NexPoint Residential Trust Inc (NXRT) 2015 Q2 法說會逐字稿

Good day and welcome to the NexPoint Residential Trust, Inc. second-quarter 2015 conference call. Today's conference is being recorded.

At this time I would like to turn the conference over to Ms. Marilynn Meek. Please go ahead, ma'am.

Thank you. Good day, everyone, and welcome to NexPoint's conference call to review the Company's results for the second quarter ended June 30. On the call today are Brian Mitts, Executive Vice President and Chief Financial Officer; and Matt McGraner, Executive Vice President and Chief Investment Officer. As a reminder, this call is also being webcast through the Company's website at www.nexpointliving.com. Additionally, a copy of the Company's second-quarter 2015 supplemental information is available for your review on NexPoint's Investor Relations section of the Company's website.

Before we begin, I would like to remind everyone that this conference call contains forward-looking statements that are based on management's current expectations, assumptions, and beliefs. Forward-looking statements can often be identified by words such as [expect], and similar expressions and variations or negatives of these words.

These forward-looking statements include, but are not limited to, statements regarding NexPoint's guidance for financial results for the 2015 full-year. 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.

Listeners should not place undue reliance on any forward-looking statement and are encouraged to review the Company's Form 10-Q for the quarter ended March 31, 2015; final information statement; and NexPoint's Form 10 Registration Statement filed with the SEC for a more complete discussion of the risks and other factors that could affect any forward-looking statements. Except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statement.

This conference call includes analysis of adjusted funds from operations, or AFFO; funds from operations, or FFO; and net operating income, or NOI; all of which are non-GAAP financial measures of performance. These non-GAAP measures should be used as a supplement to, and not a substitute for, net income/loss computed in accordance with GAAP. For a more complete discussion of AFFO, FFO, and NOI, see our earnings release and supplemental information available on our website, as well as our Form 10-Q for the quarter ended March 31, 2015, filed with the SEC.

I would now like to turn the call over to Brian Mitts. Please go ahead, Brian.

Thank you, Marilynn. First, I'd like to welcome everyone to our first earnings call. We listed our shares April 1 of this year, so this will be our inaugural call. And with that, we're going to go through our strategy and objectives in a little more detail than usual to make sure that everyone understands what we're trying to achieve.

We will go through and recap 2Q results. We will also talk about our projections for full-year 2015. We will discuss some details and topics -- or some topics in detail that we feel are important for the investment community to know. Some of those will include our growth plans, capital allocation; some of the markets we are in, and why. And then at the end, we will turn it over for questions.

So let me just start by giving you a high-level overview of NXRT and what our strategy is. We are a multifamily REIT focusing on Class B value-add properties. We are predominantly in the Southeast, Southwestern part of the United States. That includes Texas. We're in large suburban markets in that region, and we focus on the larger MSAs. And Matt will go into some detail on those markets and what we like about them.

We concentrate mainly on properties built in the 1980s and 1990s. These are typically garden-style properties; very low density. We also -- we purchase properties with a view of purchasing them at a significant discount to replacement cost. And through our value-add programs, we're attempting to remove the obsolescence from these older properties that, in many cases, haven't been updated in many years, if ever. And are -- ultimately, we're targeting a middle income type of tenant for -- in those Class B properties.

Let me give you a high-level overview of the portfolio here before I turn it over to Matt, to go through some of the details. These numbers are as of the end of Q2. We had 39 properties for total of 12,038 units. Our average occupancy across the portfolio was 93.4%, and our average rents were $784. In post-Q2, in August 5, we purchased two additional properties totaling 784 units. Both were in the Phoenix area, and that brought our total up to 12,822 units.

So let me turn it over to Matt to go through a couple of items in detail.

