NexPoint Residential Trust, Inc. (“NXRT” or the “Company”) (NYSE: NXRT) is pleased to announce the execution of agreements to sell Old Farm in Houston, TX, and Silverbrook in Dallas, TX to separate buyers, with an expected closing in early Q4 2023. Old Farm and Silverbrook’s trailing nominal cap rates are 5.12% and 4.55%, and their tax and insurance-adjusted cap rates are 4.96% and 4.61%, respectively.
The Company expects the dispositions of these assets to generate approximately $67 to 69 million of net sales proceeds at a combined approximate trailing nominal cap rate of 4.96% and tax and insurance-adjusted cap rate of 4.82%.
The executed agreements have $3.0 million (or approximately 2% of the combined purchase price) of non-refundable earnest money held in escrow. The properties are being sold to separate institutional investors at cap rates below their respective market cap rates calculated within our Net Asset Value Summary (Page 8 of NXRT’s Second Quarter Earnings Supplement).
The dispositions are expected to close in early October. After completing these sales, the Company expects to pay off the entire $57 million outstanding balance on the corporate credit facility. The retirement of the corporate credit facility and the property-level debt will reduce portfolio-level debt by approximately $156 million. NXRT’s hedged debt will increase to 97% from 88%. The portfolio will be hedged, 77% by swaps, 18% property-level rate caps, and 2% first mortgage fixed debt. The combination of these asset sales provides greater strategic flexibility and de-risks the Company’s balance sheet heading into 2024.
In addition, NXRT is currently in the process of selecting buyers for Timber Creek and Radbourne Lake in Charlotte, NC and Stone Creek at Old Farm in Houston, TX. We expect these sales to be completed in late Q4 2023 or early Q1 2024. These sales will allow NXRT to acquire new assets, continue to deleverage the portfolio and/or buy back shares.
“NXRT is excited to execute our strategic objectives to sell out of our Houston market positions and pay off our most expensive debt capital. Old Farm and Silverbrook sales showcase the liquidity in our markets, and low cap rates further prove the quality and desirability of our assets in a turbulent marketplace. We have seen a good buyer turnout for our other three assets in the market and expect strong returns from these additional sales. We will continue to unlock liquidity the Company can use to repurchase shares, should our stock continue to trade at a material discount to our internal NAV estimate, and to pursue attractive internal and external growth strategies should those opportunities present themselves throughout the remaining part of 2023 and into 2024.” said Matt McGraner, Chief Investment Officer.
About NXRT
NexPoint Residential Trust is a publicly traded REIT, with its shares listed on the New York Stock Exchange under the symbol “NXRT,” primarily focused on acquiring, owning and operating well-located middle-income multifamily properties with “value-add” potential in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. NXRT is externally advised by NexPoint Real Estate Advisors, L.P., an affiliate of NexPoint Advisors, L.P., an SEC-registered investment advisor which has extensive real estate experience.
Cautionary Statement Regarding 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 “expect,” “estimate,” “will,” “should,” and similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding the expected closing of the sale of the Old Farm and Silverbrook properties, the expected net sales proceeds and nominal cap rate and adjusted cap rate of the properties, the expected payoff of the corporate credit facility and related timing, the expected reduction of property-level debt and hedged debt, the asset sales provide greater strategic flexibility and derisk the Company’s balance sheet heading into 2024, the timing and expected strong returns from the sale of Timber Creek, Radbourne Lake and Stone Creek at Old Farm and that these maneuvers will unlock liquidity which the Company can use to repurchase common stock, deleverage the portfolio and pursue internal and external growth strategies. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement, including that the property sales do not close or are delayed and those described in our filings with the Securities and Exchange Commission, particularly those described in our Annual Report on Form 10-K. Readers 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 other filings with the SEC for a more complete discussion of the risks and other factors that could affect any forward-looking statements. The statements made herein speak only as of the date of this release and except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statements.
Contact:
Kristen Thomas
Investor Relations
IR@nexpoint.com
