Title

Presentation

NexPoint Residential Trust, Inc. beats earnings expectations. Reported EPS is $-0.27, expectations were $-0.36787.

Operator: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Residential Trust, Inc. Q1 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Kristen Griffith, Investor Relations. Please go ahead. Thank you. Good day, everyone, and welcome to the NexPoint Residential Trust, Inc. conference call to review the company’s results for the first quarter ended 03/31/2026.

Kristen Griffith: On the call today are Paul Richards, Executive Vice President and Chief Financial Officer; Matthew Ryan 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.

Operator: Before we begin, I would like to remind everyone that this conference call contains forward-looking statements.

Kristen Griffith: 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 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 statement. The statements made during this conference call speak only as of today’s date, and, except as required by law, NexPoint Residential Trust, Inc. 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 will now turn the call over to Paul Richards for the financial results. Please go ahead, Paul.

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Paul Richards: Thank you, Kristen, and welcome everyone joining us this morning. We appreciate your time. I will cover our Q1 2026 financial results and then walk through a refresher on our full-year outlook. Matthew will then discuss the operating environment, our technology platform and AI strategy, as well as portfolio positioning. Q1 2026 results are as follows. Net loss for the first quarter was $6.8 million, or $0.27 per diluted share, on total revenue of $63.5 million. This compares to a net loss of $6.9 million, or $0.27 per diluted share, in Q1 2025 on total revenue of $63.2 million. Total NOI was $37.6 million across 36 properties, including Sedona at Lone Mountain, which we acquired last December. This compares to $37.7 million on 35 properties for Q1 2025.

On a same-store basis across our legacy 35 properties and 12,984 units, total income was $61.4 million, down 2.2% year over year. Total operating expenses declined 1.6% to $24.8 million, resulting in same-store NOI of $36.7 million, a 2.7% decrease, and an NOI margin of 59.8%. Same-store occupancy closed the quarter at 93.6%. While the year-over-year comparison reflects the tail end of a supply-driven pricing reset, our monthly trajectory is improving materially, and Matthew will walk you through that cadence and the structural factors driving our confidence in the second half. We reported Q1 core FFO of $17.3 million, or $0.68 per diluted share, $0.03 better than consensus, compared to $0.75 per diluted share in Q1 2025. The year-over-year decline is primarily driven by interest expense, which I will address now.

We have always been transparent that 2026 carries a meaningful interest expense headwind as certain swap positions fall off. Q1 total interest expense was $15.4 million versus $14.4 million in Q1 2025, with the swap benefit declining from $8.4 million to $5.5 million. Since we issued initial guidance in February, the forward SOFR curve has shifted 7 to 47 basis points higher across the remaining quarters of 2026. This adds approximately $2.2 million, or roughly $0.08 per diluted share, of incremental interest expense versus our original assumptions. Q1 came in essentially in line with our prior model. Q2 is modestly higher, Q3 steps up as swap positions begin to expire, and Q4 reflects the full run-rate impact. Full-year 2026 interest expense is now projected at $69.3 million versus $67.1 million in our original model.

We do not attempt to forecast rates. We manage the risk. The same volatility that has moved the curve against us in recent weeks creates the entry points for our next swap execution. We have visibility into the maturity schedule and the optionality to execute forward-starting hedges before September, and we will move when economics are compelling, as we did with the $100 million JPM forward swap last April at 3.49%. We are not waiting for September 1. Interest rate swaps currently fix the rate on $917.5 million, or 62%, of floating-rate mortgage debt. We continue to evaluate opportunities to layer additional hedges and will act when risk-adjusted economics are compelling. Moving to expense detail. On the expense side, same-store operating expenses improved 1.6% year over year.

Payroll declined 4.3%, a direct output of the centralized operating model and AI-enhanced leasing platform that Matthew will discuss in detail. Real estate tax decreased 11.2%, and insurance declined 23.5%, partially offset by a 15.2% increase in repairs and maintenance, which included bulk fiber service contract costs offset by revenue gains, and a 50.5% increase in marketing spend as we invested in lease-up velocity at properties below target occupancy. The repairs and maintenance increase reflects two primary drivers. First, we accelerated deferred maintenance at several properties as part of a deliberate portfolio quality initiative. Second, we incurred elevated one-time costs associated with lender-required CapEx at select Florida properties.

