• Net Income (Q4 2024): $0.43 per diluted share, down from $0.73 per diluted share in Q4 2023.
• Interest Income (Q4 2024): $32.3 million, up from $16.9 million in Q4 2023.
• Interest Expense (Q4 2024): Decreased by $2.5 million compared to Q4 2023.
• Earnings Available for Distribution (Q4 2024): $0.83 per diluted common share, up from $0.44 in Q4 2023.
• Cash Available for Distribution (Q4 2024): $0.47 per diluted common share, down from $0.51 in Q4 2023.
• Dividend (Q4 2024): $0.50 per share, with a coverage of 0.94 times by cash available for distribution.
• Book Value per Share (Q4 2024): Increased to $16.97 per diluted common share.
• Net Income (Full Year 2024): $1.02 per diluted share, up from $0.60 in 2023.
• Interest Income (Full Year 2024): $72.5 million, up from $68.4 million in 2023.
• Earnings Available for Distribution (Full Year 2024): $1.78 per diluted share, down 5.3% from 2023.
• Cash Available for Distribution (Full Year 2024): $2.42 per diluted share, up 18% from 2023.
• Portfolio Composition: 83 investments with an outstanding balance of $1.2 billion.
• Debt Outstanding: $799.3 million, with 50.2% short term.
• Weighted Average Cost of Debt: 6% with a weighted average maturity of 1.4 years.
• Guidance (Q1 2025): Earnings available for distribution of $0.45 per diluted common share at the midpoint; cash available for distribution of $0.50 per diluted common share at the midpoint.

• Warning! GuruFocus has detected 5 Warning Signs with NREF.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NexPoint Real Estate Finance Inc (NYSE:NREF) reported an increase in net income for the full year 2024, with $1.02 per diluted share compared to $0.60 per diluted share in 2023.
• Interest income increased by $4.2 million for the year ended 2024, driven by higher rates.
• The company paid a regular dividend of $0.50 per share in the fourth quarter, maintaining a consistent dividend payout.
• Book value per share increased to $16.97 per diluted common share, primarily due to unrealized gains on preferred stock investments.
• The portfolio's underlying credit profile remains strong, with expectations for growth in multi-family and life sciences sectors in 2025.

Negative Points

• Net income for Q4 2024 decreased to $0.43 per diluted share from $0.73 per diluted share in Q4 2023, due to unrealized losses on common stock investments.
• Interest expense decreased by $2.5 million in Q4 2024, indicating potential challenges in managing financial costs.
• Earnings available for distribution decreased by 5.3% year-to-date compared to the same period in 2023.
• Cash available for distribution in Q4 2024 was $0.47 per diluted common share, down from $0.51 in the same period of 2023.
• The company has a high debt equity ratio of 1.39 times, with 50.2% of its debt being short-term, which could pose refinancing risks.

Q & A Highlights

Q: Can you discuss the returns on new investments like construction and Freddie K deals, and how they compare to the cost of Series B capital? A: On the Freddie K deals, we expect a 5-year fixed deal in Q2, with yields in the 8% to 9% range, leading to low to mid-teens returns with leverage. For construction, we see high-quality assets with 60% loan-to-cost and 300 to 400 spread, using Series B to fund these attractive opportunities. Matthew McGraner, Executive Vice President, Chief Investment Officer

Q: How is the performance of life sciences investments, and what metrics should we monitor? A: Our Massachusetts loan in Alewife is a $220 million commitment, with a 25% loan-to-cost. The stabilized debt yield is 30+ with strong leasing activity. Across the portfolio, detachment points are 40% to 50%, with assets valued at $1,600 to $1,800 per foot. We are confident in our strategy and expect positive outcomes. Matthew McGraner, Executive Vice President, Chief Investment Officer

Q: Are there any delinquent or defaulted loans, or loans on a watch list? A: We have a few CMBS portfolio loans on the watch list, but overall, the portfolio is strong. We expect refinancing for some loans in Q2 or Q3. The portfolio performance remains robust. Paul Richards, Executive Vice President and Chief Financial Officer

Q: Is the Cambridge deal a speculative development, and what gives you confidence in its success? A: Yes, it is speculative. Despite oversupply concerns, the true competitive supply in core markets is less than $2 million square feet. We have strong interest and a bid for the loan, with a 25% loan-to-cost, which is less than land value. Matthew McGraner, Executive Vice President, Chief Investment Officer

Q: What is the delinquency rate in the Freddie Mac K series portfolio? A: The delinquency rate is extremely small, with only two loans out of 7 or 8 B pieces being 30 or 60 days delinquent. Paul Richards, Executive Vice President and Chief Financial Officer

For the complete transcript of the earnings call, please refer to the full earnings call transcript.