Nexpoint Real Estate Finance Inc (NREF) 2025 Q4 法說會逐字稿

Thank you for standing by. My name is Jordan and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Next Point Real Estate Finance Q4 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. And if you'd like to withdraw your question, press one again.

Thank you. I'd now like to turn the call over to Kristen Griffith, Investor relations. Please go ahead.

Thank you. Good day, everyone, and welcome to Next Point Real Estate Finance's conference call to review the company's results for the fourth quarter ending December 30, 2025. On the call today are Paul Richards, executive Vice President and Chief Financial Officer, and Matt McGreiner, executive Vice President and Chief Investment Officer. As a reminder, this call is being webcast through the company's website at invest.nextpoint.com.

Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1,995 that are based on management's current expectations, assumptions, and beliefs.

Listeners should not place a new reliance on any forward-looking statements and are encouraged to review the company's annual report on Form 10K and the company's other filings with the SEC for a more complete discussion of risk and other factors that could affect the forward-looking statements.

The statements made during this conference call speak as of today's date and except as required by law, and ref does not undertake any obligation to publicly update or revise any forward-looking statements.

This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company presentation that was filed earlier today.

I would now like to turn the call over to Paul Richards. Please go ahead, Paul.

Thanks, Kristen, and good morning, everyone. I'll walk through our quarterly results, cover the balance sheet, and provide guidance for Q1 before turning it over to Matt for a deeper dive on the portfolio and the macro lending environment. Fourth quarter results are as follows. We report a net income of $0.52 per diluted share compared to $0.43 in Q424. The increase was driven by unrealized gains on our preferred stock and stock warrant investments. Earnings available for distribution came in at $0.48 per diluted share compared to $0.83 in Q424. Cash available for distribution was $0.53 per diluted share, up from $0.47 in the prior year, our prior quarter. We paid a regular dividend of $0.50 per share in the fourth quarter, which was 1.006 times covered by cash available for distribution. The board has declared a dividend of $0.50 per share for the first quarter of 2026.

Book value per share increased 1.4% from Q3 to $19.10 per diluted share, primarily driven by unrealized gains on preferred stock investments and stock warrants.

Turning to new investment activity during the quarter. We funded $5.7 million on a loan with a monthly coupon of SOA plus 900 basis points with a 14% floor, along with $22.5 million on a loan paying an 11% monthly coupon. We also funded a combined $17.4 million across two marina loans at a 13% monthly coupon. On the capital market side, we raised $60.5 million in gross proceeds from our Series B preferred stock offering. For the full year, we reported net income of $2.09 per diluted share, more than double the $1.02 reported in 2024. The increase was primarily driven by higher net interest income.

Interest income increased $17.4 million to $89.9 million for 2025, up from $72.5 million in the prior year, driven by higher rates on the portfolio. At the same time, interest expense declined from $44.4 million to $42.8 million. Earnings available for distribution was $1.84 per diluted share, up 3.4% from $1.78 in 2024. Cash available for distribution was $1.97 per diluted share compared to $2.42 in the prior year, a decrease of 18.6%. Moving to the portfolio and balance sheet, our portfolio consists of 92 investments with a total outstanding balance of $1.2 billion. By sector we are allocated as follows 47% multi-family, 30% life sciences, 70%, 17% single family rental, and the balance across storage, marina, and industrial by investment type, 28% CMBSB piece, 23% preferred equity, 20% mezzanine loan, 14% revolving credit facilities, 10% senior loans, and the remainder in IO strips and promissory notes. Geographically, our collateral is concentrated in Massachusetts at 24%, Texas at 16%, and California at 7%, with the Massachusetts and California exposure heavily weighted towards life science. Florida, Georgia, and Maryland round out the top states reflecting our continued preference for Sun Belt markets. The collateral on our portfolio is 82.5% stabilized with a 63.6% loan to value ratio and a weighted average debt service coverage ratio of 1.24 times.

