NEXPOINT RESIDENTIAL TRUST, INC. (NYSE:NXRT) Files An 8-K Financial Statements and Exhibits

NEXPOINT RESIDENTIAL TRUST, INC. (NYSE:NXRT) Files An 8-K Financial Statements and Exhibits
Item 9.01(a) and (b)of Form 8-K. This Form 8-K/A should be read in conjunction with the Initial Filing.

Item 9.01. Financial Statements and Exhibits.
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INDEPENDENT AUDITOR’S REPORT

To the Board of Directors and Shareholders of

NexPoint Residential Trust, Inc.

We have audited the accompanying Historical Statement of Revenues and Certain Direct Operating Expenses of Rockledge Apartments (the “Property”) for the year ended December31, 2016.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of this financial statement in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of this financial statement that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Historical Statement of Revenues and Certain Direct Operating Expenses referred to above presents fairly, in all material respects, the revenue and certain direct operating expenses described in Note 2 of the financial statement for the year ended December31, 2016, in accordance with accounting principles generally accepted in the United States.

Emphasis of Matter

The accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 2 and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to that matter.

/s/ Aprio, LLP

Atlanta, Georgia

June8, 2017

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ROCKLEDGE APARTMENTS

HISTORICAL STATEMENTS OF REVENUES

AND CERTAIN DIRECT OPERATING EXPENSES

(in thousands)

FortheThreeMonthsEnded March31, 2017 FortheYearEnded December31, 2016
(Unaudited)

Revenues

Rental income

$ 2,227 $ 8,686

Other income

1,070

Total revenues

2,491 9,756

Certain direct operating expenses

Property operating expenses

2,451

Property taxes and insurance

1,011

Management fees

Total certain direct operating expenses

3,739

Revenues in excess of certain direct operating expenses

$ 1,496 $ 6,017

See accompanying notes to historical financial statements

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ROCKLEDGE APARTMENTS

NOTES TO HISTORICAL STATEMENTS OF REVENUES

AND CERTAIN DIRECT OPERATING EXPENSES

Note 1. Business

The accompanying historical statements of revenues and certain direct operating expenses (“Historical Summary”) include the revenues and certain expenses of Rockledge Apartments (the “Property”), with 708 units, located in Marietta, Georgia. NexPoint Residential Trust, Inc. (the “Company”) acquired the Property on June30, 2017.

Note 2. Basis of Presentation

The accompanying Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and is not intended to be a complete presentation of the Property’s revenues and expenses.

A Historical Summary is being presented for the most recent year available instead of the 3 most recent years based on the following facts: (1)the Property was acquired from an unaffiliated party; and (2)based on the due diligence of the Property conducted by the Company, except as disclosed in these Notes to Historical Summary, management is not aware of any material factors related to the Property that would cause this financial information not to be indicative of future operations.

Note 3. Unaudited Interim Information

The unaudited Historical Summary for the three months ended March31, 2017 has been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. In the opinion of the Property’s management, all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation (in accordance with Basis of Presentation as described in Note 2) have been made to the accompanying unaudited amounts for the three months ended March31, 2017.

Note 4. Significant Accounting Policies

Revenues

The Property contains apartment units occupied under various lease agreements with residents, typically with terms of 12 months or less. All leases are accounted for as operating leases. Rental income is recognized as earned over the life of the lease agreements on a straight-line basis. Some of the leases include provisions under which the Property is reimbursed for certain operating costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to residents to the lease agreements. Other income consists of charges billed to residents for utilities reimbursements, administrative, application, and other fees and is recognized when earned.

Certain Direct Operating Expenses

Certain direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Property. Property operating costs includes property staff salaries, marketing, utilities, landscaping, repairs and maintenance, and other general costs associated with operating the property. Costs such as depreciation, amortization, interest, and professional fees are excluded from the Historical Summary.

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Use of Estimates

The preparation of the financial statements, as described in Note 2 and in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Note 5. Commitments and Contingencies

Litigation

The Property may become party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition.

Other Matters

The Company is not aware of any material environmental liabilities relating to the Property that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environment laws and regulations or other environmental conditions with respect to the Property could result in future environmental liabilities.

Note 6. Subsequent Events

In preparation of the accompanying Historical Summary, subsequent events were evaluated for recognition or disclosure through June8, 2017, which is the date the Historical Summary was issued.

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NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma information should be read in conjunction with the Company’s historical consolidated financial statements and the notes thereto as filed in the Company’s Annual Report on Form 10-K for the year ended December31, 2016, which was filed with the SEC on March15, 2017, and the Company’s Quarterly Report on Form 10-Q for the three months ended March31, 2017, which was filed with the SEC on May2, 2017. In addition, this unaudited pro forma information should be read in conjunction with the historical statements of revenues and certain direct operating expenses and the notes thereto of the Property, which are included herein.

