Ladies and gentlemen, thank you for standing by, and welcome to the NexPoint Residential Trust Q2 2023 conference call. I would now like to turn the call over to Kristen Thomas. Please go ahead. Thank you. Good day, everyone, welcome to NexPoint Residential Trust conference call to review the company's results for the second quarter ended June thirtieth, 2023. 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 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 meaning 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 any 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. 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. Thanks, Kristen. Welcome to everyone joining us. Appreciate you participating. Excuse me. I'm gonna kick off the call and cover our Q2 and year-to-date results. I'll talk about our updated NAV and then revised guidance before I turn it over to Matt to discuss some of our results and forward guidance in detail. Results for second quarter are as follows: Net loss for the second quarter was $4 million or $0.15 per share loss, and that's per diluted share on total revenue of $69.6 million. This compared to a net loss of $7.8 million, or a $0.30 loss per diluted share in the same period of 2022. That was on total revenue of $65.8 million, which is a 6% increase in revenue. The second quarter NOI was $42 million on 40 properties, compared to $39 million for the second quarter of 2022 on 41 properties, which is an 8% increase in NOI. For the quarter, same-store rent increased 7.9%, and same-store occupancy was down 60 basis points to 93.8%. This, coupled with an increase in same-store expenses of 7.7%, led to an increase in same-store NOI of 7.6% as compared to Q2 2022. As compared to Q1 2023, rents for the second quarter on the same-store portfolio were up 0.7% quarter-over-quarter. We reported second quarter Core FFO of $20.4 million, or $0.77 per diluted share, compared to $0.78 per diluted share in the second quarter of 2022. For the quarter, we completed 505 full and partial renovations, which is an increase of 2.2% from the prior quarter, and leased 517 renovated units, achieving an average monthly rent premium of $224 and a 20.9% return on investment during the year, which is in line with our long-term average ROI on renovations. In substance to date, in the current portfolio, we've completed 8,736 full and partial upgrades, for about 58% of the total units, 5,091 kitchen upgrades, washer/dryer installments, and 10,753 technology package installations, achieving an average monthly rent premium of $161, $49, and $45, respectively, and an ROI of 21%, 66.8%, and 35.3%, respectively. NXRT paid a second quarter dividend of $0.42 per common share on June thirtieth of this year. Results year to date for 2023 are as follows: Net loss year to date was $7.8 million or a $0.31 loss per diluted share on total revenue of $138.8 million, as compared to a net loss of $12.5 million, or a $0.49 loss per diluted share in the same period in 2022, on total revenue of $126.6 million, which is an increase of 10% in revenue over the prior year. Year to date, NOI was $83.1 million on 40 properties, as compared to $75.6 million on 40 properties for the same period in 2022, or an increase of 10%. Year- to- date, same-store rent increased 7.9%, and same-store occupancy was down 70 basis points to 93.7%. This, coupled with an increase in same-store expenses of 11.2%, led to an increase in same-store NOI of 8.5% as compared to the same period in 2022. We reported year to date Core FFO of $39 million or $1.49 per diluted share, compared to $1.54 per diluted share in the six months into June 30, 2022. For our NAV per share, based on the current estimate of cap rates in our markets and forward NOI, we are reporting an NAV per range as follows: $64.09 on the low end, $72.51 on the high end, and $68.30 at the midpoint. These are based on average cap rates ranging from 5% on the low end to 5.3% on the high end, which remains unchanged from last quarter. To wrap up my comments, we'll go through full- year 2023 guidance, which we're revising as follows: Core FFO per diluted share, $2.90 on the low end, $3.05 on the high end, with a midpoint of $2.98. Same-store revenue, 8.3% on the low end, 9.4% on the high end, and 8.8% at the midpoint. Same-store expenses, 7.3% on the low end, 6.8% on the high end, for a midpoint of 7%. Same-store NOI is 9% on the low end, 11% on the high end, with a midpoint of 10%. Our Core FFO decreased from prior quarter. Guidance is based primarily on the Houston asset, which did not sell in the second quarter as we thought it would, but Matt's got more details on that and the other guidance. With that, I'll turn it over to him. Thanks, Brian. Let me start by going over our second quarter same-store operational results. Same-store effective rents ended the quarter at $1,510 per month per unit, up 7.9% year-over-year, with nine out of our 10 markets averaging at least 5.1% growth. Our Florida markets led the way, with Tampa at 12.9%, South Florida at 11.7%, and Orlando at 11.5%. Our national assets just missed 10% growth, registering 9.8% over the prior year quarter. Same-store