We have 771.2 million of debt outstanding at a weighted average cost of 5.3% and a weighted average maturity of roughly one year. Our secured debt is collateralized by 689.2 million of assets with a weighted average maturity of 3.6 years and a debt-to-equity ratio of 0.92 times.

During the quarter, we refinanced $36.5 million unsecured notes with a new $45 million unsecured offering at 7.875%, a modest step up from the 7.5% notes we issued in October of 2020 when we were in a zero% interest rate environment. The new notes carry a 2-year term with prepayment flexibility which positions us real well in the declining interest rate environment. We're pleased with its execution and look forward to turning out the remaining unsecured notes in the first half of 2026. On that note, we have 180 million of unsecured notes maturing in May, and we are actively reviewing several options to achieve the best execution and pricing on the refinancing.

We also recently launched our Series C 8% preferred stock at $25 per share. Through the end of the year, we have sold approximately 80,000 shares for a total gross proceeds of $2 million and a total of $14.1 million through today.

Lastly, subsequent to quarter end, we entered into a re-remit transaction on our fra 2017 K62 DB piece with Mizuho. Under this structure, we are selling the B piece and purchasing a horizontal risk retention tranche, which represents roughly 5.8% of the re remix. This transaction reduces our mark to mark repo financing by 75.2 million, and our debt to equity ratio would decrease to 0.83 times, and the HRR tranche carries an expected yield of 18.5%. On a gof basis, the interest expense, savings and reinvestment capacity are expected to be around 30 to 430 to $0.34 per share accreted to annual CAD. We view this as a compelling example of actively managing our BP's portfolio to unlock value and improve our capital efficiency.

Moving to guidance for the first quarter, earnings available for distribution, $0.40 per diluted share at the midpoint with a range of 35 to $0.45. Cash available for distribution, $0.50 per diluted share at the midpoint with a range of 45 to $0.55.

And with that, I'd like to turn over to Matt for a detailed discussion of the portfolio and the current market environment. Matt, appreciate it, Paul.

I'm excited to speak to everyone today about N rev's pipeline and trends in our main verticals. I also want to thank our team here, as Paul just mentioned, and all of our partners for another quality quarter for the business and our shareholders with great execution.

As it relates to our main verticals, I'm very pleased with our portfolio of assets in this.

Era of major.

AI disruption.

Indeed, Next point has been steady and intentional about our asset selection, and thankfully Next Point, and by extension in ref especially, is not investing in AI scare trade assets or assets historically leverage to these property types. We are intentional about our residential and self storage exposure, both recession resilient property types necessary for everyday life. Indeed, the introduction of AI to these property types is only improving efficiency and margins in these businesses and not rendering them obsolete.

Even our life science exposures in first to fill assets in elite educational districts producing this AI talent. What's more, the demand funnel for our life science collateral is widening to AI companies themselves, which need the purpose-built lab-type buildings to house their compute infrastructure.

Our Airlife project is a perfect example. Lab and AI tenants could go to older converted assets for half the rent, but they must have the infrastructure and bones of these purpose-built, well-located assets, and they'll pay for it.

So, let me start there with Life Science for the quarter.

Our largest single asset exposure in Life Science, Lwife Park, is now 64% leased at a debt cap rate with RFPs, LOIs, and leases now totaling 2.8 times the square footage of the project. Momentum has materially increased since the li the lease, and we expect this trend to continue to have the project fully leased in 2026, yielding a debt cap rate with a 12 handle.

More broadly, certainly less expensive alternatives exist in the suburbs or in second gen space. The first to fill buildings in impossible to recreate locations again in elite educational centers is our exposure.

And what we are fairly certain of are two things. Number 1, health, wellness, and longevity of life was already a rapidly growing trend before the latest AI disruption. And if we do get the productivity gains and GDP growth as a result, we believe the population will prioritize spending in their health, i.e., living longer and entertainment. Drug discovery and delivery are key tenets of life science demand, and we believe each of these have a massive tailwind for purpose-built new life science products and elite academic ecosystems. The second tenet of our thesis in leaning in when we did, is that new supply over the near term is non-existent.

