NEXPOINT RESIDENTIAL TRUST, INC. (NYSE:NXRT) Files An 8-K Financial Statements and ExhibitsItem 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. |
2
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
3
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
4
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.
5
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.
6
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.
7
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
8
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
9
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
10
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. ExhibitEX-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.