Thanks, Brian. So, given all you on the call are familiar with the multifamily fundamentals and demographic changes, we will mention of course why we like multifamily. The eco-boomers -- individuals under the age of 35 -- have the highest propensity to rent. Homeownership is on the decline, now hitting, as of last month, 63.5%, down from its peak of 69%. Marriage deferrals; 54% of adults were married as of 2010, down from 57% a decade earlier. Obviously when people put off marriage, they typically delay buying homes; they are more transient. And then student loan debt approaching $1.1 trillion. These are macro factors as to why we like the multifamily space.

But more micro, as Brian mentioned, we target the Class B value-add space within the multifamily sector. And we like it qualitatively because we target the middle-income workforce housing segment, which is the largest rental population, and are typically renters by necessity. Our typical deal is a low density, two- to three-story garden type apartment complex in the suburbs with top MSAs in the Southeastern and Southwestern United States.

More quantitatively, at Highland, we focused on this strategy because we're obsessively focused on our basis in the real estate asset. To Brian's point, we target assets at substantial discounts to replacement cost. And generally our basis in these assets range between 60,000 to 80,000 per unit after improvements. We like the recession-proof nature of only needing $750 per unit in rent to make a 6% unlevered yield. Then we will seek to grow that at 100 to 150 basis points over the first three years of ownership by rehabbing the sites' exterior, and also through a targeted interior unit upgrade campaign, which I'll go into more detail here in a minute on.

We contrast this strategy with a Class A strategy and deals in our markets that are higher density, 60 to 80, 100 units per acre, in a $160,000 or $180,000 a unit replacement cost. Those deals require anywhere from $1,500 to $1,700 a unit to achieve a 4% to 4.5% yield. And just given where we are in the cycle, in a rising interest rate environment, and given were cap rates are for multifamily assets, we think yield will predominantly drive total return in the multifamily sector.

And so, we believe our strategy provides superior risk-adjusted returns and that it doesn't rely on cap rate depreciation to create value. Instead, we are higher yielding out of the gate, growing the unlevered deals to 7% or 8% over the first three years of ownership, but still provide an apartment at an affordable cost; as I mentioned, only $775 in effective rent across our portfolio.

The value-add and CapEx execution is a key component of our strategy. We have partnered with BH Management; they are our sole operator. They are a seasoned, value-add operator, and a partner in all but one of our assets. They have cash invested in a significant majority of all our deals. They have 65,000 units under management. They were founded in 1993, and they are terrific at delivering value-add management CapEx execution.

Let me flesh out a little bit of our CapEx execution to date. We have achieved strong value-add results over the past couple of years. Generally we spend about $4,000 to $10,000 a unit updating exteriors and interiors. Exterior enhancements include adding amenities such as resort-style pools, outdoor kitchens, and Starbucks-style cafes. The interior programs consist of removing carpet, adding wood flooring, upgrading appliance packages, brushed nickel finishes, and 2-inch blinds, as an example.

In spending the $4,000 on interiors, we've been achieving over the past two years about 25% ROI, on average, on the CapEx dollars spent. Year to date and as of June 30, 2015, we have upgraded 690 units of the 12,038 units we owned as of 6/30. The number of units upgraded across the portfolio is at 1,021 units. The average cost per unit to upgrade is $4,000 -- about $4,100. The range consists of, on the low end, $1,350, to on the high end $7,700, for interior upgrades.

The average rent premium we're achieving is about $90 per unit. The range consists of $51 on the low end to $165 on the high end. The average ROI on the upgrades, again, is 25.5%. The range is 17.9% on the low end to about 50% on the high-end.

Take a minute to walk you through our same-store portfolio for the quarter. The calculation and methodology of it is -- the communities that are defined as those that are stabilized and comparable for both the current and the prior reporting year. There are nine properties that meet this definition for 2Q of 2015. Those properties include Miramar, Arbors on Forest Ridge, Cutter's Point, Eagle Crest, Meridian, Silverbrook, Timberglen, Toscana, and The Grove at Alban. So, eight deals in Texas: seven in Dallas; one in Austin; and then one in greater DC Metro.

