NexPoint Residential Trust Q2 Earnings Call Highlights

Key Points

• NexPoint lowered its 2026 core FFO guidance to $2.35–$2.54 per share, primarily because higher interest rates are expected to increase full-year interest expense to about $71.2 million.
• Second-quarter core FFO fell to $16.9 million, or $0.66 per share, while same-store revenue declined 0.6% and same-store NOI dropped 2.9%. Nashville was responsible for roughly 85% of the reduction in the same-store NOI outlook.
• Leasing trends improved during the quarter, with blended trade-outs turning positive by July, occupancy holding at 93.6%, and Sedona Mountain reaching 92.2% occupancy. Expense-growth expectations also improved, and the company reported approximately $133.5 million in available liquidity.

NexPoint Residential Trust NYSE: NXRT lowered its full-year 2026 core funds from operations guidance after higher projected interest expense and softer-than-expected revenue in several markets, despite management pointing to improving leasing trends and lower operating-cost growth.

The multifamily real estate investment trust reported second-quarter core FFO of $16.9 million, or $0.66 per diluted share, compared with $18.0 million, or $0.71 per share, a year earlier. FFO was $15.2 million, or $0.60 per share, while adjusted FFO totaled $19.7 million, or $0.77 per share. The company recorded a net loss of $8.6 million, or $0.34 per diluted share, including $23.9 million of depreciation and amortization.

Total revenue increased to $64.6 million from $63.1 million in the prior-year quarter, aided by the contribution from Sedona Mountain, a North Las Vegas property acquired in December 2025. Across the same-store portfolio, however, revenue declined 0.6% to $62.4 million and net operating income fell 2.9% to $36.9 million.

Guidance Reset Driven Primarily by Rates

Executive Vice President and Chief Financial Officer Paul Richards said NexPoint reduced its 2026 core FFO outlook to a range of $2.35 to $2.54 per diluted share, with a midpoint of $2.45. That compares with the company’s prior midpoint of $2.57.

Richards said the largest element of the revision was a higher forward interest-rate curve. NexPoint now expects approximately $14.6 million less in projected swap inflows during the remainder of 2026, representing roughly $0.16 per share of additional interest expense. The company projects full-year interest expense of about $71.2 million, compared with roughly $69 million discussed in April and $67 million in its original outlook.

The company said interest-rate swaps fix rates on $817.5 million, or approximately 51.5%, of its floating-rate mortgage debt. About $717.5 million of that protection, carrying a weighted average fixed rate near 1.14%, is scheduled to roll off in September.

NexPoint also reduced its same-store NOI outlook to a range of negative 2.5% to positive 0.5%, with a midpoint of negative 1%, from a prior midpoint of negative 0.5%. Same-store revenue growth is now expected to be about 0.2% at the midpoint, down about 90 basis points from prior assumptions.

Richards said Nashville accounts for about 85% of the same-store NOI reduction, citing softer revenue and same-store expense growth near 15% in that market. He added that South Florida, Atlanta, Phoenix and Raleigh-Durham are expected to post better same-store NOI than initially forecast.

Expense Outlook Improves

While revenue expectations were reduced, NexPoint lowered its full-year same-store expense-growth outlook by 140 basis points to approximately 2.1% at the midpoint, from 3.5% originally.

Same-store operating expenses rose 2.4% year over year in the second quarter. Real estate taxes declined 3.5%, insurance costs fell 11.7%, and payroll expense decreased 1%. Repair and maintenance expense increased 13.9%, while marketing expense rose 38.2% from a small base as the company increased lead-generation efforts at properties below target occupancy.

Richards said resident amenity services, including bulk fiber installations, accounted for 83% of repair-and-maintenance growth. The fiber work is concentrated in Atlanta, Nashville, Phoenix and South Florida, and management said related expenses are offset by resident amenity fees recorded in other income.

During the quarter, NexPoint completed 459 full and partial apartment upgrades and leased 258 upgraded units at an average monthly rent premium of $89, generating a reported 23% return.

Leasing Trends Show Improvement

Executive Vice President and Chief Investment Officer Matt McGraner said leasing trends improved through the quarter. New lease trade-outs were negative 5% across 1,360 new leases, while renewals increased 1.9% across 1,684 renewals, producing a blended trade-out of negative 1.16%.

Monthly blended trade-outs improved from negative 1.7% in April to negative 1.2% in May and negative 0.5% in June, turning positive by roughly 0.3% in July, according to McGraner. New-lease trade-outs improved from negative 5.4% in April to negative 2.3% in July, while renewal increases remained above 2%.

Same-store physical occupancy ended the quarter at 93.6%, up 30 basis points from a year earlier and flat sequentially. Retention rose to 55.9%, while turnover improved to 44.1% from 46.5%. During the question-and-answer session, Vice President of Asset and Investment Management Bonner McDermett said occupancy declined by roughly 40 basis points during June as the company emphasized pricing, adding that management was prioritizing progress toward positive new-lease pricing while operating in the mid-93% occupancy range.

McGraner said management’s updated forecast assumes slightly negative new-lease pricing in the third quarter and slightly positive pricing in the fourth quarter. He described positive new-lease rates as the “clean inflection” the company expects as supply conditions improve.

Liquidity, Capital Allocation and Sedona Mountain

As of June 30, NexPoint had approximately $1.6 billion of total debt at an adjusted weighted average interest rate of about 3.58%. The company reported $14.6 million of unrestricted cash and $118.9 million of undrawn credit-facility capacity, for total available liquidity of approximately $133.5 million. NexPoint said it has no scheduled debt maturities until 2028, when a $33 million fixed-rate loan comes due.

The company declared a second-quarter dividend of $0.53 per share, payable Sept. 30. Management said its acquisition and disposition assumptions remain unchanged at $0 million to $200 million each, with a midpoint of $100 million, as it continues capital recycling efforts.

McGraner said Sedona Mountain reached 92.2% occupancy during the quarter, up 430 basis points from the first quarter. He said the property’s NOI was nearly 5% above budget and expenses were 12.2% below forecast, while management continues to target a 7.2% NOI compound annual growth rate through 2029.

About NexPoint Residential Trust (NYSE:NXRT)

NexPoint Residential Trust is a real estate investment trust focused on the acquisition, leasing and management of single‐family rental homes across the United States. The company targets suburban and Sun Belt markets with favorable demographic trends, seeking to build a diversified portfolio of standalone residences that serve the growing demand for quality rental housing. By concentrating on professionally managed homes rather than multi‐family apartments, NexPoint Residential Trust aims to offer tenants the benefits of privacy and space, while generating predictable rental income for investors.

The firm’s investment strategy combines direct acquisitions of built single‐family homes with selective joint ventures and partnerships to optimize scale and geographic diversification.

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