rental revenue growth was 7.6% for the period, with a healthy 5.9% earn in benefit from prior periods. Our Florida markets again paced the field at 12.8%, 12.2%, and 11.1% respectively for South Florida, Tampa, and Orlando. Again, 9 out of our 10 markets achieved at least 5.2% rental growth over the prior periods. Renewal conversions were 60% for the quarter, with 7 out of our 11 markets executing renewal rate growth of at least 3.5%. Raleigh was 6.4%, Orlando was 4.8%, Dallas Fort Worth was 4.7%, Tampa at 4.3%, and Atlanta at 3.99%. We're also pleased to report some moderating expense growth for the quarter. Second quarter same-store operating expenses were 7.7% higher year-over-year, a significant reduction from the 15.1% growth reported in Q1. Payroll growth was down from 15.3% in Q1 to 6.9% in Q2. R&M expense growth was more than halved from 22.4% down to 10% this quarter. Real estate taxes were down to 8.1% from 15.7%. Add to that, insurance expense saw some relief as well after our April first renewal, realizing only 4% growth over the prior year period. Seven out of our 10 same-store markets achieved year-over-year NOI growth of 7.6% or greater, while South Florida setting the tone at 14.4%. Our Q2 same-store NOI margin registered a healthy 6.4%, while rent-to-income ratios continue to hold steady at a healthy 22% of household income. For the second half of the year, as Brian mentioned, we think revenue will moderate faster than we anticipated, mostly due to increased bad debt and higher vacancy. That said, we believe this moderation will be largely offset by expense savings in several categories, including labor, utilities, and taxes, leading to a full-year same-store NOI guide of 9%-11%, which should be at the top of the multifamily REIT peer group. Turning to capital markets activities. As you know, in November of 2022, we refinanced 22 properties and lowered our weighted average floating rate spreads while pushing out our maturity wall another 7+ years. In total, we paid down $278 million of our corporate facility, which was and still is our highest cost of capital. The current balance of the credit facility is $57 million. As you also know, we've been working to dispose of our remaining two Houston assets to exit the market, as it has been one of our lowest growth markets for some time due to continued high inventory, newly developed assets, and non-controllable expense pressures. Our buyer for Old Farm and Stone Creek got caught in between some regulatory uncertainty with the Houston Housing Authority, which it was relying on for some tax subsidies to complete the sale. Ultimately, they could not obtain approval and forfeited $250,000 of earnest money to us earlier this month. The good news is we are negotiating the sale to a repeat counterparty right now at approximately $103 million, with $500,000 of non-refundable earnest money, day one, with an outside closing date of October first. In the meantime, we have relaunched Stone Creek, the smaller, more liquid of the two, and expect to transact on this asset in the fourth quarter at approximately $27 million, which collectively are Stone Creek and Old Farm, in line with where we were with the last buyer. In the meantime, and due to a scarcity premium in the market, we recently launched the marketing of two legacy Charlotte assets, Timber Creek and Radbourne Lake. These assets have been held in the portfolio for nine years or more and are expected to provide healthy returns in excess of 25% IRRs and 4.5x- 6x multiples on invested capital. Between these multiple sale processes, we plan on retiring the remaining $57 million of the corporate facility as planned, as well as paying off the first mortgage on Hudson High House, our highest cost of debt outside of the corporate credit facility. Following these pay downs, these dispositions will generate approximately $25 million of excess additional proceeds to buy back stock or complete 1031 exchanges. We believe these dispositions are reflected in our updated guidance range and set us up extremely well to resume double-digit growth in Core FFO in 2024. That's all I have for prepared remarks. I appreciate our team's work here at NexPoint BH, I'd like to turn it over to the operator for questions. The floor is now open for your questions. To ask a question at this time, please press star one on your telephone keypad. At any point you'd like to withdraw from the queue, please press star one again. We'll now take a moment to compile our roster. Our first question comes from the line of Rob Stevenson from Janney Montgomery Scott. Please go ahead. Good morning, guys. It's Kyle Katorincek on for Rob today. How are you thinking about the uses of any disposition proceeds today? I saw you reduced your acquisition guidance by $50 million, so that's going to be more to reduce debt, repurchase common stock, fund the value add program going forward? Hey, it's Matt Kyle. We're primarily focused on retiring the $57 million of the credit facility first and foremost with the first disposition proceeds that we get in. The second, as I mentioned, to retire, I think roughly it's, you know, high six