten kind of initial values, notices in May in Texas and a couple of other of our municipalities and overall, I think our outlook is pretty stable. Valuations are down. There's less ammunition, there's less sales, that are really pushing kind of the equalniform story for us.

So we believe in access should be favorable this year to the last couple. I think we've got in our numbers roughly 4.1% year-over-year growth at the midpoint with some savings in the Q1 bookings. So we're going to continue to shoot to outperform that work to do there. Some of those flights roll into the next year. But overall, the outlook is kind of in the 3% to 4% range, and we booked, I think, 3 or 4 settlements in Q1 to help that quarterly number.

And just on the repairs and maintenance expenses, you mentioned you pulled forward some deferred CapEx, is that trend going to continue into the second quarter? When does that kind of deferred CapEx spending or that maintenance spend start to normalize? .

Yes. I think there were a few things that were a little bit noisy. Again, it's 1 quarter. Some of that is seasonal. Some of that is lender-driven on the 2024, '25. We think R&M broadly stabilizes. And when you look at the component parts of R&M that we report One of the things that's in there is that service contract revenue, it probably deserves some better specification outside that. That includes our bulk fiber contract billing. So it looks a little bit outsized, but there is a revenue offset there. So Q1, I would say, we got hit by a couple of kind of onetime things, a few of the deferred maintenance items Matt mentioned. But I think the outlook for the year generally is pretty favorable, again, kind of inflation level of R&M growth. And then we're certainly working to outperform.

Congrats good job.

Thanks, Bob.

And there are no further questions at this time.

All right. Thanks for everyone's participation and look forward to speaking seeing everyone at NAREIT in June. Have a good day. .

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Residential Trust Q4 2025 Earnings Call. [Operator Instructions]

I would now like to turn the call 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 fourth quarter ended December 31, 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 and Investment Management.

As a reminder, this call is being webcast through the company's website at nxrt.nexpoint.com. Before 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, NXRT 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 session of these in GAP financial measures, see the company's earnings release that was filed earlier today.

I would now like to turn the call over to Paul Richards. Please go ahead, Paul.

Thanks, Kristen, and welcome everyone joining us this morning. We appreciate your time. I'll kick off the call and cover our Q4 and full year results and highlights, update our NAV calculation and then provide initial 2026 guidance. I'll then turn it over to Matt to discuss specifics on the leasing environment and metrics driving our performance and guidance and details on the portfolio. Results for Q4 are as follows: Net loss for the fourth quarter was a loss of $10.3 million or $0.41 per diluted share on total revenue of $62.1 million as compared to a net loss of $26.9 million or $1.06 per diluted share in the same period in 2024 on total revenue of $63.8 million.

For the fourth quarter, NOI was $37.1 million on 35 properties compared to $38.9 million on 35 properties for the fourth quarter of 2024, a 4.7% decrease in NOI. For the fourth quarter, same-store rental income decreased 2.8% and same-store occupancy closed at 92.7%. This, coupled with an increase in same-store expenses of $0.11, led to a decrease in same-store NOI of 4.8% as compared to Q4 2024. We reported Q4 core FFO of $16.5 million or $0.65 per diluted share compared to $0.68 per diluted share in Q4 '24. During 2025, NXRT repurchased 223,109 shares for a weighted average price of $34.29 per share, which is approximately 29% discount to the midpoint of our Q4 25 NAV to be discussed here shortly.

We continue to execute our value business plan by completing 388 full and partial renovations during the quarter and leased 275 renovated units, achieving an average monthly rent premium of $74 and a 22.2% ROI. Since inception, NXT has completed installation of 9,856 full and partial upgrades, 4,979 kitchen and laundry appliances and 11,199 tech packages resulting in $158, $50 and $43 average monthly rental increases per unit and 20.8%, 63.7% and 37.2% ROI, respectively. Results for the full year 2025 rolls. Net loss for the year ended December 31 was $32 million or a loss of $1.26 per diluted share which included a $95.8 million of depreciation and amortization expense. This compared to net income of $1.1 million or income of $0.04 per diluted share for the full year '24, which included a gain on sale of real estate of $54.2 million and a $97.8 million of depreciation and amortization expense.

As a quick reminder, the company sold our 2 remaining Houston assets as well as Radbourne Lake in Charlotte in '24. For the year, NOI was $151.7 million on 35 properties as compared to $157 million on 35 properties for the same period in 2024 or a decrease of 3.4%. For the year, same-store rental income decreased 1.3% and same-store occupancy closed at 92.7%. This, coupled with a slight increase in same-store expenses of 0.1% led to a decrease in same-store NOI of 1.6% as compared to the full year in '24. We reported core FFO in 2025 of $71.3 million or $2.79 per diluted share compared to $2.79 per diluted share for 2024. Since inception of the business in 2015, NXRT has generated 8.54% compounded annual growth rate in our core FFO.

Moving to the NAV per share. Based on our current estimate of cap rates in our markets, unchanged at 5.25% to 5.75% and our 2026 NOI guidance, we are recording a NAV share range as follows: $41.43 on the low end, $85. 72 on the high end with a $48.57 at the midpoint. Next, our dividend update. For the fourth quarter, we paid a dividend of $0.53 per share on December 31. Since inception, we have increased our dividend 157.3%. For 2025, our dividend was 1.35x covered by Core FFO with a payout ratio of 73.8% of core FFO. Now our capital markets, balance sheet, leverage and liquidity. On July 11, 2025, the company entered into a $200 million revolving credit facility with JPMorgan Chase Bank and the lenders party there to from time to time. The credit facility may be increased by up to an additional $200 million if the lenders agreed to increase their commitments.

The new facility improves pricing by 15 basis points across all leveraged tiers to term SOFR plus 150 to 225 basis points. The credit facility will mature on July 30, 2028, unless the company exercises its option to extend for a 1-year term. NXRT has $13.7 million of unrestricted cash and $108 million of available undrawn capacity on our unsecured corporate credit facility, giving the company $121.7 million of available liquidity as we head into 2026. We have no scheduled debt maturities until 2028. Over time, we will look to reduce leverage, credit facility leverage, in particular, through a disposition and recycling of long-held lower-growth assets where we have the ability to harvest gains and put capital back in to work into more productive strategies and investments.

