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    NXRT
    Earnings call· Jun 2026(Q2 FY26)

    NexPoint Residential Trust Q2 FY26 earnings call NXRT

    Aug 4, 2026 Source

    Executive summary

    NexPoint Residential Trust Q2 FY26 — Interest Rate Headwinds Drive FFO Guidance Revision Amidst Improving Leasing Trends

    NexPoint Residential Trust revised its full-year FFO guidance downward, primarily due to increased interest expense from expiring swap positions and a slower same-store revenue rebound, particularly in Nashville. Despite these headwinds, the company reported improving leasing trends with positive blended tradeouts in July and strong expense management across the portfolio. Management anticipates a "clean inflection" in new lease pricing by late 2026 into 2027, driven by a favorable supply-demand backdrop in Sunbelt markets.

    Highlights

    5

    • Blended lease tradeouts improved from -1.7% in April to +0.3% in July, marking the first positive print since early 2025.

    • Same-store operating expenses are projected to grow by only 2.1% at the midpoint for FY26, a 140 basis point improvement from original outlook.

    • Q2 FY26 Core FFO of $0.66 per diluted share exceeded consensus by $0.01.

    • Bad debt improved by approximately 40% year-over-year, representing 60 basis points of gross potential rent.

    • Sedona Mountain community's NOI is beating budget by almost 5%, with expenses 12.2% under forecast.

    Concerns

    4

    • Full-year 2026 Core FFO guidance lowered to $2.45 per share midpoint, down $0.12 from $2.57, primarily due to higher interest expense.

    • Full-year same-store NOI guidance lowered to -1.0% midpoint, from -0.5%, with Nashville accounting for 85% of the reduction.

    • Interest expense is projected to be approximately $71.2 million for FY26, up from $69 million previously, due to an upward shift in the forward rate curve.

    • Full-year same-store revenue growth for FY26 is now projected at 0.2% at the midpoint, down 90 basis points from prior estimates.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year 2026 Core FFO
    $2.35 to $2.54 per diluted share
    high materiality
    High
    Full-year 2026 Same-store NOI growth
    -1.5% to -0.5%
    high materiality
    High
    Full-year 2026 Same-store expense growth
    2.1%
    medium materiality
    High
    Full-year 2026 Same-store revenue growth
    0.2%
    medium materiality
    High
    Full-year 2026 Interest expense
    $71.2 million
    high materiality
    High
    Full-year 2026 Acquisitions and Dispositions
    $0 to $200 million each
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Same-Store Portfolio (35 properties)
    The same-store portfolio represents approximately 98% of total units. Revenue improved by 160 basis points year-over-year from Q1 to Q2. Repairs and maintenance increase is concentrated in four markets undergoing fiber build-out (Atlanta, Nashville, Phoenix, South Florida) and is offset by resident amenity fees in other income.
    NOI Growth YoY: -2.9%End of Period Occupancy: 93.6%Average Effective Rent: $1,487 (down 80 bps)Operating Expenses Growth YoY: 2.4%Real Estate Taxes Growth YoY: -3.5%Insurance Growth YoY: -11.7%Payroll Growth YoY: -1%Property Management Fees Growth YoY: -1%Office Operations Growth YoY: -1%Repairs and Maintenance Growth YoY: 13.9%Marketing Growth YoY: 38.2%Utilities Growth YoY: 6.1%Other Income Growth YoY: 29.2%
    		$62.4 million-0.6%—$36.9 million
    Sedona Mountain (1 property)
    This 321-unit community in North Las Vegas was acquired in December of last year. Roof, exterior paint, smart rent, and amenity work are complete. The property was purchased at a high-5 cap rate.
    Occupancy: 92.2% (up 430 bps from Q1)NOI vs Budget: beating budget by almost 5%Expenses vs Forecast: 12.2% under forecastTarget NOI CAGR: 7.2% through 2029Stabilized Yield on Cost: 7.5% to 8%
    		————

    Operational metrics

    81
    Core FFO
    $16.9 million
    Q2 FY26

    Ahead of consensus.

    Core FFO per diluted share
    $0.66ahead of consensus by $0.01
    Q2 FY26

    Compared to $0.71 a year ago.

    Core FFO per diluted share
    $0.71
    Q2 FY25

    Prior year comparison.