These are episodic expenses that position the affected units for improved performance and do not reflect a structural change in our cost base. Importantly, our expense outlook is steady relative to our original model. Operating expense is on track, as is corporate G&A. On insurance specifically, we settled rates for our new policy renewal on April 1, achieving a 13.3% reduction year over year, better than the strongest end of our originally guided range of 0% to negative 10%. Moving to the value-add update. During the first quarter, NXRT completed 252 full and partial upgrades and leased 225 upgraded units, achieving an average monthly rent premium of $69 and a 19% ROI. Since inception, NXRT has completed over 10,100 full and partial interior upgrades across the portfolio, generating average monthly premiums of 13.3% and inception-to-date ROIs of 20.7%.

In addition, we have completed 5,027 kitchen and laundry appliance upgrades and 11,199 tech packages, generating ROIs of 63.5% and 37.2%, respectively. For Q1, we declared a dividend of $0.53 per share, paid 03/31/2026. Since inception, we have increased our dividend 157.3%. We remain fully committed to the current distribution level. At our core FFO guidance midpoint, coverage stands at approximately 1.21x, and we expect coverage to improve as revenue trends strengthen through peak season into 2027. On the balance sheet and liquidity. On 01/30/2026, the company entered into a 55% LTV, $40.3 million mortgage loan secured by Sedona at Lone Mountain with Newmark. The loan matures on 02/01/2033, with all principal due at maturity, and bears interest based on 30-day average SOFR plus a margin of 1.23%.

As of 03/31/2026, total indebtedness was approximately $1.6 billion at an adjusted weighted average interest rate of 3.3%, with $18.5 million of unrestricted cash and $143 million of undrawn capacity on our credit facility, providing approximately $161.5 million of available liquidity. We have no scheduled debt maturities until 2028, when our $33.8 million 4.24% fixed-rate loan matures at Residences at West Place. That loan should be easily refinanced with a new agency senior when the time comes. NAV per share. Our estimated net asset value at quarter-end is $47.70 per diluted share at the midpoint, using a blended cap rate of 5.5% across the portfolio. The range spans $40.66 at a 5.75% cap rate to $54.74 at 5.25%. Based on approximately 25.6 million diluted shares outstanding, the closing stock price as of yesterday at $26.36 represents a 44.7% discount to our midpoint NAV.

Even at the most conservative end of our range, the stock trades at a 27% discount to estimated liquidation value. We believe the disconnect between public market pricing and the underlying real estate value is significant. The capital recycling initiatives we will discuss provide a path to validating these values through third-party transactions. 2026 guidance reaffirmed. We are reaffirming our full-year 2026 core FFO guidance range of $2.42 to $2.71 per diluted share as well as our same-store NOI range, with a midpoint of negative 0.5%. Two months ago, we issued initial guidance. Since then, we have absorbed two distinct headwinds and realized meaningful offsets that, in aggregate, fully neutralize the pressure. On the headwind side, a 7 to 47 basis point shift in the forward SOFR curve adds approximately $0.08 per share incremental interest expense and a slightly lower-than-modeled Q1 leasing environment.

On the offset side, a stronger insurance renewal, expense discipline, and strategic fee income from our adviser private capital platform, which Matthew will address in a moment. Together, these fully absorb those pressures. Our core FFO and same-store guidance ranges are unchanged. We are also reaffirming our same-store sub-metric ranges for the year. To reiterate our full-year targets, we see the ranges as follows: same-store rental income growth of 0% to 1.9% (midpoint 0.9%); same-store revenue growth of 0.1% to 2.0% (midpoint 1.1%); same-store expense growth of 2.8% to 4.2% (midpoint 3.5%); and same-store NOI growth of negative 2.5% to positive 1.5% (midpoint negative 0.5%). With that financial overview, let me turn it over to Matthew.