As of December 31, 2025, we had total indebtedness of $1.6 billion at an adjusted weighted average interest rate at 3.28%. Interest rate swap agreements effectively fixed the interest rate on $0.9 billion or 62% of our $1.5 billion of floating rate mortgage debt outstanding. As we have done historically, we will continue to evaluate the credit markets for opportunities to hedge or restructure our debt to best position our assets and the portfolio for future growth while maintaining the highly liquid low friction optionality afforded to us through the use of floating rate agency mortgage financing arrangements. Full year 2026 guidance. For 2026, we are issuing the guidance as follows: rental income on the low end, 0%, with a midpoint of 0.9% in the high end of 1.9%. Total revenue low end of 0.1% with a midpoint of 1.1% at a high end of 2%. Total expenses, low end of 4.2%, midpoint 3.5%, high-end 2.8%. The same-store NOI, low end, negative 2.5%, midpoint negative 0.5% and the high end of 1.5%.

Earnings per diluted share, low end, negative $1.54 and midpoint negative $1.40 and the high end negative $1.26. And lastly, core FFO per diluted share, low end, $2.42 a midpoint $2.57 and at high end $2.71. Matt will go into detail on our same-store operating assumptions with his prepared remarks and the largest driver from our 25 actuals to 26 midpoint guidance is interest expense. And again, Matt will provide details on our thoughts regarding upside on the operational front and our same-store operating assumptions.

And with that, I'll turn it over to Matt for commentary on the portfolio.

Thank you, Paul. Let me start by diving a bit deeper into our fourth quarter same-store operational results. Same-store average effective rents post the year at $1,489 per unit per month, down 10 basis points year-over-year. Six of our 10 same-store markets generated positive year-over-year growth in effective rents with Tampa leading the way at 3.1% followed by Las Vegas, South Florida and Charlotte at 2.1% and 1.6% and 1.3%, respectively. On the occupancy front, the same-store portfolio closed the year at 92.7%, down 195 basis points year-over-year. South Florida took the poll position at 94.5% with Phoenix, Charlotte, [indiscernible] Raleigh rounding out the top 4 markets with at least 93% occupancy as of the year-end.

We saw noteworthy occupancy improvement in Phoenix, in particular, billing to 94.5% as the team maintained heavy focus on defense to combat the heavy delivery of new units over the past several quarters. Renewal conversions were 57.4% for the quarter and 54.25% for the full year, with 2026 retention being starting off strong with January over 50% in February month-to-date is 51.6%. March is projected to finish around 56%. Revenue for the year of 5 of our 10 same-store markets delivered positive revenue growth with South Florida, Atlanta and Raleigh each growing at least 1%. Tampa and Charlotte rounded out the growth markets. Bad debt continued to trend down, finishing the year at 80 basis points of GPR, a 42% improvement year-over-year, demonstrating both the health of our tenant demographic as well as the efficacy of the centralized screening techniques we have employed to strengthen our portfolio post COVID.

Tampa, Raleigh and Atlanta saw particular improvements to bad debt with each producing losses by more than half the prior year total. Concession utilization has increased from 38 basis points as a percentage of gross potential written in 2024, up to 69 basis points for the full year 2025. The most noteworthy increase clearly seen within our Phoenix market at 1.4% of GPR as our value-add assets were made to contend with the significant market level occupancy acquisition strategies for merchant builders throughout the year. Phoenix, Orlando, South Florida and Atlanta each saw a need for increased concessions with 1.1%, 0.47%, 0.4% and 0.36% increase in utilization, respectively.

Overall, same-store revenues were down 1% year-over-year and turning to the expense side. With limited catalysts for revenue growth in 2025, the team paid particular attention to expense management and we're pleased to report a full year decline of 10 basis points to same-store operating expenses. Advances in AI and our strategic focus on its development to streamline workflows across both our resident and property staff experience enabled us to achieve a 3.7% year-over-year decrease in total payroll costs and an 80 basis point decline in office operations expense.

We see this trend continuing, and I'll have more detail later on this in my prepared remarks. Thoughtful asset management, zero-based budgeting and our sharp focus on turn management costs -- turn cost management and material contract negotiation kept the lid on repair and maintenance expense inflation growing by just 2.5% for the year. Other favorable results were realized through our real estate tax and insurance strategies, up 1.8% and down 12% for the year, respectively. Our full year same-store NOI margin was a stable 60.8% while our year-over-year same-store portfolio finished down 1.6%, as Paul mentioned. Notable same-store and high-growth markets for the year were South Florida, Charlotte and Nashville at 1.4%, 1% and 90 basis points, respectively. On December 11, 2025, NXT purchased loan Mountain in Las Vegas, Nevada for $73.25 million, management identified an opportunistic high-growth acquisition in a long-term market.

The strategy involves deploying accretive value-add capital to normalize economic occupancy and expand operating margins through targeted demand generation, interior and amenity enhancements, lifestyle upgrades and disciplined execution ultimately driving asset appreciation and outsized returns. Recent scale developments have driven significant expansion, job growth in residential revitalization in North Las Vegas, which is now the Las Vegas Valley most prominent industrial market. Over 15 million square feet of industrial space is currently under construction or planned supporting the creation of 8,000 new jobs in the market. And as a reminder, we intend to improve economic occupancy by approximately 900 basis points over 4 years while grading 182 units and installing smart home technology throughout the community, driving a 7.2% NOI CAGR through 2029.

Now turning to 2026 guidance. As Paul said, we were guiding between 2.5% decline and a 1.5% increase in same-store NOI growth for 2026, with the midpoint projecting a 50 basis points reduction year-over-year. Our 2026 guidance includes the following assumptions: a 90 basis point net income growth at the midpoint, forecasting 93.4% and to 94.1% financial occupancy with peak occupancy model for Q3 with a more normal seasonal demand and performance expectations for the year, a negative 30 basis point earn-out from lease trade-outs in a gain to lease in version in 2025, a positive 1.2% market rent growth in 2025 with roughly 40% realized this year, predominantly in the second half of the year. a positive 40 basis point top line growth attributable to ROI CapEx spending as detailed further hereafter. Flat economic occupancy at 91.8% at the midpoint, 30 basis points lower vacancy cost at the midpoint, 93.7% versus 93.4% for the prior year.

We're stabilizing bad debt approximately 80 basis points with a range of 70 basis points to 90 basis points, down more than 75% and from peak pandemic era payment behavior. And then flattish concession utilization at 71 basis points CPR heavily weighted in the first half of the year. We're assuming 1.1% total revenue growth at the midpoint, driven by modest rental income growth expectations I just went over and mid-single-digit other income growth.