    FFO
    $15.2 million
    Q2 FY26
    FFO per share
    $0.60
    Q2 FY26
    AFFO
    $19.7 million
    Q2 FY26
    AFFO per share
    $0.77
    Q2 FY26
    Core FFO per share
    $0.68
    Q1 FY26

    Company earned in the first quarter.

    Core FFO per share
    $1.34
    H1 FY26

    Cumulative through June.

    Total Annual NOI
    $37.9 millionessentially flat with last year
    Q2 FY26
    Value-add upgrades completed
    459
    Q2 FY26
    Upgraded units leased
    258
    Q2 FY26
    Average monthly rent premium from upgrades
    $189
    Q2 FY26

    For units leased in Q2.

    Return on Q2 upgrades
    23%
    Q2 FY26
    Total full and partial interior upgrades
    10,474
    Since inception
    Total kitchen and laundry packages
    5,100+
    Since inception
    Total tech packages
    11,200
    Since inception
    Average monthly rent increase from total upgrades
    $152.50
    Since inception
    Average monthly rent increase from tech packages
    $43
    Since inception
    Return on total interior upgrades
    20.7%
    Since inception
    Return on kitchen and laundry packages
    63.7%
    Since inception
    Return on tech packages
    37.2%
    Since inception
    Dividend per share
    $0.53
    Q2 FY26

    Payable September 30th.

    Dividend increase since inception
    157.3%
    Since inception
    Total indebtedness
    $1.6 billion
    June 30th, 2026
    Adjusted weighted average interest rate
    3.58%
    June 30th, 2026
    Unrestricted cash
    $14.6 million
    June 30th, 2026
    Undrawn credit facility capacity
    $118.9 million
    June 30th, 2026
    Total available liquidity
    $133.5 million
    June 30th, 2026
    Net leverage
    57%
    June 30th, 2026

    Of internal NAV estimate.

    Estimated NAV per diluted share
    $46.76
    Q2 FY26 end

    Midpoint estimate.

    Interest expense impact on FFO
    -$0.16
    FY26

    Largest single driver of FFO revision.

    Same-store revenue impact on FFO
    -$0.09
    FY26
    Same-store expense impact on FFO
    +$0.06
    FY26
    Interest income impact on FFO
    +$0.05
    FY26

    Tied to a Waterford DST transaction.

    Corporate G&A and other impact on FFO
    +$0.02
    FY26
    Same-store NOI reduction
    85%
    FY26

    Nashville accounts for the majority of the same-store NOI reduction.

    Same-store expense growth
    15%
    FY26

    Steepest same-store expense growth in the portfolio.

    Revenue reduction
    $590,000
    FY26

    Almost entirely offset by expense savings.

    Expense savings
    $505,000
    FY26

    Offset revenue reduction, resulting in very little drop to NOI.

    Starts off peak
    70%from peak
    Current

    National starts are off roughly 70% from the peak.

    Submarkets with less than 2% active annual inventory growth
    Two-thirds
    Current
    Submarkets with fewer than 500 units under development
    More than half
    Current
    Sunbelt submarkets absorption
    6,000
    Q2 FY26

    Against 3,146 units of new supply.

    Sunbelt submarkets net absorption
    2,852
    Q2 FY26

    Follows a positive 1,307 in Q1 FY26.

    Premium to own versus rent
    44%vs 17% long-run average
    Current

    According to John Burns.

    Move-outs to buy a home
    8.7%down from 10.9% a year ago
    Q2 FY26
    Renter households created per 50 bps decline in homeownership rate
    675,000
    Ongoing

    Based on 135 million households.

    National household growth
    70 bps
    Annually

    Per Zelman's work.

    NexPoint markets household growth
    Twice national rate
    Annually
    New leases
    1,360
    Q2 FY26
    New lease tradeout
    -5%
    Q2 FY26
    Renewals
    1,684
    Q2 FY26
    Renewal tradeout
    +1.9%
    Q2 FY26
    Blended tradeout
    -1.16%75 bps better than Q1 FY26
    Q2 FY26
    Blended tradeout
    -1.7%
    April
    Blended tradeout
    -1.2%
    May
    Blended tradeout
    -0.5%
    June
    Blended tradeout
    +0.3%
    July

    First positive blended print since early 2025.