Matthew Ryan McGraner: Thank you, Paul. Let me start with the macro backdrop because the structural setup for our portfolio has become increasingly compelling, and even the largest real estate investors in the world are now publicly validating themes we have been articulating. Last week, Jon Gray described real estate as a sleeping giant at Blackstone and signaled conviction that an acceleration is approaching, particularly around sectors with favorable supply-demand fundamentals. Reinforcing this point, they highlighted the collapse in new supply that will be very supportive to fundamentals over time across major sectors, including multifamily, where industry forecasts call for deliveries this year to be at their lowest level in 12 years.

Twelve years. That is the headline. Multifamily deliveries in 2026 will be at their lowest level since 2014. That is precisely the supply backdrop we are operating in, and it is the primary structural driver of our confidence in the second half of the year and into 2027. Let me put some numbers around it. National multifamily deliveries peaked near 100 thousand units in 2024 and are declining sharply. New construction starts have fallen 70% from their peak. Units under construction nationally have declined 29% from their Q1 2024 high of 760 thousand units. By Q4 of this year, net deliveries are projected to fall to roughly 69 thousand units nationally, the lowest level in a decade. In our Sunbelt markets, this deceleration is even more pronounced.

In NXRT’s specific submarkets, the demand picture is compelling. Q1 net absorption was positive 1,307 units against supply of 2,426 units, with total demand of 3,733 units. For the full year, our submarkets are projected to see 10,158 units of supply against 10,239 units of demand—effectively a balanced market, with demand now outpacing the remaining supply wave. On the demand side, homeownership remains increasingly out of reach. Today, average monthly mortgage payments run 36.7% above average multifamily rents nationally. Move-outs to purchase a home fell to 7.9% for the quarter, down from 10.6% a year ago. The longer-term demographic picture remains favorable, as I covered last quarter. The bottom line: while near-term fundamentals are weaker than initially expected in select markets, the structural setup is improving quarter by quarter.

The supply cliff, the construction starts collapse, the demand-supply convergence—these are all intact and accelerating. The recovery is asymmetric rather than synchronized, with roughly 35% of our NOI already at or near equilibrium and another 44% reaching that threshold through the balance of the year. We expect fundamentals to stabilize and then accelerate as the back half of 2026 unfolds. On to operating performance. Let me walk through the leasing cadence because the monthly trajectory tells the story. Across 1,388 new leases signed in Q1, our new lease trade-out was negative 6.6%, or a $97 per unit decrease. On 1,528 renewal transactions, we achieved positive 2.3%, or a $33 per unit increase. The blended rate across 2,916 total transactions was negative 1.9%.

The monthly progression is what matters. New lease trade-outs improved from negative 7.0% in January to negative 5.6% in March. Blended trade-outs narrowed from negative 1.9% in January to negative 1.7% in March. And the momentum has continued into April. New lease trade-outs have improved to approximately negative 4% month to date—a 300 basis point improvement from January to April. Blended trade-outs have narrowed to approximately negative 1.2%. At the market level, Las Vegas renewals led the portfolio at positive 12.2%, or a $164 per unit increase. Raleigh renewals grew 2.2%, with new lease trade-outs at negative 3.8%, the shallowest decline in the portfolio. Dallas generated 181 renewals at a positive 1.9%. On the occupancy front, the same-store portfolio closed Q1 at 93.6% physical occupancy, up from 92.6% at the start of the quarter and 92.7% at the end of Q4.

April month to date has improved to 93.9%, and our leased percentage reached 95.9%, the highest since 2025. Per ApartmentIQ data, our portfolio is outperforming market comps by 130 basis points in occupancy, which validates both our pricing discipline and the effectiveness of our centralized leasing program. Resident turnover was 44.4%, essentially flat sequentially but down from 46.3% a year ago. Resident retention improved to 55.6%, with March reaching 57.2%. Same-store total income was $61.4 million, down 2.2% year over year. Rental revenue declined 3.1%, partially offset by a 39% increase in other income driven primarily by resident amenity fee programs, which added $469,000 of incremental revenue versus the prior year. The standout within revenue is bad debt.