Turning to expense guidance. We're assuming 6.4 controllable expense growth at the midpoint. 80% growth is attributable to bulk increased WiFi contract costs that have a direct revenue offset. We're assuming down 1% R&M and turn cost growth with turnover in interior R&M is expected to decrease $375,000 or 8.4% due to effective cost management and an increased volume of renovations in 2026. We're assuming 2% labor growth, the continuation of our rollout of AI technology and centralization of operations contribute to modest labor growth. We see optimism in outperforming our midpoint as we further implement Agentic AI strategies and maintenance body across our markets. We're assuming a 7.4% growth in advertising and marketing expense and just a 10 basis point growth in G&A expense.

We're assuming total expense growth of 3.5% at midpoint, which is a 4.5% increase in the utility expense line item a 2.1% insurance premium reduction, assuming a 0% to 10% renewal on April 1 of this year. But for that, our team, including Paul here, we're recently meeting with the markets in both London and New York and we're optimistic we'll achieve another favorable outcome for the program with this 2026 renewal.

On the real estate tax expense growth side, we're assuming a positive 4.4% growth real estate taxes make up 31% of the 3.9% total expense increase at the midpoint and are expecting the band of real estate taxes to increase from 2% to 8% across the portfolio. And of course, we will protest and litigate outsized value assessments vigorously throughout the year. On the value-add side, we continue to be an internal growth business at our core. And to that end, our guidance includes the following assumptions regarding our value-add programs, which remain aligned with our historical 15% to 20% ROI targets. We expect to accelerate value-add CapEx deployment toward the back half and into 2027 as our submarkets see net demand and occupancy pricing power improves for landlords.

We're assuming approximately 300 full interior upgrades at an average cost of $16,500 per unit and generating a $240 average monthly premium. We're assuming approximately 400 partial interior upgrades at an average cost of $3,500 per unit, generating a $70 average monthly premium. These partial upgrades include varying bespoke additions such as new stainless steel appliances, hard service countertops, updated tub enclosures and private yards, among other aspects. These partial bespoke rehab initiatives are strategically tailored by property to drive rate growth where we see opportunities among competing properties. Blended ROI expectations here are the low to mid-20s. And if market conditions allow, we have identified another 1,500 bespoke upgrades across the portfolio with double-digit ROIs. Finally, we're also planning to install 680 washer dryer installs at an average cost of $1,200 per unit, generating a $54 monthly average premium or 54% return on investment.

Now turning to summarize the -- our outlook for the 2026 year. Basically, we like what we own. We believe affordable residential assets in well-located suburbs and the top job growth and net migration markets in the country will outpace demand over the near term. Our markets are business friendly with the continued and persistent tailwind of factors pointing towards Sunbelt growth. You name it, we have it, taxes, weather, business climate, jobs, investment in physical and digital infrastructure. Indeed, many signs for growth we're already pointing to the Sunbelt, and we believe still are. In underpinning our guidance for the year is cautious optimism. We think the Sunbelt multifamily market is approaching its long-awaited inflection point.

After absorbing the largest supply of ways since the 1980s, completions with completions peaking at almost 700,000 units in 2024, a 54% increase from 2021 baseline completions. We are optimistic that new lease growth is set to turn positive across most undented markets than the second half of this year with sharp acceleration into 2027. Reasons for our belief in include persistent structural demand, the cost to own a home is 3x more than a rent apartment in our markets. a 60% decline in new market rate deliveries from the peak and construction starts running approximately 70% below their 2022 peak, locking in a multiyear supply trough. Weighting each NXRT market by unit exposure, the portfolio level to jobs new construction unit ratio bottomed at approximately 1.5 jobs to one unit of new delivery in mid-2025 and our entire portfolio is projected to cross back above the historically significant ratio of 4 jobs to one unit by Q1 of 2027.

However, the recovery is highly asymmetric. Roughly 35% of our portfolio, South Florida, Las Vegas and Atlanta is already at or approaching equilibrium, while 44%, including Phoenix and DFW won't reach that threshold until 2026. But for example, South Florida or 21% of our NOI as an adjusted BLS nonfarm payroll divided by the CoStar and Yardi delivery ratio of 7.5 jobs to 1 unit, well above the equilibrium. Atlanta or 12.5% of NOI just crossed back over 5:1. And given that supply is now relatively muted over the near term, the key variable is weather Sun job growth and debt migration can maintain its recent pace. If you can, the supply cliff now baked into every NXRT markets pipeline creates the conditions for a sharp and synchronized recovery in the second half of 2026.

Another reason for optimism is the demographic profile of our renter population, we do believe in AI and they will have a near-term chilling effect over entry-level white-collar jobs. But today, the NXRT average renter is largely blue collar, 38 years old with a household income of $90,000 per year, not really the AI bulls eye. Furthermore, advances in health and wellness are adding longevity of the population, creating somewhat of a demographic backstop to demand. The 65-plus percent population -- 65-plus population is growing at 3% to 5% across NXRT markets and Harvard JCHS projects the senior renter population to double from 5.8 million households to 12.2 million households by 2030. While obviously a senior housing tailwind, we are starting to see sizable signs of this trend in our own results. So in closing and through the last few -- the last few years have indeed been difficult, we're optimistic that new inflection will happen in the Sun Belt this year for the vast majority of our portfolio.

In the meantime, we will continue to do all that we can to utilize technology to become more efficient, drive value-add programs and ultimately drive value for our tenants and our shareholders. That's all I have for prepared remarks based to our teams here at NexPoint and BH for continuing to execute. And with that, we'll turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from the line of Omotayo Okusanya with Deutsche Bank.

First question around the refurbishment and remodeling. I think you mentioned that in 2026, you're going to do about 400 of those I mean you do like 600 washer dryer installation. So that's like 1,000 altogether versus, I think in 2025, you did about 1,800 total volume. Just kind of curious why you kind of have the drop, especially as you're talking about it could do another 1,500 if market conditions allow.

Yes, it's Matt. Maybe I didn't come across or you misheard the category. So the plan is to do 300 full upgrades across the portfolio and additional 400 partials and then roughly -- yes, and so I think that was the delta, but we're ending up basically at the same place of about 1,700 units. And then as we're if what we believe will happen, happens, then we'll be able to drive those incremental bespoke upgrades that I mentioned that can't reach up to 1,500 additional units. .

That's awesome and helpful. And then in regards to the interest rate swap, again, a few years ago, you guys kind of successfully negotiated some of these swaps and kind of came out ahead with some lower rates. Just kind of curious as you kind of think about '26, how you kind of see that playing out this time around, especially when again, you do kind of see rates have been coming down at least to start the year.