    New lease tradeout
    -5.4%
    April
    New lease tradeout
    -2.3%improved by 310 bps from April
    July
    Retention rate
    55.9%
    Q2 FY26
    Turnover
    44.1%improved from 46.5%
    Q2 FY26
    Bad debt
    60 bps40% improvement from 1.02% in Q1 FY25
    Q2 FY26

    Of gross potential rent.

    Rent-to-income ratios
    20%
    Q2 FY26

    Healthy margin.

    Concession utilization
    55.6%
    Q1 FY26

    Share of new leases taking a month free.

    Concession utilization
    27.7%cut roughly in half from Q1 FY26
    Q2 FY26
    Average weeks free
    2.2 weeks
    Q1 FY26
    Average weeks free
    1.1 weeksfell from 2.2 weeks
    Q2 FY26
    Concession utilization
    4.8%from 87.6%
    Q2 FY26

    South Florida drove most of the reduction in concession utilization.

    Concession dollars as percentage of gross potential rent
    1%
    Q2 FY26

    Still slightly above forecast. Heaviest use in Tampa, Orlando, Nashville, and Dallas.

    Portfolio with no active concession offering
    One-third
    Q2 FY26
    Portfolio offering selective pricing only
    Roughly half
    Q2 FY26

    On aged vacants and specific floor plans.

    Leads converted
    24,703
    Q2 FY26
    Applications
    1,321
    Q2 FY26
    Move-ins
    1,226
    Q2 FY26
    Lead-to-application rate
    5.3%improved from Q1 FY26
    Q2 FY26
    Tour-to-application rate
    34.6%improved from Q1 FY26
    Q2 FY26
    Self-guided tours
    26.2%up from 18.7% in Q1 FY26
    Q2 FY26

    Represents after-hours demand.

    Interest rate swaps fixed rate
    1.1392%
    Current

    Applies to $717.5 million of protection rolling off in September.

    Interest rate swaps amount
    $817.5 million
    Current

    Total amount of floating rate mortgage debt fixed by swaps.

    Industry KPIs

    10
    MetricValueDetails
    Concessions27.7%%
    Turnover rate44.1%%
    Occupancy rate93.6%%
    Blended rent change-1.16%%
    New supply backdrop—
    Renewal rent change+1.9%%
    New lease rent change-5%%
    Same store revenue growth-0.6%%
    Development starts lease up—
    Bad debt uncollectible revenue60 bpsbps

    Orderbook & backlog

    2
    Disposition volume remaining$100 millionQ2 FY26

    Midpoint of $0 to $200 million full-year guidance.

    Acquisition volume under contract$100 millionQ2 FY26

    Midpoint of $0 to $200 million full-year guidance.

    Deals & partnerships

    1
    Sedona MountainAcquisition of a 321-unit multifamily community in North Las Vegas.$73.25 million

    Acquired in December of last year (FY25). Occupancy closed at 92.2% for the quarter, up 430 basis points from Q1.

    Capital programs

    1
    Sedona Mountain Community Upgradescompleted

    Benefit: 7.2% NOI CAGR

    Roof, exterior paint, smart rent, and amenity work are complete. Targeting a 7.2% NOI CAGR through 2029, taking a high-5 cap rate purchase to a 7.5% to 8% stabilized yield on cost.

    Risks & headwinds

    4
    Higher interest rate expenseH2 FY26

    $0.16 per share impact on FFO; $14.6 million fewer projected swap inflows; $717.5 million of swap protection at 1.1392% rolls off in September

    Mitigation: Ability to layer in more protection when risk-adjusted economics make sense.

    Slower same-store revenue reboundFY26

    90 basis point reduction in full-year same-store revenue growth outlook; Nashville accounts for 85% of same-store NOI reduction

    Mitigation: Resetting full-year forecast to a level management is confident in delivering.

    Remaining concentrated supplyLate 2026 into 2027

    Most meaningful pressure in North Charlotte, South Las Vegas, southern Orange County, and Orlando

    Mitigation: Supply cliff remains intact, and the backdrop continues to improve, leading to a clean inflection approaching.

    Concession usageYear-end FY26

    Concession dollars as a percentage of gross potential rent ran at ~1% for the quarter, still slightly above forecast. Heaviest use in Tampa, Orlando, Nashville, and Dallas.