The number of same-store properties are nine. The number of units are 2,795 units. The average rent per unit, $749.64 in effective rent. Year-over-year growth in the same-store portfolio in occupancy was 104 basis points, up to 93.6%. Our rental revenue increased by 4.6%. And NOI, as reported this morning, was up a healthy 7.3%.

I'll turn it back over to Brian for a discussion on the second-quarter financials.

Thanks, Matt. So, the drivers behind our financial results for this quarter were primarily our same-store growth in the nine properties. Also, we obviously added a fair number of properties versus the same quarter last year, which also drove the raw numbers up.

Our AFFO for the second quarter was $7.1 million, or $0.34 a share. For the six months ended 6/30, it was $14.1 million or $0.66 a share. Our FFO for the three months ended 6/30 was $6.7 million or $0.32 per share. And our six-month was $11.7 million or $0.55 per share.

Our revenue for the three months, total revenue, was $28.7 million. For the six months, it was $54.3 million. Rental revenue was $25.5 million for the three months, and $48.2 million for the six months.

Our NOI for the three-month period ended 6/30 was $14.8 million. And for the six-month period ended 6/30, it was $28 million. And just to reiterate, as Matt mentioned, same-store results -- revenues up 6.5%; NOI was up 7.3%; and our occupancy was up 104 basis points.

So, we feel these are very strong numbers. In the quarter, second quarter, we added one property; we have added a total of seven for the year in 2015. We spent $183 million on those new purchases. And we spent approximately $15 million on CapEx in upgrading units and exteriors in our existing properties.

Let me talk a little bit about what our growth strategy is and what we're trying to accomplish. We have -- our story is an NOI growth story. We're trying to accomplish growth, first and foremost, through growing our NOI. We do that primarily through the value-add program. Additionally, as Matt mentioned, we partnered with BH Management out of Des Moines, Iowa. They are a large manager of properties; approximately 65,000 across the country. And they've been very good at going in and getting efficiencies from properties, keeping expenses low, driving rents without the value-add, and then maximizing rents on the value-added properties.

Our current value-add has been good. We intend to accelerate it a bit, going forward, starting in Q3; already have in July. We think there are some opportunities for operating efficiencies at some of the properties. Matt and his team, including myself, visit the properties. We work very, very closely with BH to drive some of those efficiencies and to make sure that we're on top of properties and monitoring expenses.

And -- we'll get into this in a minute, about our balance sheet and capital allocation -- but we've got quite a bit of cash on the balance sheet. It is one of the things that we think sets us apart. We've fully funded all of our planned CapEx. In addition to that, we have a healthy amount of cash on the balance sheet. We think this positions us well for what happens in the market, which we can't predict, obviously. But we think we are in a strong position with that. And the projections that we will discuss later are not contingent upon us raising capital to fund the value-add because it's already on our balance sheet.

So, let me turn it back to Matt to talk about our acquisition plan.

Yes. Thanks, Brian. A couple things to mention about what we've done for the past couple of years. We've had a pretty good track record of making accretive acquisitions. Those of you that followed us at least for the four months that we've been a public company and have met us, know that we started in 2013. And so, the vast majority of our deals were bought very well. We bought a lot of portfolios at wholesale discounts, and have seen not only organic rent growth and NOI growth across our portfolio, but significant value-add as well.

So we were talking, just before the call -- amazingly, our market cap today is about $250 million and change, literally less than $10 million higher than the actual equity we invested across the entire portfolio for the last couple of years, which is staggering. Which is to say that the remaining 40 properties haven't increased in value at all over the last two years at today's price, even with the NOI growth and millions of dollars that we've spent in CapEx.

So, we have generally significant unrealized gains across the entire portfolio. And $10 million of the delta between the actual invested equity and our market cap today, we have that in a single deal in Dallas. We know this because we get quarterly BOVs from the top investment sales professionals on all our assets, and NAV calcs from a variety of third parties, as well as our own internally at Highland. Just wanted to make that point.

