NREF Announces Fourth Quarter 2023 Results, Provides First Quarter 2024 Guidance
- None.
- Earnings Available for Distribution for Q1 2024 is projected to be negative, with a midpoint guidance of $(0.45) per diluted common share. The estimated net income (loss) attributable to common stockholders for Q1 2024 ranges from $(11.7) million to $(9.6) million, indicating a potential decline in financial performance compared to Q4 2023.
Insights
The reported net income of $17.9 million by NexPoint Real Estate Finance, Inc. for the quarter ending December 31, 2023, reflects a positive performance in a challenging commercial real estate environment. This is a significant metric as net income provides an indication of the company's profitability, a key driver for stock valuation. The earnings per diluted share of $0.74 offer a snapshot of the company's earnings relative to its number of shares, which is crucial for investors assessing per-share profitability.
Furthermore, the cash available for distribution (CAD) of $11.8 million, or $0.51 per diluted share, is a critical figure as it represents the cash earnings that could potentially be distributed to shareholders. This number is particularly important for real estate investment trusts (REITs) like NREF, as they are required to distribute at least 90% of their taxable income to shareholders in the form of dividends. The CAD is a non-GAAP measure that adjusts net income for items such as amortization and depreciation, providing a clearer picture of the company's cash-generating ability.
It is also worth noting the company's portfolio diversification across sectors such as multifamily, single-family rental, life sciences and self-storage, which can provide resilience against sector-specific downturns. The weighted-average loan to value (LTV) of 68.8% is indicative of moderate borrowing relative to the properties' appraised values, suggesting a conservative approach to leverage. The debt service coverage ratio (DSCR) of 1.72x signals that the company's earnings are sufficient to cover its debt obligations, which is reassuring for creditors and investors alike.
The composition of NREF's portfolio, with a strong emphasis on single-family rental (46.0%) and multifamily (47.2%) properties, aligns with current trends favoring residential investments over commercial properties, particularly in the context of changing work and lifestyle patterns post-pandemic. The company's operational capabilities in these areas could be a strategic advantage as they navigate market disruptions.
The absence of loans in forbearance is an encouraging sign of portfolio health and suggests effective risk management practices. Follow-on investments in preferred equity and the origination of a new preferred equity investment with a high all-in blended yield of 11.5% are notable as they may boost future earnings. However, the projected net income (loss) for 1Q 2024 indicates a potential downturn, which could be a concern for stakeholders. This forward-looking guidance suggests that investors should be prepared for volatility in the near term.
Lastly, the company's focus on sectors like life sciences and self-storage, though smaller portions of the portfolio, could provide growth opportunities given the robust demand in these industries. The specialized nature of these investments may yield higher returns but could also entail higher risk, which should be carefully weighed.
Given the projected negative net income (loss) for 1Q 2024, stakeholders should consider the implications of this anticipated performance dip. The guidance suggests a loss per diluted share of between $(0.55) and $(0.45), which could impact investor sentiment and the company's stock price in the short term. The reasons behind this expected loss would be critical to understand, as it could be due to one-time charges, changes in market conditions, or operational issues.
Moreover, the reconciliation of non-GAAP financial measures to GAAP net income is important for transparency and allows investors to assess the company's performance using standardized metrics. While non-GAAP measures like CAD can provide additional insight, reliance solely on these figures without understanding their reconciliation to GAAP could lead to a skewed perception of the company's financial health.
Analyzing the company's financial results and guidance within the broader context of the real estate market and economic conditions can provide a more comprehensive understanding of its future performance. Any significant deviations from industry norms should be scrutinized for their underlying causes and potential impact on the company's strategic direction and investor returns.
NREF reported net income of
NREF reported cash available for distribution2 of
"Despite a difficult commercial real estate landscape, NREF's portfolio continues to consistently deliver stable and defensive returns," remarked Chief Investment Officer Matthew McGraner. He further stated, "We remain confident that NREF will proactively seize opportunities arising from the current market disruptions in the multifamily, single-family rental, life sciences, and self-storage sectors, areas where we possess strong operational capabilities."
