Thank you for standing by. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to NXRT Q3 2024 Earnings Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Kristen of Investor Relations. Kristen, your line is now open.

Thank you. Good day, everyone, and welcome to NexPoint Residential Trust conference call to review the company's results for the third quarter ended September 30, 2024. On the call today are Brian Mitts, Executive Vice President and Chief Financial Officer; Matt McGraner, Executive Vice President and Chief Investment Officer; and Bonner McDermett, Vice President, Asset and Investment Management. As a reminder, this call is being webcast through the company's website at nxrt.nexpoint.com. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs. Listeners should not place undue reliance on forward-looking statements and are encouraged to review the company's most recent Annual Report on Form 10-K and the company's other filings with the SEC for a more complete discussion of risks and other factors that could affect any forward-looking statements. The statements made during this conference call speak only as of today's date. And except as required by law, NXRT 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's earnings release that was filed earlier today. I would now like to turn the call over to Brian Mitts. Please go ahead, Brian.

Thank you, Kristen, and welcome to everybody this morning. Appreciate you joining the call. I'm Brian Mitts, and I'm joined today by Matt McGraner and Bonner McDermett. I'm going to start the call off by covering our results for the quarter. I'll provide updated NAV and guidance outlook for the year, and then I'll turn it over to Matt, Bonner to discuss specifics on the leasing environments and metrics driving our performance and guidance. Results for Q3 are as follows. Net loss for the third quarter of 2024 totaled $8.9 million, or a loss of $0.35 per diluted share, which includes $24.6 million of depreciation and amortization. This compared to net income of $33.7 million, or a gain of $1.28 per diluted share for the third quarter of 2023, which included $23.8 million of depreciation and amortization. The third quarter '24 NOI was $38.1 million on 36 properties compared to $42.1 million for the third quarter '23 out of 40 properties. For this quarter, same-store rent decreased 1.8%, while same-store occupancy grew to 94.9%. This coupled with an increase in same-store revenues of 1.7%, offset by 8.2% increase and same-store operating expenses led to a 2.4% decrease in same-store NOI as compared to Q3 of '23. As compared to Q2 of 2024, rents for this quarter on the same-store portfolio were down 1.2% or $18 sequentially, while occupancy grew by 70 basis points to 94.9%. Reported Q3 core FFO of $17.9 million, or $0.69 per diluted share compared to [69%] (ph) per diluted share for same quarter last year. During the third quarter for the properties in our portfolio, we completed 45 full and partial upgrades and leased 39 upgraded units, achieving an average monthly rent premium of $253 and a 19.5% return on investment. Since inception, for the properties…

Yeah. Thanks, Brian. Let me start by going over our third quarter same-store operational results. Same-store revenue -- same-store rental revenue was up 2% with five of 10 markets averaging at least 2.4% growth with our Las Vegas and Raleigh markets leading the way at 11.6% and 5.4% growth, respectively. Total same-store revenues were up 1.7% year-over-year for the quarter. Third quarter same-store NOI growth portfolio average, as Brian said, was down to negative 2.4%. Raleigh and Las Vegas led all NOI growth in the quarter with 49.5% and 12.7% growth, respectively. Raleigh's growth was driven by positive tax accrual adjustments as a result of a successful process. Our Q3 same-store NOI margin remains strong at 59.7% and are in a well position to finish the year strong on that metric. Operationally, the portfolio experienced continued positive revenue growth in Q3 2024 with six out of our 10 markets achieving growth of at least 2% or better. Our top five markets are Las Vegas at 10.5%, Charlotte at 6.4%, Raleigh at 5.5%, South Florida at 2.3%, and Atlanta at 2.1%. Renewal conversions for eligible tenants were up 63% for the quarter or were 63% for the quarter, excuse me, with five out of the 10 markets exceeding renewal rate growth of at least 2.5%. Charlotte, South Florida, Phoenix, Las Vegas and Raleigh all exceeded 2% growth. On the occupancy front, the portfolio registered 98.9% -- excuse me, 94.9% occupancy as the close of the quarter. As of this morning is 94.7% occupied, 96.2% leased and has a healthy trend of 92%. On the expense side, expenses finished the quarter at 8.2%. R&M expenses were driven by higher turn costs due to lower renovations when compared to Q3 2023 and typical seasonality in Q3 of this year. We expect these costs…

Thanks, Matt. Let's open it up for questions, please.