Talk a little bit about our recent footprint expansion in Arizona. It's a market that we've been watching very carefully. We think Phoenix is about where Atlanta was a couple of years ago. It's starting to burn off concessions; and then where Dallas was about four years ago. You are seeing about 6 -- or we're seeing about 6% organic rent growth in that market. And with the deals that we bought and closed last week, we saw an opportunity to acquire an asset that basically fell out of contract at an accretive cap rate on a purchased cap rate which was a far north of 6, for a value-add asset in a top MSA in a pretty good location was pretty compelling to us.

So, going forward, as Brian mentioned, we will be opportunistic to acquire one-off acquisitions with free cash flow. But we will be primarily focused in the near term on the internal growth value-add story, just given where the stock is.

Thanks, Matt. Let me turn to our views on shareholder value, and increasing shareholder value and our dividend. We declared and paid our first dividend on June 30. It was $0.206 per share. That equates to AFFO coverage of 1.63, and FFO coverage of 1.53. So, we feel there is room there to, over time, increase the dividend. Our goal is to at a minimum of a stable dividend, but ultimately that would be an increase in dividend.

One of the things that we are passionate about and proud of is our management ownership of the Company. Across our Board and our management team, we've got -- we personally own 15.6% of the Company, which we think is pretty unique in the REIT space. It shows our dedication to our story; shows our dedication to the results we're putting up, and our belief in those results. So, we're committed to continuing the strategy. We think the second-quarter results were good. We think we're going to have good results going forward for the rest of the year.

And we think if you look at our stock price in comparison to some of the peers, it's out of line, and has room to move up. And at our current price we're approximately 6.8%, 6.9% yield. The Board yesterday declared -- we've put out a press release this morning -- a Q3 dividend of $0.206; so, maintaining the same dividend. And we think that offers pretty attractive yields for investors to come into the stock, and see the value as the stock hopefully rises.

Talking about the full-year 2015 and our guidance. For AFFO, we are guiding to a range of $1.38 per share to $1.45 per share. For FFO, we are guiding to $1.22 to $1.29 per share. As I just mentioned, I think if you look at the peers and where they trade as multiples of FFO and AFFO, we would be the cheapest stock out there. So, we're obviously looking at that and keeping our focus on that.

As mentioned before, let me talk about our capital structure a little bit, if you look at our balance sheet. We've got a total of $82 million of cash at the end of the second quarter. $24 million of it is basically free cash flow, generated from the properties. $58 million is a combination of our reserved capital for value add improvements; real estate, escrows, and other lender required escrows. Of that, the $45 million of value-add fully funds our planned CapEx. With the two Phoenix acquisitions, we added $3 million to that, after the second quarter. So we have a total of $48 million on our balance sheet in cash that we can use to invest in the properties, improve the quality of the properties, and drive rents and NOI.

Our average weighted debt -- or rate on our debt is 2.53%. As you will see going through our 10-Q, the vast majority of our debt is floating rate, 91%. The remainder is fixed at 9%. We have $624 million of total outstanding debt as of the end of the quarter. All of our floating rate debt is capped. It is capped at an average of 6%.

And we will talk about -- I'm sure there will be some questions on it -- we will get into more detail on the floating rate and why we do that. But the basic premise is that with the value-add strategy, we buy it at good basis. We add value to the property over the two-, three-year period, so we don't want to lock in a valuation with a fixed-rate debt structure.

And then as we go forward, as we create the values, as the property begins to stabilize, if we look to sell it to maximize returns and try to reallocate capital, it's much easier to do it -- much cheaper to do it in a floating rate instrument. So, that's the primary reason why we did it. And as mentioned, we cap all that floating-rate debt.

So, just going forward for the rest of the year, we intend to continue upgrading units. We plan to do that as we have done, without unnaturally moving tenants out to upgrade those units, but do it just as a natural turnover. We think that's the best way to maintain occupancy, cash flow, as well as drive NOI. And we think that that pace is going to increase here in the next six months.