Yes. Great question, Tayo. This is Paul. So yes, we look at '26 and what the swap market is pricing a 3-, 5-, 7-year swap and it just isn't taking in what we fully expect on the rate cut side. If you look at the current [indiscernible], the dispersion is extremely interesting. You've deeply divided committee with 175 basis points of actual spread with mirroring at the bottom end at [indiscernible] and you have a few multiple hawks that your pricing in 0 rate cuts this year. You have 3 decenters this past meeting.

So it's a really deeply divided dot plot, which is affecting swap markets and not really pricing what we truly believe will be at the end of the year with rate cuts. So we're holding tight right now on putting and layering in additional swaps. But again, this can change in a moment's notice. So it's one daily recheck and refresh of those rates to see if they're hitting what we believe to be kind of to 3 rate cuts for the year. And we're -- I'm a little more bullish too on that, too. So it's just a constant refresh and remodel of our models and when we want to layer in additional swaps for the year to layer in behind the ones that are burning off here in Q3, Q4 this year.

Your next question comes from the line of Buck Horne with Raymond James.

Just wondering if you could give us any updates on either January and/or February trends since quarter end in terms of new renewal, blended lease rates, just occupancy. Any additional color on how early spring leasing has gone?

Yes, it's Matt. The January new leases were down 7%. -- renewals were 1.6 for a blended minus 2.6 or 2.7 or $40 trade out. February is better and getting better and firming. The new leases were down 5.7%, and renewals were up a positive 1.7% for a blended negative 1.8% and again, we're seeing pretty positive trends on the renewal side, too, so on the trend.

Got you. Got you. Appreciate the color there. And then I think secondly, my other question was on CapEx and maybe potential CapEx spending for the upcoming year. It looks like the trend in both kind of the recurring and nonrecurring maintenance CapEx numbers still trending above normal or above trend line historically. What were some of the key drivers for that this year? And then how are you thinking about total CapEx spending for this coming year?

Yes. On the maintenance side, I'll kick that to Bonner, but some of the outsized things that we're doing are the bulk WiFi on the resident amenity side. which again has a direct offset. So that's kind of elevated the numbers. But again, the net effect of that is minimal on the on the income statement. Bonner, do you have anything to add on the maintenance side? .

Yes. So our 2026 outlook and relative to '25, you see 2025, we had a little bit of a pickup in interior rehab spending. We had less of the exterior and common area this year post refinancing the portfolio at a $2.2 million. There were some more major projects there. So I think outside the Sedona acquisition, there is about $1 million of exterior work to do there. The capitalized rehab should be pretty stable year-over-year. And I think that same for the capitalized maintenance, the recurring and nonrecurring, we're certainly looking to control those expenses, understand that's roughly $30 million for the full year 2015. I think that we've seen some price easing we're certainly being thoughtful about that as a team.

And as Matt has mentioned, we kind of have a strategic approach here where pricing power is going to dictate the volume of renovation all for the year. So if we can get trade-outs that justify the spend, we'll see a little bit higher spend probably more in line with 2025. But if we're not getting to the trade-offs that we need and the ROIs that we want, we may look to skinny that down a bit.

Your next question comes from the line of Michael Lewis with Truist Securities.

Maybe this question kind of logically follows after talking about CapEx. When we subtract CapEx from your AFFO calc, it looks like the dividend isn't covered. I know you recently raised the dividend. This is always a tough -- I realize it's a board decision. It's a hard question to answer. But as you look forward to '26, I mean, do you think the dividend is covered by cash flow? And maybe just kind of remind us of what the dividend policy is?

Yes. The dividend is covered by cash flow and its target ratio of 65% to 75% of core FFO.

Okay. Okay. And then I wanted to ask, you gave a lot of great data about supply and demand really detailed. The occupancy for 4Q was a little lower than we expected. I was wondering if it was lower than you expected and how you're kind of managing pricing versus occupancy right now where we are before we kind of get to that inflection whenever it comes?

Yes, it's a great question, Michael. We -- it is lower than we expected, but it was somewhat intentional. So concession utilization was increased over the fourth quarter and into January, it's abating somewhat in February. But we're reluctant to utilize more than 1 month of concessions on -- particularly when we believe pricing power will significantly increase over the year. It also didn't look to lock in a negative 12-month earn in and cannibalize what we believe is an inflection year.

We truly believe that on a deal-by-deal basis, largely for the vast majority of our portfolio and not jumping up and down, happy with 92.7%. But the good news is our first quarter guidance is a 93%. So I think we're on track to hit that and hopefully, we'll capture some of this inflection.

Your next question comes from the line of Linda Tsai with Jefferies.

In terms of your comment on the senior renter population doubling by 2030 and that you're seeing sizable signs of this trend in your markets. Can you delved into this comment more? And then would you start to amenitize your properties any differently based on an aging population?

Yes. Again, great question. We're seeing it because our average age is picking up, and we're just getting anecdotally from the sites, especially in the Sunbelt particularly in Florida for resident amenities that cater more to the senior housing population. It's something that we've I guess, taking notice of as Welltower and the others catch up into a really good bid and believe in the -- this demographic backstop, as I mentioned in my prepared remarks, we do believe this trend, we think AI is going to be positive for GDP growth ultimately and have people when they live longer and make more money, they want to invest in their health and entertainment.

And so we are actively looking to resource our portfolio designed to cater to health and wellness and entertainment. And I think that those things will produce a wider demand funnel than what we've historically been used to and catering to blue collars. And so there's no reason in our portfolio, why we can attract in Richardson Texas [indiscernible] located somewhere outside of Dallas, some empty nesters that want to be closer to their kids, they go to SMU, for example. So I think that, that trend will continue particularly in the Sunbelt, particularly in our markets and just follow the same net migration trends as we've seen over the last 5 years.

Are you seeing you rent your income from the older population increasing?

Yes, indeed. And that's adding to our both our age and our average household demographics. When we started this company 11, 12 years ago, our average renter was 28 years old and made $60,000 a year. So we're increasingly catering, I think, to a purpose-driven renter and it makes sense. The aging population, they want less yard when they want more amenities. They don't want to deal with maintenance themselves. And they want to travel. So we like that trend. We're going to play into it. And I think we have the portfolio to take advantage of it.

And then just one guidance question. It doesn't seem like your guidance incorporates buybacks. Are you still considering buybacks in '26?

Yes, we are. We'll always consider them. I think that we -- the Sedona deal was important because we like the ability to take that cap rate from a 5.7% going into a 7.5%, and that was a one-off opportunity. And those opportunities we'll always do. But in the meantime, I think if we do it at a stock price sub-30 and a 6.6% implied cap rate, and we stay here for a while. I think you'll see us buy back some star. That being said, I mean I really do believe that this year is the year that we will inflect and I think stock prices we'll follow that upwards in the second half of the year. .