or mid to high six is debt on Hudson House. Those two uses will be the primary first two uses of any disposition proceeds. To the extent that there's that $25 million left over after I mentioned, from the Charlotte assets, depending on where our stock trades, we would probably look to buy, you know, buy back at these levels where we are today. To the extent we sell any more assets, which potentially we're thinking about maybe some Dallas assets in the latter half of the year as well, we've looked at 1031 those in the early half of next year. Okay. Thank you for that. Then, how much price sensitivity are you seeing with residents today? Any meaningful uptick in move-outs due to price increases across the portfolio? I wouldn't say it's any more meaningful than normal. There are, you know, a massive amount of supply deliveries, hitting, you know, in the second, third quarter and in the fourth quarter this year, after which it kind of falls off a cliff or moderates significantly. I'd say, you know, from... It's just, it feels fine. You know, everything is we're not really getting that much pushback. Just, you know, there's a little bit of competition from concessions, from new supply in, like, a Phoenix. Other than that, you know, we're, you know, we feel pretty good about where our residents, rent-to-income ratios are and the traffic we're seeing. All right. Thank you. That's all for me. Our next question comes from the line of Michael Lewis from Truist Securities. Please go ahead. Great. Thank you. You guys did 8.5% same-store revenue growth in the first half of the year, and your full-year guidance is 8.9%. You know, we've talked about this before. That still seems aggressive to me to expect a little bit of acceleration in year to year-over-year same-store revenue growth in the back half of the year. I'm just curious, you know, what gives you know, kind of confidence to guide to that, when, to my knowledge, nobody else is? Yeah, I mean, we think that, you know, we think that notwithstanding the fact that, you know, revenue growth was 7.9%, the latter half of the year, really in the fourth quarter, we see an uptick from, and also a pretty compelling comp there. A lot of the earn in benefit is going to hit in the third quarter, second quarter and then in the third quarter, and then we'll have a, you know, a pretty good comp in the fourth quarter on the revenue side. Yeah, we're starting from a place of strength, I'd say, for the second half of the year. You know, we think that the moderation of inventories that we're seeing hit in the first, second, and third quarter, will lead to more demand for our assets. Okay. Then kind of a follow-up on that. I noticed, you know, you had 14,100 same-store units this quarter versus 13,500 in the first quarter. I think the other apartment REITs generally keep the same store pool static for the calendar year unless there's a disposition. Is there going to be an uplift in the back half that's kind of just related to, you know, properties coming in and out of the same store pool that maybe, you know, might be difficult for me to model? Yeah, there, the inclusion of Charlotte probably will attribute some upward tick in the same store pool. Yeah, that's probably the difference. Okay, gotcha. Just lastly from me, kind of following up on the first question you were asked about the disposition proceeds. You know, you listed off kind of three, you know, sort of near-term uses for those. I know this is far in the future, and I keep kind of harping on it. You know, I look at those 2026 hedges burning off. You know, is there a thought to maybe start working on that now to kind of get the leverage down before you have to deal with those? You know, none of us know what rates will be when that time comes, but, you know, maybe it can never be too early to kind of take a look at those because it does look like a, you know, could be a significant headwind. You know, should we expect more dispositions and try to attack that debt over the next, you know, couple of years? Yeah, that's a good thought. Again, yeah, we're not, the curve is pretty indecisive as well as our policymakers' decision making, I think, at the time. As I mentioned, we will take the proceeds from Charlotte, work to retire, you know, one of our first mortgages on one of our assets, which will leave that asset unencumbered. Then, there is a plan for either the second half of the year or early next year, to look to dispose of three additional assets located in Dallas. That'll generate, we think, you know, somewhere in the $180 million range. You know, if we did that, as I alluded to on the call, in the prepared remarks, 2024 would set up to be, you know, a really strong year in Core FFO growth and then, you know, even get our net debt to EBITDA down in the high single digits from where it is today. That will be a focus, and we think that we can achieve both deleveraging while also increasing earnings. Obviously, we'll look to delever, while also, you know, to the extent we can take advantage of rolling out, you know, extended out year swaps, we'll do that as well. Great. Thank you. Our final question comes from