Matt, do you have anything else to --?

No, I don't think so.

Okay. With that, we'd like to turn it over for questions.

(Operator Instructions). Daniel Donlan, Ladenburg Thalmann.

Guys, I was just curious on the (inaudible) to NAV. It looks like your estimated NAV per share is down about 10% on the low and the high end. And it looks to be that your estimated NOI might be slightly different than what it was before. It's actually up a little bit. Just curious what drove the decline in your estimated NAV per share versus what you guys stated in the (technical difficulty) presentation.

Yes, let me take their first crack at that, Dan. It's Brian. First on the NAV, we changed the methodology we used. Before, we were using a forward-looking number. Now we're using -- we're essentially taking our Q2 -- or our NOI through Q2 -- so for a six-month period, annualizing that, and then putting it through the cap rates, et cetera, that you see on page 10 of our supplement. So that's why that went down, because NOI decreased from a forward-looking NOI to essentially a current NOI.

As far as the NOI, I think you're probably looking on page -- sorry, page 8 of our supplement. That changed a little bit, also. We revised the way we calculated that slightly, because we have entity-level expenses at the property level because of our arrangement with BH. BH invests alongside of us in every property. They put cash in, and get an equivalent interest for that. So we don't give them -- they are not getting their interest through a promote. They are investing alongside of us. We like that model. They have so-called skin in the game.

And because of that, we incur certain expenses at that entity level that aren't necessarily property level, and it's not comparable across some of our peers. So, we added that back in, which increased our NOI. So, that's why you see those two changes from the June presentation that we did at NAREIT.

Okay, so you are adding those back to get to that NOI number. Is that right?

Correct. Correct. It's shown on the statement of operations and property operating expenses, so it's captured there. But for our NOI calculations -- and you'll -- when you go through our Q, you'll see it in the back, in the MD&A section, where we calculate NOI. We detail that add-back in there. It's a separate line item.

Okay.

Yes (multiple speakers) Dan, let me add this, too. If you looked at the supplement for the first quarter, we should mention that we beat pretty handily, without any of those add-backs, the NOI. For the second quarter, it was up about 6% from our budget. And so our guidance was -- I don't have it in front of me, but the Q1 guidance on our supplement for -- that we put out with the Q1 earnings was 13 and change. And we did 14.85. So, actually we took -- we did take up NOI, if you look at page 8 of the supplement for 2Q -- or the second quarter.

Okay. And then as far as -- sticking with guidance. What is implied, maybe at the midpoint, from a same-store NOI growth standpoint for 2015?

Overall, for the full year, it's 10% to 12% NOI growth for the full year.

And how is that trending relative to where you guys started the year? Is that pretty much in line with what you expected? I'm just trying to see if there's any softness relative to your expectations when you started the year. And, if there is, maybe what's driving that -- what regions that's in; or we're pretty much in line or maybe even better than where you had anticipated earlier this year.

Yes, I think one of the challenges that we have is we estimate a number of units, obviously, to upgrade, and then what we'll get from those upgrades. We put our models together to try to determine our guidance. And what we've seen in the first half of the year was turnovers at our units were a little bit lower than we had planned, which I think is a good thing. And as we mentioned, we don't artificially try to move tenants out to grab a unit and upgrade it. If we can drive rents without doing that, we think it makes more sense than spending the capital.

So, I'd say that's the one thing that we've seen. But we baked it in a little bit in our estimates, knowing that that could be a number that is very hard to pin down.

So, Matt, you want to --?

No softness across the markets that we see at all. With the majority of our portfolio being in Dallas and Atlanta, both of those markets are on fire, Dallas especially. The one thing I will say with the same-store quarter in the portfolio, those nine properties: two of those, we got hammered on tax adjustments in Tarrant County -- Silverbrook and Eagle Crest. So, the same-store NOI could've been a couple points higher but for those non-controllable expenses on the tax side.

