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NexPoint Residential Trust, Inc. ("NXRT" or the "Company") (NYSE:NXRT) is pleased to announce the execution of agreements to sell Old Farm in Houston, TX, and Silverbrook in Dallas, TX to separate buyers, with an expected closing in early Q4 2023. Old Farm and Silverbrook's trailing nominal cap rates are 5.12% and 4.55%, and their tax and insurance-adjusted cap rates are 4.96% and 4.61%, respectively.
The Company expects the dispositions of these assets to generate approximately $67 to 69 million of net sales proceeds at a combined approximate trailing nominal cap rate of 4.96% and tax and insurance-adjusted cap rate of 4.82%.
The executed agreements have $3.0 million (or approximately 2% of the combined purchase price) of non-refundable earnest money held in escrow. The properties are being sold to separate institutional investors at cap rates below their respective market cap rates calculated within our Net Asset Value Summary (Page 8 of NXRT's Second Quarter Earnings Supplement).
The dispositions are expected to close in early October. After completing these sales, the Company expects to pay off the entire $57 million outstanding balance on the corporate credit facility. The retirement of the corporate credit facility and the property-level debt will reduce portfolio-level debt by approximately $156 million. NXRT's hedged debt will increase to 97% from 88%. The portfolio will be hedged, 77% by swaps, 18% property-level rate caps, and 2% first mortgage fixed debt. The combination of these asset sales provides greater strategic flexibility and de-risks the Company's balance sheet heading into 2024.
In addition, NXRT is currently in the process of selecting buyers for Timber Creek and Radbourne Lake in Charlotte, NC and Stone Creek at Old Farm in Houston, TX. We expect these sales to be completed in late Q4 2023 or early Q1 2024. These sales will allow NXRT to acquire new assets, continue to deleverage the portfolio and/or buy back shares.
"NXRT is excited to execute our strategic objectives to sell out of our Houston market positions and pay off our most expensive debt capital. Old Farm and Silverbrook sales showcase the liquidity in our markets, and low cap rates further prove the quality and desirability of our assets in a turbulent marketplace. We have seen a good buyer turnout for our other three assets in the market and expect strong returns from these additional sales. We will continue to unlock liquidity the Company can use to repurchase shares, should our stock continue to trade at a material discount to our internal NAV estimate, and to pursue attractive internal and external growth strategies should those opportunities present themselves throughout the remaining part of 2023 and into 2024." said Matt McGraner, Chief Investment Officer.
Posted In: NXRT