We achieved 0.55% of gross potential rent in Q1, down 45.7% year over year from 1.02% of GPR. This is a structural improvement driven by AI-enhanced screening and centralized credit evaluation, not a one-quarter anomaly. On to concessions. Let me address concessions directly because I know this is front of mind for our investors. First, the context. Our portfolio-level concession rate is 1.9% of gross potential rent. Per ApartmentIQ, the competitive set in our submarkets is running 5.7%. That is a 380 basis point advantage, and it reflects a deliberate operating philosophy. We compete on occupancy through operational execution and technology, not through concession givebacks. Our revenue per available unit exceeded comps by 3.77% in Q1. Second, the concentration.

Total concessions were approximately $1.15 million in the quarter, up from $271 thousand in 2025. However, 39% of the year-over-year increase, or $342 thousand, was driven by a single asset in Pembroke, where a concentrated competitive supply wave entered the submarket in Q4 2025. Concessions were deployed proactively to defend occupancy and market position, and that strategy has worked. We closed Q1 at 94.1% occupancy at Pembroke and have continued to build, reaching 94.9% quarter to date. Concessions at Pembroke have already been reduced from one month free to a $500 incentive, which is a 75% reduction. Excluding Pembroke, the portfolio concession increase was approximately $535,000, or roughly two times the prior year—elevated, but a fundamentally different story than the headline.

Third and most importantly, the forward trajectory. Our full-year 2026 operating forecast projects concession utilization declining 75% from Q1 levels by the second half of the year. Q1 ran at 2% of GPR; we forecast Q2 at 1% of GPR, Q3 at 50 basis points, and Q4 at 40 basis points. Simultaneously, financial occupancy improves from 92.8% in Q1 to 94.0% in Q2 and 94.1% in Q3. Six of our 10 markets showed improving concession environments sequentially in Q1 versus 2025—those are Atlanta, Las Vegas, Nashville, Orlando, Raleigh, and South Florida. Even in the four markets still facing supply-driven pressure, the rate of deterioration has stopped. As one-month-free concessions roll off, we realize approximately an 8% pop in effective rents without raising prices.

This is an embedded tailwind that begins to materialize through the balance of the year as supply deliveries decelerate and seasonal demand strengthens. We believe Q1 was the trough for concession deployment in this cycle. Let me spend a few minutes on the technology platform Paul alluded to because Q1 results are a direct product of the investments we have been making. We are deploying a two-layer architecture model for technology. Layer one is property operations—BH Management and their Funnel Leasing AI CRM platform handling day-to-day leasing, maintenance, and resident services under their centralized operating model. Layer two is what we are building at the adviser level—NextPoint Intelligence, an asset management platform that drives better decisions at the portfolio, market, and unit level.

We are literally building agents per property across the portfolio to enhance predictive analytics. This architecture is deliberate. Self-managed peers investing in AI must spend across both layers simultaneously. Our model delivers a disproportionate share of the AI impact at a fraction of the capital outlay. BH Management’s Funnel AI platform gives us the property operations layer as a managed service, and we focus our investment on the intelligence layer for the highest-value judgments to happen. We will provide the full AI product roadmap and financial impact thesis at REITweek in early June. Q1 results from the platform. Our AI-powered Leasing Pro platform processed 31,882 leads and converted them into 1,571 signed leases during the quarter—a 4.9% lead-to-lease conversion rate versus the industry benchmark of 3.2%.