Okay, that's helpful. And then given your portfolio occupancy, 93.6%, do you still think you have the ability to push rent at your properties that have already gone rehab? And where do you think that number can stabilize? Is there anything driving that number a little bit lower in terms of maybe -- or as you are rehabbing these properties, maybe that occupancy number stays lower than the marketplace. Just any clarity there would be helpful.

Yes. I think, as far as the average effective rent, I think -- the first question -- I think we still have significant room to grow. In our markets, Class A and B plus units are still $1.30 to $1.50 square-foot unit rents. Which I know in New York, if you are in New York that number sounds like a parking spot. But that's about a $1,500 unit rental -- effective rent. And our average is $780, so there is still plenty of room between that delta. And then also single family that is in our market that's really either single family or other garden-style units is our comp in our market. Those are $1,100, $1,200, so we still have a lot of room between now and -- in those levels.

And as far as occupancy, we want to have a few more units rehabbed in August than we did in July and over the prior quarters. Because we want to have nice, new, clean, [bidded] units to hit for the fall -- September, August and September, when the second primary leasing season arises. But I wouldn't expect to see any lower. We will be focused on not having any lower occupancy than 92%, 93%. Because again, we're not dumping rent rolls; it just kind of shoots ourselves in the foot.

Okay. Makes sense. And then shifting to the acquisitions you made subsequent to the quarter-end, could you maybe give us the nominal and economic cap rate that you guys acquired those assets at? And what you see as -- is there any low-hanging fruit there from either an operations perspective or a rehab perspective?

Yes, definitely low-hanging fruit from an operational perspective. The units are very -- the two deals were very clean. The prior ownership did the heavy lifting, so to speak. So they hit the exteriors, the roofs, the mechanicals -- all of that stuff had been done before we bought them. But they left the balance to focus on the interior programs, which is what we're good at, and what we're seeing the best ROIs anyway across the portfolios. So that's a good thing.

As far as cap rate, when we originally put it under contract, we were 5.5% on year one -- 5.5% to 5.75% on these two assets, on year one. But by the time we closed it last week, that had inched up just because of organic rent growth, up to about 6.25% on T3 over T12 expenses. So we think our pro forma year-one cap rate, adjusted for taxes on these two assets, are going to be north of 6.25%. Which at the time we bought them, we were trading around there. Today we're not, but that was our thought process.

Okay. And that's economics. So that's factored in a -- I mean, it's CapEx reserve, as well as property management expenses.

Yes.

Okay. And then as far as -- what's your current debt to gross asset, or debt to EBITDA? And what's the range that you want to maintain your leverage at? Some of the more liquid peers are, call it, 40% debt to gross asset. And some of the smaller cap guys are significantly higher: into the 60s, maybe even 70%, pro forma some deals. So, where do you intend on playing from a leverage perspective between those two groups?

I think that we're -- obviously given the structure of the Company, and when it came out from the spin, we have higher leverage than the peers. It is what it is, but we're continuously focused on getting that number down. I don't think we will ever be 20%, 30%, 40%. But we are today sitting at 63% debt to enterprise value in our calc. And then hopefully with the deals that we have coming off of value-add programs, especially the early ones, we have the ability to refi those fixed -- fix them or sell them, or what have you, to pay down debt. And that's in the next six months.

As I mentioned on the call earlier, our market cap today assumes basically our book value, equity invested in all the deals, when we can sell one of our portfolios we know for about a $40 million, $50 million gain in the market. So, that will be a way that we naturally delever to recycle capital and either pay down debt or find new acquisitions, to the extent that they are accretive.

Okay. Well, sticking with that theme, there's been some portfolio trades recently on an entity-level basis at cap rates probably significantly lower than where you are trading. Just curious how you look at future growth opportunities relative to potentially just starting the process over, selling a big chunk of the portfolio or even the portfolio as a whole.