Fourth Quarter 2023 Highlights
- Outstanding total portfolio of
$1.6 billion - Single-family rental ("SFR"), multifamily, life sciences, and self-storage represent
46.0% ,47.2% ,5.2% , and1.5% of the Company's debt portfolio, respectively - Weighted-average loan to value ("LTV")4 and debt service coverage ratio ("DSCR") on our SFR, CMBS, CMBS IO strips, preferred, mezzanine, credit risk transfer and mortgage-backed security investments are
68.8% and 1.72x3, respectively - As of February 28, 2024, there are no loans currently in forbearance in our portfolio
- During 4Q 2023, NREF made follow on investments of
$16 $15 11.5% - During 4Q 2023, NREF received
$3 $29
1 | Weighted-average diluted shares outstanding assumes vesting of all outstanding unvested restricted stock units and the conversion of all redeemable non-controlling interests. |
2 | Earnings available for distribution and cash available for distribution are non-GAAP measures. For a discussion of why we consider these non-GAAP measures useful and reconciliations of earnings available for distribution and cash available for distribution to net income (loss) attributable to common stockholders, see the "Reconciliations of Non-GAAP Financial Measures" and "Non-GAAP Financial Measures" sections of this release. |
3 | As of December 31, 2023; and excluding the common stock investments, preferred stock investment, the Hudson Montford and Alexander at the District multifamily properties, CMBS B-Pieces reflected on an unconsolidated basis. |
4 | Loan to value is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated or by the current principal amount as of the date of the most recent as-is appraised value. For our CMBS B-Pieces, LTV is based on the weighted-average LTV of the underlying loan pool. |
5 | Net income (loss) attributable to common stockholders in 1Q 2024 is estimated to be between |
Looking Ahead: First Quarter 2024 Guidance
Earnings Available for Distribution
- 1Q 2024 EAD per diluted common share guidance is
$(0.45)
Low | Mid | High | ||||||||||
Mar. 31, 2024 | Mar. 31, 2024 | Mar. 31, 2024 | ||||||||||
Net income (loss) attributable to common stockholders (1) | $ | (11,656) | $ | (10,619) | $ | (9,581) | ||||||
Net income (loss) attributable to redeemable noncontrolling interests | (2,002) | (1,802) | (1,602) | |||||||||
Adjustments | ||||||||||||
Amortization of stock-based compensation | 1,284 | 1,284 | 1,284 | |||||||||
EAD (1) | $ | (12,374) | $ | (11,137) | $ | (9,899) | ||||||
Weighted average common shares outstanding - basic | 18,163 | 18,163 | 18,163 | |||||||||
Weighted average common shares outstanding - diluted | 24,748 | 24,748 | 24,748 | |||||||||
EPS per Diluted Weighted Average Share (1) | $ | (0.55) | $ | (0.50) | $ | (0.45) | ||||||
EAD per Diluted Weighted Average Share (1) | $ | (0.50) | $ | (0.45) | $ | (0.40) | ||||||
Cash Available for Distribution
- 1Q 2024 CAD per diluted common share guidance is
$0.58
Low | Mid | High | ||||||||||
Mar. 31, 2024 | Mar. 31, 2024 | Mar. 31, 2024 | ||||||||||
EAD (1) | $ | (12,374) | $ | (11,137) | $ | (9,899) | ||||||
Adjustments | ||||||||||||
Amortization of premiums | 29,450 | 29,450 | 29,450 | |||||||||
Accretion of discounts | (5,075) | (5,075) | (5,075) | |||||||||
Amortization and depreciation | 1,035 | 1,035 | 1,035 | |||||||||
CAD | $ | 13,036 | $ | 14,273 | $ | 15,511 | ||||||
Weighted average common shares outstanding - basic | 18,163 | 18,163 | 18,163 | |||||||||
Weighted average common shares outstanding - diluted | 24,748 | 24,748 | 24,748 | |||||||||
EPS per Diluted Weighted Average Share (1) | $ | (0.55) | $ | (0.50) | $ | (0.40) | ||||||
CAD per Diluted Weighted Average Share | $ | 0.53 | $ | 0.58 | $ | 0.63 | ||||||
(1) | Net income (loss) attributable to common stockholders, EPS and EAD include |
Conference Call Details
The Company is scheduled to host a conference call on Thursday, February 29, 2024, at 11:00 a.m. ET (10:00 a.m. CT), to discuss fourth quarter 2023 financial results.
The conference call can be accessed live over the phone by dialing 888-660-4430 or +1 646-960-0537 and entering Conference ID 6891136. A live audio webcast of the call will be available online at the Company's website, https://nref.nexpoint.com (under "Resources"). An online replay will be available shortly after the call on the Company's website and continue to be available for 60 days.
A replay of the conference call will also be available through Thursday, March 14, 2024, by dialing 1 800- 770- 2030 or, for international callers, +1 647- 362- 9199 and entering passcode 6891136.
For additional commentary and portfolio information, please view NREF's earning supplement, which was posted on the Company's website, http://nref.nexpoint.com.