    Mitigation: Projecting utilization to fall another 50% by year-end; one-third of portfolio has no active concession offering.

    What to watch in Q3 FY26

    5

    Blended Lease Tradeouts

    Q3 FY26
    Current+0.3%
    TargetContinued positive trend

    Why it matters

    Leading indicator of revenue growth and pricing power, crucial for the "clean inflection" narrative.

    Blended tradeouts went from -1.7% in April to -1.2% in May to -50 basis points in June. And it turned positive at about 30 basis points in July.

    Q&A highlights

    2

    Clarification on "clean inflection" in operating environment, specifically if it refers to positive new lease rates and how it shapes the 2027 outlook.

    Management confirmed the "clean inflection" refers to positive new lease pricing, expected to be slightly negative in Q3 and then slightly positive in Q4, with Q4 being the strongest quarter. The guidance revision was concentrated in four or five assets that underperformed expectations.

    “Yes, I was referring to the positive new lease rates. You know, our revisions to the guidance are concentrated really in four assets, four or five assets, that make up about $2.2 million of gross potential rent revisions. And really those markets were just not as strong as we originally thought. And so as we look forward in the new guidance and what it implies for new leases, slightly negative in the third quarter and then modeling slightly positive in the fourth quarter.”

    asked by Peter Abramowitz · answered by Matthew McGraner

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Financial Performance Overview

    NexPoint Residential Trust reported a Q2 FY26 net loss of $8.6 million, or $0.34 per diluted share, compared to a net loss of $7 million, or $0.28 per share, in Q2 FY25. Total revenue for the quarter was $64.6 million, an increase from $63.1 million a year ago, primarily due to the inclusion of Sedona Mountain. Depreciation and amortization for the quarter amounted to $23.9 million.

    02

    Interest Rate Environment and Hedging

    The Federal Reserve recently held its benchmark rate at 3.5% to 3.75%. NexPoint's full-year 2026 interest expense is now projected at approximately $71.2 million, an increase from the previously discussed $69 million, largely due to an upward shift in the forward curve (30 bps in Q3, 72 bps in Q4) and the rolling off of swap protection. Approximately $717.5 million of swap protection at a weighted average fixed rate near 1.1392% will roll off in September.

    03

    Market Fundamentals and Supply/Demand

    National apartment deliveries peaked near 700,000 units in 2024, with starts now off roughly 70% from the peak. Deliveries in 2026 are tracking to the lowest level in over a decade. In NexPoint's Sunbelt submarkets, two-thirds have less than 2% active annual inventory growth, and over half have fewer than 500 units under development. The first half of 2026 saw net absorption of 2,852 units in Q2 and 1,307 units in Q1 against new supply.

    04

    Affordability and Renter Demand

    The premium to own versus rent stands at 44%, significantly higher than the 17% long-run average, with the entry-level payment gap at its widest since 1984. Move-outs to buy a home decreased to 8.7% this quarter from 10.9% a year ago. Every 50 basis point decline in the homeownership rate creates 675,000 renter households, representing two years of normal absorption without population growth. National household growth is projected at 70 basis points annually through the end of the decade, while NexPoint's markets run at roughly twice that rate.

    05

    Valuation and Capital Allocation

    The estimated net asset value at quarter-end is $46.76 per diluted share at the midpoint, using a cap rate range of 5.25% to 5.75%. The stock trades at $25.91, representing a significant 40% discount to this midpoint, even at the most conservative end of the range ($40.35). The company's capital allocation priorities include closing this value gap through operating execution, capital recycling, and stock buybacks. Street consensus for FFO is about $2.51, with some recent estimates closer to $2.40.

    06

    Technology Platform Impact

    The company's two-layer technology model, utilizing BH Management's Funnel Leasing platform for property operations and NexPoint Intelligence at the advisor level, is contributing to operational efficiencies. In Q2, the platform converted 24,703 leads into 1,321 applications and 1,226 move-ins, achieving a 5.3% lead-to-application rate and a 34.6% tour-to-application rate. Self-guided tours accounted for 26.2% of tours, up from 18.7% in Q1.

    AI-generated summary of the company’s earnings call. Not investment advice.