That concludes our question-and-answer session. I will now turn the call back over to management team for closing remarks.

Thank you for all your time this morning. I appreciate everyone's again, time and attention and look forward to speaking to you next quarter.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Hello, and thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Residential Trust Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Kristen Griffith, Investor Relations. You may begin.

Thank you. Good day, everyone, and welcome to NexPoint Residential Trust conference call to review the company's results for the third quarter ended September 30, 2025. On the call today are Paul Bridges, Executive Vice President and Chief Financial Officer; Matt McGraner, Executive Vice President and Chief Investment Officer; and Bonner McDermett, Vice President, Asset and Investment Management.

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

Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meanings 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, and expertise 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. I would now like to turn the call over to Paul Richards. Please go ahead, Paul.

Thank you, Kristen, and welcome, everyone, joining us this morning. We appreciate your time. I'll kick off the call and cover our Q3 results, updated NAV and guidance outlook for the year. I will then turn it over to Matt to discuss specifics on the leasing environment and metrics driving our performance and guidance.

Results for Q3 are as follows: Net loss for the third quarter was $7.8 million or a loss of $0.31 per diluted share on total revenues of $62.8 million the $7.8 million net loss for the quarter compares to a net loss of $8.9 million or a $0.35 loss per diluted share for the same period in 2024 on total revenue of $64.1 million.

For the third quarter of 2025, NOI was $38.8 million on 35 properties compared to $38.1 million for the third quarter of 2024 on 36 properties. For the quarter, same-store rent and occupancy decreased 0.3% and 1.3%, respectively, This, coupled with the decrease in same-store revenues of 0.6% and same-store expenses of 6.2% led to an increase in same-store NOI of 3.5% as compared to Q3 2024.

As compared to Q2 2025, rents for Q3 2025 on the same-store portfolio were down 0.2% or $3. We reported Q3 core FFO of $17.7 million or $0.70 per diluted share compared to $0.69 per diluted share in Q3 2024. During the third quarter, for the properties in the portfolio, we completed 365 full and partial upgrades, lease 297 upgraded units, achieving an average monthly rent premium of $72 and a 20.1% return on investment.

Since inception, NXRT has completed installation of 9,478 full and partial upgrades, 4,925 kitchen and laundry appliances and 11,389 tech packages resulting in $161, $50 and $43 average monthly rental increase per unit and 20.8%, 64% and 37.2% return on investment, respectively. NXRT paid a third quarter dividend of $0.51 per share of common stock on September 30, 2025.

For Q3, our dividend was 1.37x covered by core FFO with a 73.2% payout ratio of core FFO. On October 27, 2025, the company's Board approved a quarterly dividend of $0.53 per share a 3.9% increase from the previous dividend per share payable on December 31, 2025, to stockholders of record on December 15, 2025.

Since inception, NXRT has increased the dividend per share by 157.3%. Turning to the details of our updated NAV estimate. Based on our current estimate of cap rates in our market and forward NOI, we are reporting a NAV range per share as follows: $43.40 on the low end, $56.24 on the high end and $49.82 at the midpoint.

These are based on average cap rates ranging from 5.25% in the low end and 5.75% in the high end, which remains stable quarter-over-quarter. Turning to full year 2025 guidance. NXRT is reaffirming guidance midpoints for loss per diluted share, core FFO per diluted share, same-store rental income, same-store total revenues same-store total expenses and same-store NOI and tightening guidance ranges for acquisitions and dispositions.

Loss per share core fulfill ranges are as follows: loss per diluted share of negative $1.22 at the high end negative $1.40 at the low end with a midpoint of negative $1.31 and for core FFO per diluted share, $2.84 at the high end, $2.66 at the low end with affirming the midpoint of $2.75.

This completes my prepared remarks. So I'll now turn it over to Matt for commentary on the portfolio.

Thank you, Paul. Let me start by going over our third quarter same-store operational results. Same-store total revenue was down 60 basis points, albeit with 5 of our 10 markets, averaging at least 1% growth, with Atlanta and South Florida leading the way at a positive 2.8% each.

We are also pleased to report continued moderation in expense growth for the quarter. Third quarter same-store operating expenses were down an impressive 6.3% year-over-year. payroll and R&M declined 7.5% and 6.1%, respectively, with year-over-year in total controllable expenses down a meaningful 6%.

Insurance was also favorable by 19%, driven by the team's efforts here and market improvement on the property casualty side. Real estate taxes also decreased 8.7% due to favorable protest outcomes, most notably in our Nashville portfolio. Third quarter same-store NOI growth continues to improve in our markets with the portfolio averaging a positive 3.5%, a marketable improvement from down 1.1% last quarter.

Seven of our 10 markets achieved year-over-year NOI growth of at least 2.5% or greater with Nashville and Atlanta leading the way at 26% and 7.8% growth, respectively. Our Q3 same-store NOI margin registered a healthy 62.2%. The portfolio experienced improved revenue growth also in Q3 with 5 out of our 10 markets achieving growth of at least 1% or better.

Our top 5 markets were Atlanta and South Florida at 2.8%, Tampa at 2.4%, Raleigh at 2.1% and Charlotte at 1%. Renewal conversions for eligible tenants were 63.6% for the quarter, with all 10 markets executing positive renewal rate growth of at least 75 basis points or better. 646 renewals were signed during the quarter at an average of 1.81%.

On the occupancy front, the portfolio registered a 93.6% occupancy as of the close of the quarter, market competition from lease-up assets on down the spectrum remain our biggest challenge, but clearer skies are forming ahead. As of this morning, our portfolio is 93.6% occupied and 95.8% leased with a healthy trend -- 60-day trend of 92%.

Even though we saw elevated pressures to occupancy and concession utilization, top line rent beat our internal forecast by 20 basis points for the quarter and bad debt continues to stabilize with a meaningful 32% year-over-year improvement for the quarter. Again, on expenses, they continue to moderate and finish the quarter down 6.4%.

Payroll declined 7.6% this quarter and continues to trend downward as we implement centralized teams and AI technology. Our centralized platforms for renewals, screening, call centers, alongside AI applications deployed across various aspects of the resident experience are all driving greater efficiency and enabling reductions in on-site staffing, particularly within the leasing offices.

As mentioned previously, we're now focused on optimizing our maintenance operations to drive similar efficiencies across our markets. Insurance, real estate taxes, R&M and G&A were the other categories that saw meaningful year-over-year improvement for the quarter with all categories improving at least 6% or more. Now turning to our updated view on supply. We believe we're close to the end of a record national new multifamily supply cycle.