Year over year, leads were up 26%, applications were up 34%, and move-ins were up 53%. Our lead-to-tour conversion was 36.8% for the quarter, the best of the four quarters since we launched our new AI-enabled CRM system. Self-guided touring technology enabled 24.7% of our leases to be executed after business hours—demand that would have been lost entirely without technology-enabled engagement. We hosted nearly 800 self-guided tours during the quarter and expect to surpass 1,000 per quarter as we move into peak leasing season. Fifty-nine percent of self-guided visitors submit a lease application—an extraordinary conversion rate that speaks to the quality of the funnel. The 4.3% payroll reduction, 45.7% improvement in bad debt, the 130 basis point occupancy advantage over comps, and concessions at 1.9% of GPR versus 5.7% for the comps—these are all outputs of a centralized, data-driven model.

Turning to Sedona at Lone Mountain as a quick update on our latest acquisition. As a reminder, we acquired this 321-unit community in North Las Vegas in December for $73.25 million. Occupancy closed Q1 at 87.9%, and as of April 28, the property is approximately 90.3%, with a projected 30-day trend of 92.2%. The rent roll cleanup and operating recovery are ahead of our underwriting and tracking well ahead of budget. Q1 rental income beat budget by 6.7%, or approximately $88,000, driven by lower-than-expected bad debt write-offs. Total expenses beat budget by 13.4%, or $71,000. All in, NOI is leading budget by 13.4%, or $130,000, through Q1. We continue to target a 7.2% NOI CAGR through 2029, taking this asset from a high-5% cap acquisition to a 7.5% stabilized yield.

On to the transaction market, capital recycling, and other earnings opportunities. Per Walker & Dunlop, Q1 2026 institutional multifamily sales volume was $15.1 billion across 213 deals at a weighted average cap rate of 5.09% and $260 thousand per unit. Full-year 2025 volume reached $161.6 billion, up 9.1% year over year. Institutional capital is returning selectively, with institutions and REITs comprising 36.6% of multifamily acquisitions in 2025—the highest share since 2019. Related to our capital recycling and transaction activity, I wanted to address proactively one element of our potential growth that Paul touched on—the role of strategic fee and interest income generated through our adviser’s DST platform. Some context. Our adviser, NextPoint, is one of the largest sponsors of Delaware Statutory Trusts in the United States, distributing through the NexPoint Securities broker-dealer network.

Since 2017, NextPoint has sponsored over $4 billion of DSTs across a variety of property types, including core and core plus multifamily. The DST market itself reached a record of $8.4 billion of equity raised in 2025, up 49% year over year, and multifamily is the largest category within it. Each DST transaction generates fee opportunities for sponsors—financing, acquisition, and asset management fees—and creates lending and bridge capital opportunities where a balance sheet partner is needed. Looking forward, we see meaningful potential for additional activity of this type within NXRT. The DST platform is active, the multifamily category within it continues to grow, and NXRT’s balance sheet positioning is well suited to participate selectively.

While we are not embedding additional transactions in our 2026 guidance, we believe this represents a credible source of incremental earnings optionality, essentially in the range of $0.10 to $0.20 of core FFO over the next 12 months under favorable conditions, balanced against our risk-adjusted return discipline and capital availability. More broadly, this reflects a deliberate strategy to diversify NXRT’s earnings streams. Larger peers like Prologis, Welltower, Realty Income, Ventas, and Equinix have all built private capital platforms in response to capital markets dynamics where public equity costs can be prohibitive. NXRT possesses the core infrastructure, through its external adviser, to pursue a similarly and appropriately scaled strategy.

We will be outlining the broader vision at NAREIT in early June. Let me close with this. We are entering the most favorable supply backdrop in over a decade. Again, Blackstone is calling multifamily a sleeping giant. New construction starts are down 70% from the peak. Deliveries are projected at their lowest level in 12 years, and demand is absorbing the remaining supply wave in our submarkets. The setup is asymmetric. 2026 absorbs the swap repricing and the supply tail. 2027 captures the supply cliff and earn-in. To put numbers around that earn-in, if new lease growth returns to 2% by Q4 of this year, consistent with the deliveries cliff, the carryover earn-in alone delivers 150 to 200 basis points of 2027 same-store revenue growth before a single new 2027 lease is signed.