The following unaudited pro forma consolidated balance sheet as of March31, 2017 has been prepared to give effect to the acquisition of the Property, which occurred on June30, 2017, as if the acquisition occurred on March31, 2017.

The following unaudited pro forma consolidated statements of operations for the three months ended March31, 2017 and for the year ended December31, 2016 have been prepared to give effect to the acquisition of the Property as if the acquisition occurred on January1, 2016.

These unaudited pro forma consolidated financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisition of the Property been consummated on January1, 2016.

In the opinion of the Company’s management, all adjustments necessary to reflect the effect of the transaction described above have been included in the pro forma consolidated financial statements.

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NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

As of March31, 2017

(in thousands, except share and per share amounts)

NXRT,Inc. Historical(a) Purchaseof Rockledge Apartments(b) ProFormaTotal

ASSETS

Operating Real Estate Investments

Land

$ 166,985 $ 17,451 $ 184,436

Buildings and improvements

739,099 92,240 831,339

Intangible lease assets

5,581 3,021 8,602

Construction in progress

2,895 2,895

Furniture, fixtures, and equipment

39,361 1,316 40,677

Total Gross Operating Real Estate Investments

953,921 114,028 1,067,949

Accumulated depreciation and amortization

(70,551 ) (70,551 )

Total Net Operating Real Estate Investments

883,370 114,028 997,398

Real estate held for sale (net of accumulated depreciation of $7,714)

96,904 96,904

Total Net Real Estate Investments

980,274 114,028 1,094,302

Cash and cash equivalents

27,741 (1,913 ) 25,828

Restricted cash

26,001 26,519

Accounts receivable

2,252 2,336

Prepaid and other assets

3,733 3,825

Fair market value of interest rate swaps

13,424 13,424

TOTAL ASSETS

$ 1,053,425 $ 112,809 $ 1,166,234

LIABILITIES AND EQUITY

Mortgages payable, net

$ 366,926 $ 67,711 $ 434,637

Mortgages payable held for sale, net

69,311 69,311

Credit facilities, net

324,768 324,768

Bridge facility, net

29,969 44,500 74,469

Accounts payable and other accrued liabilities

5,036 5,048

Accrued real estate taxes payable

4,640 5,073

Accrued interest payable

1,117 1,117

Security deposit liability

1,475 1,581

Prepaid rents

1,875 1,922

Total Liabilities

805,117 112,809 917,926

NexPoint Residential Trust, Inc. stockholders’ equity:

Preferred stock, $0.01 par value: 100,000,000 shares authorized; 0 shares issued

Common stock, $0.01 par value: 500,000,000 shares authorized; 21,293,825 shares issued

Additional paid-in capital

242,058 242,058

Accumulated deficit

(22,924 ) (22,924 )

Accumulated other comprehensive income

9,998 9,998

Common stock held in treasury at cost; 250,156 shares

(4,587 ) (4,587 )

Noncontrolling interests

23,550 23,550

Total Equity

248,308 248,308

TOTAL LIABILITIES AND EQUITY

$ 1,053,425 $ 112,809 $ 1,166,234

See accompanying notes to the unaudited pro forma consolidated financial statements

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NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Three Months Ended March31, 2017

(in thousands, except per share amounts)

NXRT,Inc. (Historical)(a) Purchase of Rockledge Apartments(c) ProForma Total

Revenues

Rental income

$ 31,908 $ 2,227 $ 34,135

Other income

5,083 5,347

Total revenues

36,991 2,491 39,482

Expenses

Property operating expenses

9,871 10,389

Real estate taxes and insurance

4,965 5,326

Property management fees (related party)

1,113 1,184

Advisory and administrative fees (related party)

1,825 (d) 1,825

Corporate general and administrative expenses

1,333 1,333

Property general and administrative expenses

1,586 1,631

Depreciation and amortization

12,443 (e) 13,358

Total expenses

33,136 1,910 35,046

Operating income

3,855 4,436

Interest expense

(7,159 ) (1,078 )(f) (8,237 )

Net loss

(3,304 ) (497 ) (3,801 )

Net income attributable to noncontrolling interests

Net loss attributable to common stockholders

$ (3,616 ) $ (497 ) $ (4,113 )

Other comprehensive income

Unrealized gains on interest rate derivatives

1,046 1,046

Total comprehensive loss

(2,258 ) (497 ) (2,755 )

Comprehensive income attributable to noncontrolling interests

Comprehensive loss attributable to common stockholders

$ (2,670 ) $ (497 ) $ (3,167 )

Weighted average common shares outstanding – basic

21,044 21,044

Weighted average common shares outstanding – diluted

21,293 21,293

Basic loss per share

$ (0.17 ) $ (0.20 )

Diluted loss per share

$ (0.17 ) $ (0.20 )

Dividends declared per common share

$ 0.220 $ 0.220

See accompanying notes to the unaudited pro forma consolidated financial statements

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NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December31, 2016

