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NexPoint Residential Trust (NXRT) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Real Estate· Aug 4, 2026

Source: earnings call transcript

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

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

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%
————

Orderbook & backlog

Disposition volume remaining $100 million Q2 FY26

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

Acquisition volume under contract $100 million Q2 FY26

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

Deals & partnerships

Sedona Mountain Acquisition 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

Sedona Mountain Community Upgrades completed

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

Higher interest rate expense H2 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 rebound FY26

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 supply Late 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 usage Year-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

Blended Lease Tradeouts

Q3 FY26
Current +0.3%
Target Continued 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.

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Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.