the line of Buck Horne from Raymond James. Please go ahead. Hey, morning, guys. You mentioned as part of the revenue guidance, you know, reduction, you know, things like bad debt expense as well as, you know, the occupancy pressure. I was wondering if you can just add a little color in terms of what you're seeing in terms of bad debt trends and how you expect the back half of the year to play out. I'd say the revision in rental income, Buck, kinda $1 million bucks of bad debt, a couple million bucks of GPR reduction, you know, from just moderating market rents, and then a buffer of some vacancy loss of $1.5 million bucks. Largely the bad debt, I think, is a function of a couple markets, most notably Vegas and Atlanta. Atlanta just kind of reopened their courts, and we just saw a flood of skips and evictions in the second quarter. It was kind of a unique experience, caught us a little off guard, but nonetheless, we'll move them out and kind of re-tenant the assets. That was... That's the primary driver, I would say, are those two markets. Okay. Okay. That's, yeah, that makes a little bit of sense, you know, given the court systems there. you know, just in terms of the occupancy pressure that you may be feeling from new supply, I guess, you know, part of the thesis here was that, you know, your average price points were so far below kind of the incoming level of new supply. It's a little surprising to hear you guys comment that there's, you know, new assets that are offering concessions that are maybe pulling away some demand from you guys. Can you characterize that a little bit further? how are you seeing the new supply in your markets compete against, you know, your properties specifically? Yeah, I mean, it's not across the board, right? You know, some average effective rents, you know, are $1,100-$1,200, with headroom of, you know, $400-$500. I was, I was more kind of isolating it to the couple markets where we're seeing, you know, massive deliveries right now in some markets that compete. If we're at an average average effective rent, for example, at one of our nicer assets and, or, you know, B+ assets in Phoenix at, you know, $1,400-$1,500 in rent, and you have a new lease-up deal that should have a, you know, $2,300-$2,400 effective rent, but they're giving away 8-12 months free, that's gonna push that down to, you know, $1,800 effective. $1,800-$1,900 effective, which, you know, will put a little bit of pressure on a spot time on that asset. That's the example I'm seeing. Otherwise, we're not. You know, we feel pretty good about our price point relative to the market and our continued thesis. I didn't mean to suggest that this was like a, you know, a big tide of fear for our company in particular. I would expect that the other peer group with newer assets would feel it more than we are. Okay, that's helpful. One last one, if I can dig in on the expense side of the equation. Just looking at your expectations for property taxes as well as, you know, I guess you got insurance renewal locked up at this point with the April first renewal, but, you know, congrats on that. But I'm also just, I guess, maybe more curious about what kind of initial assessments you're seeing coming through on 2023 taxes. You know, particularly curious what you're seeing for the Texas markets and Texas counties there, but any other places and kinda how you think the rest of the year shapes up in terms of those assessments? I think we're guiding to 8% growth. Bonner, do you want to take anything on Texas and what you're seeing? We took taxes down. I think, you know, we were low teens to start the year with some conservatism in budgeting. Given what we know today, that number at the midpoint is 10. You know, we're seeing about 300 basis points. We saw some settlements. We had a long-standing, outstanding litigation for the Houston assets from 2021 and 2022. We recognized a little over $700,000 on those litigations, so that's a little bit of a pickup there. In terms of what we're seeing for Texas markets specifically, you know, we're into the appraisal review boards for the protest there. You know, it's a fight like it is every year. I think that we started the year with a pretty conservative, you know, budget expectation, and, you know, we're gonna continue to fight that. I don't know that we'll have, you know, everything settled by the end of the year, but I think it is shaping up to be a little bit more favorable for us. Obviously, we've seen, you know, cap rates expand from where they were, so the argument that, you know, values as of January 1, 2023 are down year-over-year is pretty compelling. You know, we're trying to use that with our consultants to really, you know, realize that relief. Okay. All right. Appreciate the color. Thanks for the time, guys. Thanks, folks. I would now like to turn the call over to the management team for closing remarks. Very good. I don't think we have any additional remarks. Appreciate everyone's time. We'll be in touch and talk to you next quarter. Thank you. Thank you, ladies and gentlemen. This does conclude today's call. Thank you for your participation. You may now disconnect.