[ CoStar ] annual net deliveries having peaked at 695,000 units in the trailing 12-month period ending in Q3 2024 and Q4 2024. This compares to annual net delivery delivered units of 351,000 on average in the prior 5 years that prior 5 years being Q3 '14 through Q3 '19 and 282,000 units on average since 2001.

CoStar forecast net deliveries reached 697,000 units in 2024 and expected to be 508,000 units in 2025 before falling significantly year-over-year in 2026 by 49% in 2027 by an additional 20%. A critical Q3 for deliveries followed by a steeper drop off. For Q3 of 2025, deliveries are 17% down quarter-over-quarter and is the last quarter with more than 100,000 units delivered.

An increased expectation for 3Q 25 deliveries is followed by a significant drop off to Q4 2025 deliveries that is now forecasted at just 69,000 units down 52% year-over-year and 41% quarter-over-quarter. This ushers in the start of a lengthy period where deliveries are expected to be below the long run average and more bullish long-term forecast versus prior years.

2027 and 2028 delivery forecasts have also fallen. CoStar now expects 2027 deliveries of 234 units that compares to forecast from December of last year of 283,000 units and 231,000 units for 2028 that compares to prior forecast of 308,000 units.

That's down 27%. On the whole, cautious optimism best fits our rental market outlook. Looking better in place is still challenged, but we have come to the time where market fundamentals are coalescing to support a more bullish outlook for multifamily. We expect the rental market will take the lion's share of new household formation and outperform the for-sale market in the near term.

While some markets still have supply issues, particularly in our fast-growing Sun Belt markets, demand is still there. We're absorbing units at a very strong clip right now, and part of that is due to the affordability challenge in the for-sale market. It's about twice as expensive on a monthly basis to own a home as it is to rent the average apartment in the U.S.

During the quarter, the team re-underwrote each of our assets as if we were to buy them new today with a particular view on the submarket competition for lease-ups. We try to estimate based on historical lease-up trends where in each of our submarkets that have supply pressures would indeed stabilize. We define submarket stabilization as 92% occupied with new construction deals being at least 70% leased.

Our analysis showed that 5 of our 10 markets should stabilize in the first quarter 6 of the 10 in the second and 8 of the 10 in the third quarter of next year with all markets stabilizing by year-end. Indeed, this could happen sooner as NXRT markets are littered with major job and corporate relocation announcements almost daily across finance, technology, defense, logistics, manufacturing and research.

Billions of capital and thousands of jobs across names such as Align Data Centers, Alliance Bernstein, Apple, Bell, Textron, Fujifilm, Goldman, Intel, Microsoft, Oracle, TSMC, Wells Fargo have all hit our markets in the past 6 months alone. Again, more reason for cautious optimism.

On the transaction front, buyer sentiment for multifamily purchasing continues to improve in Q3 according to CBRE and our own experiences, Institutional investor allocations to real estate are expected to tick up to 10.8% in 2026 according to institutional real estate allocations monitor. Firms like Blackstone remain bullish on commercial real estate investments given muted supply growth and lower cost of capital in the form of lower rates and tightening spreads.

Indeed, Blackstone, in particular believes we're now approaching a steeper point in the price recovery, and we share that view. We continue to actively monitor the sales market for opportunities and stay close to any movements on cap rates in our markets. Many investors remain sidelined but we see opportunity to return to the market as fundamentals improve.

We're expecting to recycle capital in the next couple of quarters against this transaction backdrop and excited to announce that NXRT has been awarded the opportunity to acquire a 321-unit multifamily community in the high-growth suburbs in Northern Las Vegas. This asset features a unit mix focused on 2- and 3-bedroom floor plans ideal for young families and roommate situations.

Recent large-scale developments have driven significant expansion, job growth in residential revitalization in North Las Vegas which is now the Las Vegas Valley's most prominent industrial market. Nearby over 15 million square feet of industrial space is currently under construction or planned supporting the creation of approximately 8,000 jobs in this submarket alone.

We have evaluated this asset to be structurally sound, well located and prime for value-add execution that is the best we have underwritten all year. We believe the asset has potential to generate a 7% same-store NOI CAGR over the next 5 years. Our plan will be to acquire the asset in late Q4, utilizing available capacity on the facility.

And then we expect to execute 1 or more sales transactions in the first half of 2026, utilizing tax-efficient 1031 reverse exchange mechanics thereby initiating our capital recycling growth strategies as we head into 2026. We expect this strategy to modestly be accretive for 2026, while yielding stronger core FFO growth throughout the 2027 to 2030 period.

Capital recycling to generate growth is our primary external objective, selling mature assets with limited potential into newer growth, nicer and higher-growth assets within our familiar market geographies. Transforming the portfolio and unlocking gains for tax-efficient capital recycling and high conviction assets to grow NOI at an outsized rate is consistent with the company's extra execution.

We expect to continue scouring the market for the best opportunities, but we will absolutely prioritize stock buybacks as well in the low 30s over the near term. To summarize and reiterate a couple of points. On the macro outlook, we see the market signaling a steeper recovery ahead.

On operations, revenue is moderating, but at a decelerating pace, and we continue to demonstrate strong expense control driven by R&M, labor and insurance. We have stabilized bad debt and view that the financial health of our [ Tinet ] demographic is quite strong and resilient to market pressures. We have full conviction we can hit our same-store guidance expectations, and we are positioned for improved performance heading into 2026.

On the balance sheet, we're cognizant of the swap maturity overhang on our earnings forecast and we continue to monitor that daily for opportunities. We expect to act in replacing the swap book over the near term and certainty before any expirations. And on our path to growth, we see green lights ahead as it relates to our capital recycling strategy. Good deals are available. We are confident in our ability to underwrite, capitalize and execute on them. And our team will be heavily focused on doing just that heading into 2026 as well as, again, importantly, buying back stock in the low 30s.

In closing, in the near term, we will continue to prioritize a balanced approach, driving occupancy, maintaining disciplined risk strategies, managing controllable expenses to support steady NOI growth while we look to accelerate our capital recycling strategy and portfolio transformation to drive external growth as conditions on the field are set to improve.

Looking ahead, we are confident in the long-term fundamentals of our Sunbelt position workforce housing assets which we will -- which we see to be well positioned to outperform other geographies given our favorable trends in population migration, job creation and wage growth.