Reconciliations of Non-GAAP Financial Measures
The following table provides a reconciliation of Earnings Available for Distribution and Cash Available for Distribution to GAAP net income attributable to common stockholders (in thousands, except per share amounts):
For the Three Months Ended December 31, | ||||||||
2023 | 2022 | |||||||
Net income (loss) attributable to common stockholders | $ | 13,635 | $ | (3,733) | ||||
Net income (loss) attributable to redeemable noncontrolling interests | 3,346 | (111) | ||||||
Adjustments | ||||||||
Amortization of stock-based compensation | 1,017 | 872 | ||||||
Provision for (reversal of) credit losses, net | (1,937) | — | ||||||
Equity in income (losses) of equity method investments (1) | — | — | ||||||
Unrealized (gains) or losses (2) | (5,960) | 12,563 | ||||||
EAD | $ | 10,101 | $ | 9,591 | ||||
EPS per Diluted Weighted-Average Share | $ | 0.74 | $ | (0.17) | ||||
EAD per Diluted Weighted-Average Share | $ | 0.44 | $ | 0.42 | ||||
Adjustments | ||||||||
Amortization of premiums | $ | 4,432 | $ | 3,663 | ||||
Accretion of discounts | (3,767) | (3,521) | ||||||
Depreciation and amortization of real estate investment | 1,035 | 460 | ||||||
Amortization of deferred financing costs | (41) | 12 | ||||||
CAD | $ | 11,760 | $ | 10,203 | ||||
EPS per Diluted Weighted-Average Share | $ | 0.74 | $ | (0.17) | ||||
CAD per Diluted Weighted-Average Share | $ | 0.51 | $ | 0.45 | ||||
Weighted-average common shares outstanding – basic | 17,232 | 15,163 | ||||||
Weighted-average common shares outstanding – diluted | 23,155 | 22,696 | ||||||
(1) | Starting in the third quarter of 2023, the Company has adjusted EAD to remove the income/(losses) from equity method investments as they represent changes in the equity value of our investment rather than distributable earnings. The Company will include income from equity method investments to the extent that we receive cash distributions and upon realizing gains and/or losses. |
(2) | Unrealized gains represent the net change in unrealized gains on investments held at fair value. |
About NexPoint Real Estate Finance, Inc.
NexPoint Real Estate Finance, Inc., is a publicly traded REIT, with its common stock and
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions and beliefs. Forward-looking statements can often be identified by words such as "anticipate", "believe," "estimate", "expect," "intend," "may", "should" and similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding the Company's business and industry in general, first quarter 2024 guidance, including net loss attributable to common stockholders, EAD and CAD and related assumptions and estimates, and that NREF will proactively seize opportunities arising from the current market disruption in the multifamily, single-family rental, life sciences and self-storage sectors. They are not guarantees of future results and forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement, including those described in greater detail in our filings with the Securities and Exchange Commission, particularly those described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the Company's 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 statement. The statements made herein speak only as of the date of this press release and except as required by law, the Company does not undertake any obligation to publicly update or revise any forward-looking statements.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flows of the Company. The non-GAAP financial measures used within this press release are earnings available for distribution ("EAD") and cash available for distribution ("CAD").
EAD is defined as net income (loss) attributable to our common stockholders computed in accordance with GAAP, including realized gains and losses not otherwise included in net income (loss), excluding any unrealized gains or losses or other similar non-cash items that are included in net income (loss) for the applicable reporting period, regardless of whether such items are included in other comprehensive income (loss), or in net income (loss) and adding back amortization of stock-based compensation. Net income (loss) attributable to common stockholders may also be adjusted for the effects of certain GAAP adjustments and transactions that may not be indicative of our current operations. In addition, EAD in this press release includes the dilutive effect of non-controlling interests. We use EAD to evaluate our performance and to assess our long-term ability to pay distributions. We believe providing EAD as a supplement to GAAP net income (loss) to our investors is helpful to their assessment of our performance and our long-term ability to pay distributions. We also use EAD as a component of the management fee paid to our manager. EAD does not represent net income or cash flows from operating activities and should not be considered as an alternative to GAAP net income, an indication of our GAAP cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs. Our computation of EAD may not be comparable to EAD reported by other REITs. Starting in the third quarter of 2023, the Company has adjusted EAD to remove the income/(losses) from equity method investments as they represent changes in the equity value of our investment rather than distributable earnings. The Company will include income from equity method investments to the extent that we receive cash distributions and upon realizing gains and/or losses.
We calculate CAD by adjusting EAD by adding back amortization of premiums, depreciation and amortization of real estate investment and amortization of deferred financing costs and by removing accretion of discounts. We use CAD to evaluate our performance and our current ability to pay distributions. We also believe that providing CAD as a supplement to GAAP net income (loss) to our investors is helpful to their assessment of our performance and our current ability to pay distributions. CAD does not represent net income or cash flows from operating activities and should not be considered as an alternative to GAAP net income, an indication of our GAAP cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs. Our computation of CAD may not be comparable to CAD reported by other REITs.
Contact:
Kristen Thomas
Investor Relations
KThomas@nexpoint.com
Media: MediaRelations@nexpoint.com
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SOURCE NexPoint Real Estate Finance, Inc.
FAQ
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