Our basis in our collateral is 300, 30% to 60% below replacement costs for these assets, and that's just replacement costs, let alone the need to justify a profit for a new life science development.

In short, we really like our portfolio and where it's positioned, especially relative to comps and the demographic and AI tailwinds are real.

On the residential front, we continue to work through the highest supply cycle since the 1980s and do see the new lease inflection this year. I've detailed this on prior calls, but just to quickly repeat, we think multi-family rents will reflect positive with most of our market exposure occurring in the second half of 2026. We attribute this to four main factors persistent structural demand, the cost to own a home is 3 times more to rent an apartment in our markets.

A 60% decline in new market rate deliveries from the peak.

Construction starts running approximately 70% below their 2020 peak, locking in a multi-year supply trough, and finally concession burn off, resulting in immediate gains to gross potential rents.

We do think AI will have some job cannibalizing effects, particularly in the entry-level white collar job market, but also see an encouraging residential trend offsetting potential job weakness. That is, advances in health and wellness are adding longevity to the population, creating somewhat of a demographic backstop to demand. The 65+ population is growing at 3% to 5% across our markets. In a late 2025 study from Harvard projects the senior renter population to double from 5.8 million households to 12.2 million households by 2030.

On the self storage front, Q3 RI earnings came in at or slightly above expectations. Excuse me, Q4 R expect earnings came in slightly above expectations, but revenue was flat to slightly negative year over year.

Looking forward, Q4 full year performance is expected to show flat revenue and 50 to 150 basis point decline in NOI.

Some sell site analysts have already trimmed their 2026 and 2027 estimates.

Occupancy generally remains under pressure, with industry average ending 2025 at 89%, down 210 basis points from from the start of the year. The primary culprit is a sluggish housing market, as home sales remain near multi-year lows and mortgage rates stay elevated, reducing a key demand driver for self storage.

Rates are the bright spot. However, after two years of falling rates, some down 20% from COVID era highs, movement rates have been trending up since May of 2025 and should help offset some of the occupancy weakness.

Also good news, supply remains constrained at just under 3% of existing stock, with the already projecting deliveries as low as 1% over the next couple of years. Again, high financing costs, expensive land, and material cost inflation are deterring new development, which should eventually restore pricing power and return to NOI growth to the historical 3% to 5% range.

Our next point storage portfolio significantly outperformed the broader industry in 2025, finishing the year at 91.7% occupancy, exceeding its NOI budget by 3.2%, and growing NOI 13% over 2024.

Looking into 2026, NOI growth is expected to moderate to 4%, reflecting portfolio stabilization, softer demand, and rate constraints on our two LA properties, but still notably higher than the than the broader industry.

On the SFR and BCR front, fundamentals continue to outperform the broader multi-family segment generally. Our SFR collateral remains some of the best performing within our portfolio with steady occupancies in the mid-nineties, with positive new lease and renewal growth as well.

In recent discussion with the agencies and notwithstanding recent proposed regulation limiting institutional ownership in the sector, Fannie and Freddie remain open to finance, build to rent assets. Indeed, we believe this is an immense area of opportunity, regardless of regulation to either take subordinate risk off of the agencies or fill a direct lending void to institutional portfolios of scattered site SFR should this void materialize.

As Paul mentioned, our underlying credit profile of the portfolio remains very strong atop commercial, a top commercial mortgage rate sector.

And also given our healthy dividend coverage, very low leverage, stable book value, and capital options available to us, you can expect that we will also continue to opportunistically buy back stock while pursuing these new investments, particularly after the refinancing of our bonds. Again, very pleased with the portfolio's performance and look forward to deploying more capital this year in 2026. Again, I want to thank the team here for their hard work and now we'd like to turn the call over to the operator for questions.

As a reminder, if you'd like to ask a question, simply press star, followed by the number 1 on your telephone keypad. Your first question comes from the line of Crispin Love from Piper Sandler. Your line is live.

Hi, how's it going? Can you guys hear me all right?