In essence, how long are you going to wait for maybe the market to react to what you're doing before you decide that your cost of capital just hasn't been competitive, in which case you might look to sell? Is that a 6- to 12-month process, as you get your story out there? Or are you a little bit more incentivized to move more quickly? Or do you feel like you still have plenty of time to show the story, maybe cycle some assets? Just your thought process there.

Yes, I'll take a stab. And then, Brian, you can supplement or add. I think that we're 15% ownership, so we're clearly focused on getting NAV for us and other shareholders. So I think that that's a good alignment of interests. So we're going to do what's best, in the end. As you know, our structure in that -- in our advisory contract is really the most shareholder-friendly structure out there, in that we don't have a termination fee or an incentive fee, or really any kind of fee that would inhibit such a transaction. But our value -- or our goal is to continue.

We were only four months public. Our goal is to continue to try to tell the story to get people to take notice because we think it's a compelling, pure play value-add, and the only one out there. But we're not going to swim upstream on the idea. And we're an asset manager and capital allocator ourselves, at the end of the day. And we will get NAV for our shareholders.

I don't know. Brian, do you have anything to add?

Yes, I'd just point out obviously that two months of those -- that period we've been trading has been pretty chaotic in the markets, REITs in particular. You had the Greece noise; you have China; the markets are just up and down and going crazy. So, I think stepping back and looking at the short term, and saying that's not necessarily a time to change direction.

I think, Dan, to your question, it's probably a 12- to 18-month period of trying to get the story out, producing results. We've only put out our second Q, our second supplement. It's our first earnings call.

I think as we get into 2016, if we're continuing to see the story play out, we're going to keep pushing. And -- well, like Matt said, if the price just doesn't move up, doesn't converge to NAV, then we have to look at the strategy. I think there's also -- Dan, you know this, and I don't know how many other people know, or if they are holders because of the spinoff; they were originally with the prior fund.

But I think you had some holders that were not able, longer term, to hold the REIT, and I think that they are probably putting some unnatural selling pressure into the market, which won't last forever. We as a management team have increased our ownership from around 11 -- high 11%, 12% -- to over 15%, so far. So we're trying to be a buyer of some of those shares that are moving. But I think that plays out in a few months, at most. And then I think it's more -- people focus on our results; and just us getting the story out, doing calls like this every quarter, putting out good results.

Yes, I think one more thing to add to that, to your first question, Dan. Absolutely, there's a lot of portfolio trades going on, both in the private and public markets, that we are aware of; underwrite ourselves, just for price discovery. And I think that we're seeing some trade at easily -- value-add deals are trading at 5.5% to 5.75% cap rates. And we are sitting at a 7%, or north of a 7%. So, believe me, we're not ignoring that. And we think those types of trades give price discovery to us, particularly because of our management contract and construct, and cash flow and balance sheet, et cetera.

But we've only been doing this for four months, and we'll see -- or have been public four months -- and we'll see if we can continue to tell the story and to get value, one way or another, for shareholders.

Right, right. Well, there seems to be a pretty big disconnect, I think, between public valuations and maybe private valuation. So, I think it makes sense that there's some conversions there. But speaking along those lines, as we look at further acquisitions for the Company, how do you feel about liquidity -- your current liquidity? And it seems to me that maybe the best source to grow the Company is maybe sell some of the assets that you stabilized to roll into maybe some unstabilized assets, in order to not only show some price discovery in terms of what you've been able to create, but also maybe recharging your growth as well.

So, how do you look at future sources and uses of capital from that standpoint?

Yes, so if you look at our current debt schedule and our maturities, and taking in fact our AFFO coverage is 1.63 or 163% of our current dividend, we feel very good about liquidity. And we agree with you that a good way to grow is to -- once a property stabilizes, and we feel we've pushed values really as much as we can, is to put it on the market; get top price for it; and then redeploy that capital into another value-add opportunity.