We are not providing 2027 guidance today, obviously, but the structural drivers are clear, and they compound in our favor. Against that backdrop, our operating platform is performing. Bad debt is at a multiyear low, payroll is declining, insurance renewed significantly better than expected, leasing conversion rates are at record levels, concessions are at 1.9% of gross potential rent versus 5.7% for the competitive set, and occupancy is building again—93.9% in April and rising. Potential DST transactions can generate incremental fee and interest income that diversify our earnings streams, but the operating thesis still stands on its own. The monthly trajectory is encouraging. New lease trade-outs improved 300 basis points from January to April, and we are entering the peak leasing season with strong conversion metrics, declining supply, and really tepid expectations.

The trends and trajectories give us reason for optimism. We appreciate everyone’s continued hard work here at NexPoint and BH. I will now turn the call over to the operator for questions.

Operator: At this time, if you would like to ask a question, press star followed by the number one. We will now open the call for questions. There are no questions at this time. Oh, sorry. We do have a question from Michael Lewis with Truist Securities.

Matthew Ryan McGraner: Thank you.

Analyst: My first question, I wanted to ask—you talked about it a little bit—this 200 basis point difference between the occupied and leased percentages. I was just wondering if there is any opportunity to narrow that. And likewise, the resident retention in the mid-50% range looks like it was going up the last couple of months. Do you see upside there through operational efficiencies as well?

Matthew Ryan McGraner: Yes, definitely. Thanks, Michael, and good morning. We definitely see an opportunity to continue to drive renewals and also retention, particularly as you get into the summer months—folks do not want to move in our Southeastern and Southwestern markets. That has always been a core focus, and any incremental improvement there obviously allows us to drive new lease growth as the supply wave captures. I know if you have anything to add to the first point. Yes. I think on that spread, we are here in April, the start of peak leasing season. The properties are looking great. Traffic flows—if you look at the highlights section, you can see Q2 last year traffic patterns. This is where our demand funnel is the widest.

Getting that leased percentage higher helps us with pricing power. Fewer units available, we are able to push pricing dynamics a little bit more and try to continue to narrow that gap on the new lease pricing side. So that is the focus—pushing, as I alluded to, going into the back half of the year, continuing to hopefully start to inflect positively on rates. The more leases we can sign, the better pricing dynamics we have.

Analyst: Okay. And then you know, you talked about the core portfolio like it was essentially in line. You kept the full-year same-store guidance. But occupancy was up quite a bit across the markets. Las Vegas was up a lot sequentially. I was wondering if the occupancy increase surprised you at all. And is it fair that Q1 ran in line with your expectations, or are you running a little bit ahead to start the year? How would you frame that?

Paul Richards: I think Q1—Bonner, you can give your thoughts—but to me, Q1 felt better. I would not say we hit our budget. In fact, we missed our NOI budget by a quarter million or $300,000. But it did feel better from a demand perspective in that we saw the rent rolls continue to firm, we saw trends build, and we did not particularly give up that much relative to the prior quarters. I am pleased with, and as you can tell from my prepared remarks, I think it is firming out there, and I am pleased with the trajectory and the trends in occupancy. Bonner, if you have anything to add. Yes. On our more aggressive internal forecast, we would love to squeeze 10 to 20 basis points higher on occupancy. It is improving, and that is structurally where we are looking to go in the peak leasing season.

I would say the major wins—Matthew described it in the call—the ability to squeeze that bad debt back down to 55 basis points is a real win. We utilize a software technology called Two Dots. We are getting to a point now where we can get to a credit screening approval on an application in a 15-minute interaction, and being able to close those leads the same day, same interaction—where some of our prospects may be applying here and across the street—time to decision is really important to us. That is helping occupancies. The operating platform that we are building is really helping. So I would say we are happy with occupancy and would love to continue to build it. We described a little bit of the uptick in concession utilization and hope to see that moderate.

But overall, revenue expectations were within 1% of our optimistic goal for the quarter.