That's all I have for prepared remarks. I appreciate our team's work here at NexPoint and BH for continuing to execute. And that concludes our prepared remarks. So at this time, I'll turn it back over to the operator and open up the call for questions.

[Operator Instructions] Your first question comes from the line of Omotayo Okusanya with Deutsche Bank.

On the operating expense side, again, things look like they're going really well. Could you just talk a little bit about if that is going to be sustainable on a going-forward basis. And I just asked that in the context of full year guidance where the midpoint of guidance suggests that FFO growth in FFO in fourth quarter will be $0.61 versus your current $0.70 run rate, which is being helped by better than expected expense control?

Yes. I think the -- there's a couple of categories, [ trials ] this back. We think that we'll have continued improvement in sustainability on the noncontrollable side with insurance. We also feel good about the real estate tax protests that are going on and see potential upside in that number.

On the payroll and R&M side, we're -- we don't see anything changing materially and expect that to be consistent as well for what it implies for core, I think we're cautiously optimistic that we're -- that we'll exceed expectations as usual. And that's -- we're doing everything we can to beat on the expense side in the face of the supply pressures.

I don't know, Bonner, if you have anything to add to that.

Yes. I would just add, I think on the real estate taxes, we received one pretty significant settlement that's kind of onetime in Q3. So that's not necessarily the run rate for taxes there, but it does -- if you'll remember, Nashville is on a 4-year revaluation cycle. So we fight this battle every 4 years that occurred last year.

We've been in the process of litigating them as we've got court dates on a couple of the other deals, but we don't expect to see any dramatic shift there. So some of the real estate tax savings that you see in the quarter is more onetime to the nature.

But I agree with Matt, particularly on payroll and repair and maintenance expenses, those are heavy focuses for us controlling. So I do think that we can continue at least through the first quarter on the payroll run rate we've made strategic initiatives to centralize a lot of the operations. So most of that activity on the P&L hit kind of April 1 and going forward.

Got you. Can you quantify that onetime benefit in 3Q? How much that was?

Yes. The total there was $820,000.

Okay. That's helpful. Then my second question is, again, yourself your soft disclosed NAV. Again, you guys -- whether you're at the low end or the high end, depending on the cap rate you're using, I mean the stock has been persistently trading at this kind of huge discount to NAV. And I guess when you guys look at that over a long-term period, if that gap is not necessarily made up over time.

How do you kind of think about kind of what next for NXRT and how you try to create shareholder value? If you just kind of get a sign of perpetual large discount NAV granted a lot of the sector is already trading that way. So this is not unique to you, but just curious how you're thinking about that.

Yes. Look, we've been very clear since we became public in 2015 that we view the company as a growth company. But we -- I mean we also have the company set up to transact as well with floating rate debt. Our goal is to hit $170 million of NOI by 2027. It's that simple. And the terminal value at the in our mind, will always be there.

We think that the portfolio is hard to replace and scale we think we have the best job best exposure to the highest job growth markets. And we have -- we believe that if the discount isn't closed, then we'll close it. We own 16.5% of the company. We're highly aligned to do so. And what we absolutely know is that even in a muted transaction environment, there's still a bid for multifamily.

The transaction market is still kind of a 5 cap market and especially for assets like ours. So while the public markets are discounting multifamily stocks. We think that, that will change dramatically in 2026 as new lease pricing in flex, I think that's going to be the catalyst of it. I see that happening in the second quarter probably of 2026.

And I think our stock will start to perform into that bid of new lease growth. But if it doesn't, we're confident that there is a terminal value and a bid for the company. We know that for sure. So we'd like to continue to grow the earnings stream and think we can -- but if not, there's a bit there.

Your next question comes from the line of Buck Horne with Raymond James.

You guys give out the splits on new lease rates, renewals and the blend for the quarter?

No, we did it a supplement, but we'll update it for you. The new -- for the quarter, new leases were down 4.06% or $5 renewals were up 1.94% or 29 almost $30. That's a blended negative 44 basis points.

Got it. Appreciate that. And then by the way October?

October is kind of trending the same way. right New leases were down 3.78% or $54, Renewals were up about 70 basis points or $10 for a blended down 1%.

Perfect. You are [indiscernible] to my next question. I appreciate that. Up ahead of you, man. I also touch a little bit on the CapEx spend, just kind of the maintenance CapEx, both recurring, non-recurring in added to about $9 million in the quarter. Do you see that starting to taper off anytime soon? Or is that kind of the run rate that you expect the portfolio to be on for at least a few more quarters.

Yes. I mean I think it's a little bit elevated and the reasons for that is because we haven't been able to recycle as much of the portfolios we typically do. So there is a little bit of more maintenance CapEx going into it. Bonner, do you have anything to add to that?

Yes. I'd also say if you're referencing Page 22 of the supplement, you'll see the interior spend is up particularly in the third quarter, that's up, but it's also up on a smaller dollar improvement. So our market upgrade program, where we're not doing the full enchilada premium upgrades with hard surface counters and things like that. We're focused more on kind of that -- on average, it was about $4,000 upgrade. So to some units that we touched in the past or needed some help to be competitive.

We're spending about $4,000. We're getting a $70 premium -- so it's not quite the historical run rate for spend on interiors, but we're still getting to that kind of 20% annual return. So we think that, that may see short-term low pricing is under pressure. And then we I think we referenced this on the last call, the large refinancings that we did with Freddie Mac, we got new property condition assessments.

Those kind of dictated some larger nonrecurring CapEx spends, milling and paving of drive lines, some siding repairs, some roofs. We're also doing -- we're redoing a pool in Raleigh. So we've got some, I would say, larger projects this year. I think we're more focused on streamline that spend going into next year.

And those are more onetime in nature anyway, so it should moderate.

Perfect. Great color. I appreciate that. And again, congrats on a great job on controlling the expenses in this environment, a lot of progress there. I think I want to go back to Omotayo's question about capital allocation and just thinking about the NAV discount.

But I guess, the question really is, why go after a new asset in Vegas at this point when you could buy the existing portfolio probably at an equal or better kind of combined NOI yield and growth rate going forward? Just kind of what's the -- help us walk through the rationale of why buy an asset right now where you can buy the existing portfolio?

Yes, I think -- I don't think they're mutually exclusive. I think we can do both. As I said, I think over the near term until we close on this deal, we're going to aggressively buy back stock given where the capital is. But our view also is -- we do need to show some external growth in terms of capital recycling. We're not going to be net acquirers, so to speak. So we're not going to just go out and buy willy-nilly.