Yeah.

You're great.

Awesome.

Thank you so much. This is Benremman for Crispin Love. Thanks for taking the question. I'm wondering if you could discuss dividend sustainability and your confidence in the current level. The EAD guidance range is below the dividend, but cash available for distribution is in line, and, I'm wondering what the major factors are that are dividing yours and the board's decision on the dividends here and, when do you believe you could be covering the dividend on a more consistent basis with the AD?

Thank you.

Yeah, hey, great, getting to talk to you. So yes, our EAD, is a little below our CAD, but the majority of that is, again the bridge from EAD to CAD and amortization of premiums, some appreciation of discounts and depreciation and REO. So, we believe that CAD is the better, indicator of, dividend coverage and sustainability, hence why we have, continued to recommend a $0.50 dividend to the board, and they have. Approved it every time, so, we feel very good on the go forward, one from the rerunning transaction we discussed, two from the continued Series C raise and redeployment at 200 to 400 basis point net interest margin, for that number to grow over time as well. So, we feel well positioned, for the future for dividend sustainability.

Yeah, I just add to that, our, we've consistently out earned our dividends since our inception, again, have stable book value, going on the offensive and, really like our cost of capital again to drive the results that you're seeing here, which, relative to the comps, we think it's pretty good.

Awesome.

Thank you so much for the color there. And then if I could ask one more question, when you look at your portfolio areas between multi-family, single-family rental, self storage, life sciences, etc. I'm wondering what areas you're most excited about today and then further, how do you expect the administration's focus on real estate, mortgage, and single-family affordability to impact some of the areas where you're invested?

Thank you.

Yeah, I.

Think, I'm glad, as I mentioned that we leaned into the life sciences when we did last year, at a time when, there was no capital available, because we're starting to see, folks, re-enter that market which are going to reduce spread. So,

right now, I think, where we're spending the most time is on, the BTR, in the multi-family front, on the new construction and stretch senior side. Providing B notes, and selling off A notes for, both new construction and or, new lease up deals, both on the BTR front and on the multi-family front as it relates to, the recent proposed regulations, I think it's still too early to tell, but our organization has been involved in some of the regulatory, process, if you will, and lobbying process in DC.

And you know I think from from our exposure you know we feel very good about mainly focusing on you know built for rent assets which are adding to the the housing stock and not detracting from it. And so we still think that there's going to be a need to provide capital in that in that space, so I think the opportunity remains for BTR assets. What's more interesting and I think more in the bull's eye of the proposed regulations are scattered side SFR. There's been proposals on, limiting, institutional buyers from purchasing homes off of the MLS, and how that all shakes out in terms of, the finance ability. It's probably too early to tell, but I think the ABS market.

On the scattered site front is still very active and still, I'd say wide open. Even, post the announcements, I think that market still continues to trade well and still, I think the origination volume is still open, but to the extent that it's closed and scattered site becomes a little bit of a, out of favor with the broader, lending environment because of political pressure, I do think that that's an opportunity for us to enter that market and provide capital and liquidity because we're very obviously very comfortable with it.

Awesome.

Thank you.

So much for taking my Questions.

You bet.

Your next question comes from the line of Jade Ramani from KBW. Your line is live.

Thank you very much. Can you touch on the provision for credit loss that took place in the quarter around 12 million and what do you expect on that going forward?

Absolutely, Jade. Hey, this is Paul.

I would say that 1/3 of it was just our general reserve. We include, we updated our, calculation to be again more conservative. It now includes a severe downside component to the Cecil provision to align with our peer group. And the other, call it 66% were on deals that we've already taken a seasonal reserve on, which are on a few of the prep deals that we spoke about last quarter. On the go forward expectations, I, again, I think you're kind of at that trough, and there shouldn't be really, there aren't any more really more problem areas on the press book or in the portfolio. So, I think this would probably level off in 26.

Thank you very much and just on the life science, project which has bucked the trend in the industry of the downdraft in leasing activity, could you give your thoughts as to, what the project's specific characteristics are that drove, the positive performance and if you're seeing, outside of this project, any uptick in life science leasing activity that might make you, look at other deals in that sector.