Analyst: Okay. And then lastly for me, this seems like the most interesting question. I do not know exactly how to frame it, or if you can answer it, but the interest expense is going to be higher because rates are higher. It sounds like the offset is the fee income that you talked about. Is there anything—you said you are going to give more details at NAREIT. Is there anything more to say about how that is offsetting this year? What you need to invest or what you are earning or what you are going to be doing to earn—I think you said $0.10 to $0.20 over the next 12 months. Is there any more detail you could share on that?

Bonner McDermett: Yes, happy to.

Matthew Ryan McGraner: The one thing we know is that we are going to be wrong on the curve. It is bouncing around, it has bounced around, and unfortunately the sell side tends to model max rate pain and we get fundamentals out there possibly. That is the backdrop. As the NexPoint platform, we manage about $20 billion or so across a variety of property types with a built-out broker-dealer infrastructure across those property types. That allows NXRT to utilize that broker-dealer infrastructure. What I mean by that is NXRT would sponsor the DST program. Utilizing the balance sheet, we could be a lender to the transaction and make a spread above our credit line—you have a 300 to 400 basis point spread there. The sponsor takes acquisition fees, which could be 1% to 2% of the gross purchase price of the deal.

You can estimate that fee income to be typically $1 million to $2.5 million per transaction. It adds up. Given the fact that we have been an aligned shareholder here since inception—when we took public with fee deferrals, fee waivers, extraordinary side-by-side alignment and ownership—this is just another tool in our toolkit to help earnings and diversify earnings. We think it is the right thing to do for the business. The hope is we do not need it—the curve comes our way, we are able to swap appropriately and opportunistically, and we just add this extra earnings layer on top of it. We see it as a good thing.

Bonner McDermett: Thank you.

Matthew Ryan McGraner: You bet.

Operator: Your next question comes from Buck Horne with Raymond James.

Analyst: Congrats. Just wondering if you could give us a little bit more detail on the real estate taxes line and what were the good guys, and how those year-over-year comps are looking as you peer into the back half in terms of appraisals or potential recoveries? What is going on with taxes this quarter and the outlook for the remainder of the year?

Bonner McDermett: I am happy to help you with that. In Q1, we were still fighting last year’s taxes. We got some wins on the board. In particular, Dallas County (DFW) had a number of favorable protests from last year rolling into the Q1 booking. In terms of overall outlook, we have been working with our tax consultants. We have gotten initial values notices in May in Texas and a couple other municipalities. Overall, I think our outlook is pretty stable. Valuations are down. There is less ammunition—there are fewer sales. We are really pushing the equal and uniform story for us. We believe taxes should be favorable this year. In the last couple of years, we have in our numbers roughly 4.1% year-over-year growth at the midpoint, with some of the savings in the Q1 booking.

We are going to continue to shoot to outperform that. There is work to do there—some of those fights roll into the next year—but overall, the outlook is in the 3% to 4% range, and we booked three or four settlements in Q1 to help that quarterly number.

Analyst: Got it. Got it. That is very helpful color. And just on the repairs and maintenance expenses that you mentioned—you pulled forward some deferred CapEx. Is that trend going to continue into the second quarter? When does that deferred CapEx spending or that maintenance spend start to normalize?

Bonner McDermett: There were a few things that were a little bit noisy. Again, it is one quarter. Some of that is seasonal. Some of that is lender driven on the 2024–2025 items. We think repairs and maintenance broadly stabilizes. When you look at the component parts of R&M that we report, one of the things that is in there is that service contract billing, and it probably deserves some better specification outside that. That includes our bulk fiber contract billing, so it looks a little bit outsized, but there is a revenue offset there. Q1, I would say, we got hit by a couple of one-time items and a few of the deferred maintenance items Matthew mentioned. But I think the outlook for the year generally is pretty favorable—again, kind of inflation-level R&M growth—and we are certainly working to outperform.

Analyst: Got it. Alright. Very helpful, guys. Congrats. Good job.

Paul Richards: Thanks, Buck.

Operator: There are no further questions at this time.

Matthew Ryan McGraner: Thanks for everyone’s participation, and we look forward to seeing everyone at NAREIT in June. Have a good day.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.

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