[Operator Instructions] Your first question comes from the line of Omotayo Okusanya with Deutsche Bank. Omotayo, your line is now open.

Yes. Good morning, everyone. A couple of questions from my end. First of all, I wanted to focus on the same-store revenue for the quarter, kind of rental revenue up about 1.7% year-over-year, but again occupancy up 100 bps, net effective rent down 1.8%. It doesn't quite math out to the 1.7%. So just kind of curious, kind of what else may have happened during the quarter? Whether it's bad debt or something else that maybe we just haven't considered in that overall same-store revenue growth number?

Yeah. Thanks, Tayo. This is Bonner. I think the two things that were really impactful this quarter driving -- continuing to drive occupancy growth. So we saw for the quarter the financial occupancy about 94.5%. We closed quarter at 94.9%. That was up 140 basis points year-over-year, so 1.4% over last third quarter on a financial occupancy perspective. And then on bad debt, bad debt continues to trend down for us. We had about 1.3% bad debt in the quarter, a little bit better than forecast. That's coming off of a comp last year at 3.1%. So those two lines really drove the increase in rental revenue.

Okay. That's very helpful. And then in the quarter as well, property G&A came down quite a bit. I know, again, that's all, kind of, legal services and all sorts of things that are passed down to the property level, so it can be lumpy. But just trying to understand what happened in 3Q and if that's sustainable going forward?

Yeah. Tayo, this is Matt. We continue to utilize AI and reduce leasing staff on site as the whole guided tour seems to be waning and having less on-site staff. We do think that it is a sustainable path. But Bonner, if you have anything to add to that?

Yeah. I think we're happy with where G&A, property G&A turned out for the quarter. Very little growth in market spend. Very little growth in utilities overall. I think we've been really focused on ways we can trim expenses. Obviously in a tougher leasing environment, controllable expenses is really important for us. So, continued focus. We're into '25 budgets and continuing to look very hard at ways we can continue to control those lines.

Okay. That's helpful. Thank you.

Thank you.

[Operator Instructions] Your next question comes from the line of Michael Lewis with Truist Securities. Michael, your line is now open.

Great. Thank you. I don't know if I missed this. So what drove the small increase in the core FFO guidance? You kept all the same-store metrics the same and you took out some acquisitions. Does this have to do with the definitional change of core FFO, or is there something else?

Yeah. Michael, it's -- hey, it's Matt. Yeah. It's not only definitional change, frankly, but it's the impact of the refinancings, right. So we're redoing all the debts and then removing the mark-to-market impacts which have troubled some analysts, I think, including yourself. So those two things and smoothing it out for both this year and next year and the impact of the $1.4 billion refinancing, incrementally positive is the result.

Okay. That's what we thought. It's really, I mean -- all said and done, it's really an interest expense?

Correct. A little bit.

Okay. Got you. And then what do you expect to do from a swap or a hedging perspective on all this new debt, right? So the SOFR rate is coming down and you got a good spread. Do you ride this a little bit, right? A lot of your existing hedges burn off in '25 and '26. Do you float this for a little while, or do you start putting swaps on these as you do?

Yeah. Good question. We, I guess, holistically looked at this back when the five-year was 3%-3.3%-3.4% and thought that could be a good level to start at layering in some swaps. And then kind of concurrently with that we got this refinancing done, which bought us a little bit of time in our view. And then the work that we've done today, we think that as long as we can earn a 3% compounded annual growth return on the -- excuse me, on the same-store basis through 2027, that really offsets all the interest expense increase due to the expiration of swaps. So that's the positive. The good news is, we'll see what happens with the election and interest rates. But we are going to actively look to return to layering in swaps. We don't want to cannibalize that number, obviously at these levels. We do think that the short term or the short end does come down somewhat materially here. So, that's the long-winded answer. The short answer is, we're going to look to take advantage of the interest rate environment to the extent that we get relief on the five-year.

Got you. And then just lastly for me, did you share the new and renewal rent spreads for the quarter?

Yeah. On a blended basis, new leases were down minus 6.43%, that's $93 on 1,730 leases, renewals on 2,040 leases were up 2.2% or about $31.

Perfect. Thanks.

You bet.

Your next question comes from the line of Omotayo Okusanya again with Deutsche Bank. Omotayo, your line is now open. Omotayo? All right. So there is no further question at this time. I will now turn the conference back over to the management for closing remarks.

Yeah. Thank you. Appreciate everyone's time and questions. And hopefully we'll see everybody in NAREIT here in a few weeks. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.