Yeah, you bet. I'd say the Alewife Park project.

Is one of the very few, purpose-built, life science, slab on grade, all the qualities that you need, and it, more importantly, in West Cambridge on mass transit lines, and I think, When this project opened and CO'd, it was probably into the worst, I would say some of the worst, market dynamics that we faced, historically in life science, I think part of it is, the, again, the infrastructure that Lila Sciences needed, we were the only building that could, at that time, house their needs and their infrastructure. And then, it's kind of a, it's the cluster effect, once you get a good tenant such as Lila, backed by a very well-heeled investor base, those tenants can continue to drive more leasing activity and if people want to be around them, so I think. We might have gotten lucky, but I'll take it. I would say, more broadly, I think across the portfolio, I think activity is in the last, 30, 60 days coming out of JPMorgan, in San Francisco, there's been a, I would say a lot of optimism. We're seeing, more capital, yeah, the CFOs, folks in charge of capital allocation decisions start making those decisions.

Finally, and then I do think, some of the biggest demands and widening of the funnel will come from AI and whether or not it's life sciences, AI designed the life sciences, I don't think we really care. I think the, again, these buildings and these companies, these AI companies with this compute infrastructure, they have to go in to purpose build new buildings, with all the. The quality, the air quality, the infrastructure like that, I think that's helped our leasing activity a lot, and I can, yeah, I don't see that, I don't see that waning anytime soon.

Thank you.

Thanks, Jade.

Your final question comes from the line of Gababe Poggi from Raymond James. Your line is live.

Hey, good morning, guys. Thanks for taking the time. Can you give me a little more details around the loans you made, in the quarter, specifically the $22.5 million dollar loan, at 11%. I assume the sofa 9 is at ale White, but just any kind of incremental color around those loans would be helpful.

Sure, yeah, as you mentioned, there was the one loan which was our continued commitment on the Alife project. The other two loans which were roughly, I think it was around $10 million plus on the preferred side for, two marinas that, we really, believe in the cash flow, etc. And the last one was a it was a self storage deal in Hialeah and again very sound very great detachment point, covered 13%, again we expect to find these types of deals using more of a rifle shot approach as Matt mentioned in our, sales or in our pipeline funnel. So, you can expect to see more of the multi-family in these types of deals in the future.

Got it. And then Matt, you talked about, obviously the potential regulation out of DC, but the opportunity set just to go direct on build to rent, right? Whether you're that solution capital, so to speak, press net, etc. Can you talk about how big that sandbox could be for you guys as you just think about the whole, what next point holistically looks at what net ref and ref has touched, and how you think about how big that bucket could be over time.

Yeah, you bet it's a great question. For our single family, equity business, they have, roughly $550 million of BTR under contract or reviewing, in any given month, about $200 million of new build to rent construction and product and. We're seeing all of that obviously in terms of deal flow and look at both the debt and the equity and so it's been a steady pipeline and it's been an origination funnel for us, and one that we're really trying to, get the word out, with the Walker and Dunlops and the JLL CBs and say, hey, we're open for business on build to rent new. Construction, CFO financing we can take over at CFO, play up and down the cap stack wherever the opportunity is, and again like you gotta be, you gotta.

Be smart.

About the asset selection. I mean we're not going to go, finance, a green field, a new greenfield project next to a cow pasture, we're looking. Mainly to, on the smaller side, 50 to 125, 150 units that just feel more like an extension of the community, versus, like I said, like, random housing project in the middle of nowhere. So, like the, like.

The backdrop for it.

And certainly think, there's plenty to do there in 2026 and beyond.

Thanks guys.

Thans Gab.

There are no further questions, I'd like to turn it back over to the management team for closing remarks.

Yeah, thank you very much this morning for all your interest and participation in.

Ref, and we look forward.

To speaking to you next quarter. Thanks again.

This concludes today's meeting. You may now disconnect.