NexPoint Real Estate Finance, Inc. Q1 FY2025 earnings call

• Q1 net income increased due to higher interest income. Interest income rose $23.6 million to $22 million. Interest expense decreased $0.7 million. Earnings available for distribution was $0.41 per diluted share, cash available for distribution $0.45 per share. Book value per share increased 1.47% to $17.22. - Portfolio includes $55 million funded on life science preferred, $15 million CMBS IO strip purchased. Sold 1.8 million shares of Series B preferred for $44.7 million. - Life sciences: Lab leasing challenging due to tariff/NIH funding uncertainty, but Alewife project has two-thirds of leases likely inked in Q2 with 10+% debt yield. Bullish on CGMP and advanced manufacturing. - Resi: Strong demand with over 138,000 units absorbed in Q1. Owned rental portfolio has 40% positive new lease growth. - Self-storage: Sourced four development opportunities with 8.1%-8.5% yield on cost, expected returns ~18.5%. Actively marketing equity investments to monetize for new equity deployment.

For the first quarter, NexPoint Real Estate Finance reported net income of $0.70 per diluted share. The portfolio consists of 85 investments with a total outstanding balance of $1.2 billion. Allocations by sector: 49.4% multifamily, 31.9% life sciences, 15.6% single-family rental, 1.6% storage, 0.9% specialty manufacturing, 0.6% marina. By investment type: 28.4% CMBS BPs, 24.7% mezzanine loans, 19% preferred equity investments, 12.9% revolving credit facilities, 10.4% senior loans, 4.2% IO strips, 0.3% promissory notes. Assets collateralizing investments are geographically allocated with heavy preference for Sunbelt markets, 75.2% stabilized, 58.7% loan-to-value, weighted average DSCR 1.46x.

• For Q2, guiding earnings available for distribution midpoint $0.43 per diluted common share (range $0.38-$0.48). - Cash available for distribution midpoint $0.48 per diluted common share (range $0.43-$0.53).

• Implemented CECL reserve with weighted average base case and downside scenario, including a private preferred. - Life science sector and some parts of the economy facing temporary halt due to tariff uncertainty, but expected to resolve soon.

Q: Can you comment as to what you are seeing on the credit side? There was a notable credit loss provision. Wondering if that pertains to specific assets. And more broadly, have you seen any impact from macro uncertainty?

A: Paul Richards said they implemented a weighted average base case and downside scenario for CECL reserve, including a private preferred. Matt McGraner mentioned life science sector and some parts facing temporary halt but expected to resolve, with residential sector seeing increased interest.

Q: What was the breakout between the weighted average base case downside scenario and the private preferred? Was it evenly split between the two, or was it more weighted to one or the other?

A: Paul Richards said it was about 50-50.

Q: In terms of the life science, after the leasing – the positive leasing momentum you cited, what percentage leased will that project be or pre-leased? Will it be – is it a multi-tenant project, or is it single tenant? Can you give any more color on that?

A: Matt McGraner said it will be two-thirds leased, across two tenants.

Q: And how much is there left to be funded?

A: Paul Richards said about $40 million.

Q: And then just broadly in the environment, what are you seeing in terms of interesting opportunities? Are you going to be focused on the residential space during preferreds, or will you be ramping up CMBS B-pieces? What’s going to be the plan going forward?

A: Matt McGraner said they will participate in K-deals with Freddie, focus on shorter term stretch senior in multifamily pre-leasing deals, and the four self-storage developments.