The difference with this deal is, given the situation of the asset, it's basically going in almost a 6 cap that we believe we can drive to a 7.5% or an 8% cap over the course of our 3-year value-add campaign. And those opportunities don't really exist on a large scale. This is a very precision-based investment.

And I don't think it cannibalizes anything we're doing on a stock buyback program. Our free cash full yield is still strong. And I mean, I meant what I said when we're trying to hit $170 million of NOI in 2027 by the end of that year. I think that that's possible. And if we do that and we apply the terminal cap rate, I think we'll all be very happy.

Appreciate it.

This concludes today's question-and-answer session. I would now like to turn it back over to the management team for closing remarks.

Thank you very much for everyone's participation today and look forward to speaking to you all live in December [indiscernible] Thanks again.

This concludes today's call. You may now disconnect.

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 Q2 2025 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Kristen Griffith, Investor Relations. Please go ahead.

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 and Investment Management. As a reminder, this call is being webcast on the company's website at nxrt.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, and NXRT 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.

I would now like to turn the call over to Paul Richards. Please go ahead, Paul.

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 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 the 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. During the second quarter, for the properties in the portfolio, we completed 555 full and partial upgrades, leased 381 upgraded units, achieving an average monthly rent premium of $73 and a 26% return on investment.

Since inception, NXRT 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. NXRT 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 was 1.39x covered by core FFO with a 72.2% payout ratio of core FFO. During the second quarter, the company repurchased 223,109 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 5-year $100 million SOFR swap at JPMorgan Chase with a fixed rate of 3.489%.

Turning to the details of our updated NAV estimate. Based on our current estimate of cap rates in our markets and forward NOI, we are reporting a NAV per share range as follows: $43.90 on the low end, $57.73 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. NXRT's tightening 2025 guidance ranges for core FFO per diluted share and same-store NOI while affirming the midpoint. And NXRT is revising 2025 guidance ranges for earnings loss per diluted share, same-store rental income, same-store total revenue and same-store total expenses, loss per share and core FFO ranges are as follows: 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. NXRT 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 1-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.

So I'll now turn it over to Matt for commentary on the portfolio.

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 4 out of our 10 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 second quarter 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. 5 out of our 10 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 4 out of our 10 markets achieving growth of at least 1.2% or better. Our top 4 markets were Atlanta at 3.6%, South Florida 2.3%, Raleigh at 1.5%, Charlotte at 1.2%.

Renewal conversions for eligible tenants were 54.2% for the quarter, with 7 out of our 10 markets executing renewal rate growth of at least 2.75%. Again, on the expense front, they continue to moderate and finish the quarter up only 1.5%. Payroll declined 2.8% for this quarter and 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 2Q 2025 marked the first quarterly drop of over 20 basis points in inventory growth in over 15 years as new deliveries tapered after peaking in late 2024. Despite the slowdown, over 400,000 units were delivered in the trailing 12 months, sustaining elevated competition in lease-ups. The upshot here is that after 1 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, '27 and '28.

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. NXRT 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 the 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 and soft consumer sentiment. Renewal rent growth has been the strongest we've seen over the past 12 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 tempered for now. Orlando, we expect to finish the year at negative 1% versus prior forecast of being flat. And Atlanta finished the year at negative 70 basis points versus our prior forecast of 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 decline in evictions. The portfolio finished 2Q with only 50 basis points of net bad debt. We have continued 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 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 '26.

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 we 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, and 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. And 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 real page summary echoes the sentiment, momentum trails expectations, but fundamentals are firming, and that's what we're seeing as well.

A 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 disciplined 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 Instructions] Your first question comes from the line of Kyle Katorincek with Janney Montgomery Scott.

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 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 2 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 nonrevenue 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 the increase in output of renovations. That's really more focused on kind of bespoke $1,000 to $3,000 opportunities. So it's not been an acceleration and all that much spend there. If that's helpful.

Okay. And then on the rehab program, last quarter's call, you guys mentioned it would take us probably a few quarters to get back to 400 units a quarter target. So what drove such a large increase that allowed you guys to ramp up to the 500-plus units in the second quarter versus what you were thinking last quarter?

Yes. It's certainly been a focus of ours going into the year. We recognize there's an opportunity. It's probably not $10,000 to $15,000 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 full on.

And then last one on that. For the ROI in your post-rehab units, what like is the useful life for tenure, you usually use to calculate your ROI on those. Is there any difference between full and partial units?

No difference. And I think historically, it's been 7 years.

Your next question comes from the line of Linda Tsai with Jefferies.

Phoenix and Vegas saw bigger drops in 2Q 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. And then you also mentioned that Vegas should exceed expectations by year-end. Is the inflection in 3Q or 4Q?

Linda, it's Matt. I'll take Phoenix first. Phoenix is perhaps the most supply-driven market that we're seeing right now. Really, it's 3 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 kind of negative 8% to negative 10% 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 1 asset, Bella Solara, which had a little bit more weaker traffic than we thought. So that makes up most of the loss. Bonner, if you have anything to add on that.

Yes. I would say for Phoenix, obviously, a large geographic concentration there. That market being one of the more recent peaks in supply you've got more concession utilization in that market than we've been accustomed to. We've had to adjust to that in the segment going into the third quarter. Overall, we think we'll finish the year there actually low 93% to high 92s occupancy. I think we'll be all right. We need to use a little bit more concessions to buy some occupancy there. But feel okay. 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 Matt's point on in Bella Solara, in particular, saw a decrease in traffic. It only net resulted in about 8 fewer leases for the second quarter, but it's something we're monitoring and something we think we can do better on. That's another midpoint of our guidance there is to finish the year at 92.8% occupancy. We certainly think we could do better and hope to, but I think we're being appropriately defensive at this point.

And then just 1 follow-up. What's driving the lower turn costs.

Yes. I think the first and foremost thing is higher retention. We're trying to close the back door and have focused on renewals really kind of proud of the second quarter and into the third quarter renewal rates. And so that will continue to be a focus.

But yes. We're also prioritizing in those market updates the increase in kind of partial renovations is targeted towards those potential heavy turns where maybe a unit we've already touched before and may have the majority of kind of modern update package, but we have an opportunity to go in, add a hard service counter, add a stainless steel appliance package, lighting package. We're doing smaller upgrades, trying to get a $20 premium there and then that goes into the capital bucket. So the increase in value-add is offsetting some of that turn cost.

I will now turn the call back to the management team for closing remarks.

Yes. Well, thank you for everyone's time this morning, and I look forward to talking to you again next quarter. Thanks.

Ladies and gentlemen, that concludes today's call. You can now disconnect. Thank you, and have a great day.