(in thousands, except per share amounts)

NXRT,Inc. (Historical)(b) Purchase of Rockledge Apartments(c) ProForma Total

Revenues

Rental income

$ 115,419 $ 8,686 $ 124,105

Other income

17,429 1,070 18,499

Total revenues

132,848 9,756 142,604

Expenses

Property operating expenses

38,236 2,189 40,425

Acquisition costs

Real estate taxes and insurance

16,062 1,011 17,073

Property management fees (related party)

3,983 4,260

Advisory and administrative fees (related party)

6,802 (d) 6,802

Corporate general and administrative expenses

4,014 4,014

Property general and administrative expenses

5,877 6,139

Depreciation and amortization

35,643 6,680 (e) 42,323

Total expenses

111,003 10,419 121,422

Operating income (loss)

21,845 (663 ) 21,182

Interest expense

(21,889 ) (4,313 )(f) (26,202 )

Gain on sales of real estate

25,932 25,932

Net income (loss)

25,888 (4,976 ) 20,912

Net income attributable to noncontrolling interests

4,006 4,006

Net income (loss) attributable to common stockholders

$ 21,882 $ (4,976 ) $ 16,906

Other comprehensive income

Unrealized gains on interest rate derivatives

10,833 10,833

Total comprehensive income (loss)

36,721 (4,976 ) 31,745

Comprehensive income attributable to noncontrolling interests

5,090 5,090

Comprehensive income (loss) attributable to common stockholders

$ 31,631 $ (4,976 ) $ 26,655

Weighted average common shares outstanding – basic

21,232 21,232

Weighted average common shares outstanding – diluted

21,314 21,314

Basic earnings per share

$ 1.03 $ 0.80

Diluted earnings per share

$ 1.03 $ 0.79

Dividends declared per common share

$ 0.838 $ 0.838

See accompanying notes to the unaudited pro forma consolidated financial statements

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NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Balance sheet adjustments

(a) Represents the unaudited historical consolidated balance sheet of NexPoint Residential Trust, Inc. and subsidiaries (the “Company”) as of March31, 2017. See the historical consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for thethree months endedMarch31, 2017.
(b) Reflects the acquisition of the Property as if it occurred on March31, 2017.

Income statement adjustments

(a) Represents the unaudited historical consolidated operations of the Company for the three months ended March31, 2017. See the historical consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the three months ended March31, 2017.
(b) Represents the audited historical consolidated operations of the Company for the year ended December31, 2016. See the historical consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December31, 2016.
(c) Represents the historical operations of the Property acquired by the Company. See the historical statements of revenues and certain direct operating expenses and the notes thereto of the Property, which are included herein.
(d) Does not include advisory and administrative fees that may have been payable to the Company’s advisor in connection with the acquisition had the Property been acquired on January1, 2016.
(e) Represents depreciation and amortization expense (not reflected in the historical consolidated statements of operations of the Company) as if the Property was acquired on January1, 2016. Real estate-related depreciation and amortization are computed on a straight-line basis over the respective estimated useful lives of the assets.
(f) Represents interest expense (not reflected in the historical consolidated statements of operations of the Company) as if the borrowings attributable to the Property were borrowed on January1, 2016. In connection with the acquisition of the Property, the Company:
originated a $68.1million first mortgage, which has a current annual interest rate of one-month LIBOR plus 1.57% and an 84-month term;
drew $44.5million on its 2017 Bridge Facility, which has a current annual interest rate of one-month LIBOR plus 4.00%; and

Additionally, the adjustment reflects the amortization of deferred financing costs incurred in connection with the aforementioned loans.

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NexPoint Residential Trust, Inc. Exhibit
EX-23.1 2 d457234dex231.htm EX-23.1 EX-23.1 Exhibit 23.1 Consent of Independent Auditors We consent to incorporation by reference in the Registration Statement on Form S-3 (No. 333-216697) and in the Registration Statement on Form S-8 (No. 333-212052) of our report dated June 8,…
To view the full exhibit click here

About NEXPOINT RESIDENTIAL TRUST, INC. (NYSE:NXRT)

NexPoint Residential Trust, Inc. is an externally managed real estate investment trust (REIT). The Company’s investment objectives are to maximize the cash flow and value of properties owned, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for its stockholders through targeted management and a capex value-add program. It focuses on multifamily investments primarily located in the Southeastern and Southwestern United States. All of its business operations are conducted through NexPoint Residential Trust Operating Partnership, L.P. Its properties include The Miramar Apartments, Arbors on Forest Ridge, Cutter’s Point, Eagle Crest, Meridian, Toscana, The Grove at Alban, McMillan Place Old Farm Apartment Homes, Stone Creek at Old Farm Apartments and Dana Point. It owns approximately 40 properties consisting of over 12,960 units in approximately 10 markets. Its advisor is NexPoint Real Estate Advisors, L.P.

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