Where we are trading at, at current levels, it makes obviously no sense to raise common equity. And we don't want to dilute shareholders. We don't want to dilute ourselves. So, we have to look at other means of raising capital, whether it's refinancing deals, selling deals, et cetera; or being able to use some free cash flow from operations, to the extent that we don't have to distribute it. That's what we're focused on.

There's probably 6 to 9 deals today that we think that we could make north of a 20% IRR on, and harvest gains; to my point earlier, talking about where the market cap is relative to some of our book value equity invested. That's something we will absolutely do, or look to do, over the next 6 to 12 months.

Okay. And then just lastly on the floating-rate debt, you have a cap on that. And just curious what's the weighted average interest rate from a --? Or how much of it is capped? And what is the cap on a weighted average basis if their [activity] changes on piece to piece of (technical difficulty).

Yes, so, we've detailed in the Q and the supplement, but 100% of our floating-rate debt is capped. The weighted average cap is 6%.

Okay. That's easy enough. All right. Well, thank you. Appreciate it.

(Operator Instructions). Artem Fokin, Caro-Kann.

Congratulations, guys, on the first earnings call and second release. Seems you've spent a little bit of time on sharing your thoughts about the strategy of NXRT, and where you see it's going and everything. I thought it would be appropriate to ask -- and I don't expect any additional guidance; it's really more something in broad strokes -- where do you see the current portfolio NOI going over the next two or three years? Because clearly you are working diligently on those rehabs. And some of them will happen this year, and some of them will be happening over the next two years. So, some color on your expectations and broad vision would be helpful, I think, for the market.

Yes, it's Matt, and I'll defer to Brian after I take a stab at it. But I think if you take our current NOI of 58 and change for the full year, our goal is to grow that by 10% to 12% every year annually for the next three years.

And we are speaking organically, right? We're excluding impact of any future acquisitions, just to be sure?

That's correct. Yes, if we bought no other deal, and only had the portfolio's assets that we have assets today, that's correct.

Okay, cool. Thank you.

(Operator Instructions). Jonathan Feldman, Clear Vista Asset Management.

With the stock trading at a 30% discount to the midpoint of your estimate of the Company's NAV, how do you guys evaluate the value or appropriateness of buying back stock at the current time?

Well, we think buying stock at this level is incredibly attractive and accretive. I think from the standpoint of the Company, it's something to look at, obviously in consultation with our Board. We're certainly, as a management team, buyers, when we can be. Because of our inside information at certain times, we have to step out of the market.

But back to Dan's question of how you grow and allocate capital, if we continue to trade at very depressed levels, that's something we have to take a look at and have to seriously consider. Because it's hard to buy an asset, or a lot of assets that are going to be as accretive as that. So, that's what I would say.

I obviously can't give any guarantees or timing, as that's more of a Board decision, but that would be our view of it.

Do you have anything to add, Matt?

No, I think that's right. I'd say we've talked about it; it's come up. So we're looking at every way possible to get -- to close the gap between the discount and NAV.

Yes, I would just -- we keep coming back to it, but I think it's an incredibly important point -- being such large holders of the stock, and continuing to be buyers, we are very focused on these things and feel we are extremely aligned with shareholders. But we do want to think longer-term. And we think there's some great opportunity out there to acquire assets versus our own stock. But we will see where it goes. We're certainly tuned into it and monitor it pretty closely.

And it does appear we have no further questions at this time.

I will now hand it back over to our speakers for any additional or closing remarks.

Yes, I appreciate it. Thank you to everybody for joining. It's our inaugural call. We hope it was informative. We hope that the supplement that we posted to our website [please pull down] our view. We hope that that's informative and answers questions. We have tried to be very responsive to calls and requests for meetings with us as a management team. So if you have any questions, Marilynn Meek is listed on our materials. Please reach out to her, and she can set up some time for us to answer questions and do calls.

And again, thank you for your time this morning. We look forward to updating you on future progress and updates. Thank you.

And that does conclude today's program. We'd like to thank you for your participation. Have a wonderful day, and you may disconnect at any time.