NexPoint Residential Trust Inc (NYSE:NXRT) Q2 2020 Earnings Conference Call - Final Transcript

Aug 04, 2020 • 11:00 am ET

Previous

NexPoint Residential Trust Inc (NYSE:NXRT) Q2 2020 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Q & A
Operator
Operator

Thank you. [Operator Instructions] Our first question will come from Alex Kubicek with Baird.

Analyst
Alex Kubicek

Good morning.

Executive
Brian Mitts

Hi, Alex.

Analyst
Alex Kubicek

Have you guys seen a material performance differential between those units, which you've renovated and just you're -- kind of, more core products. I'm just curious if you've seen the trade-down effect is more pronounced on those upgraded units versus something that might be many years removed from a recent rental?

Executive
Matt McGraner

Yes, I'd say, it's market dependent. Obviously markets that are stronger, for example, Phoenix and South Florida, where we can just rehab more, I think that we've seen, again, as I mentioned, demand rise in those markets. I think Dallas-Fort Worth, Charlotte, Phoenix and South Florida, we didn't think we would budget as many during the quarter, but ultimately did increase our revised pipeline numbers, because of that demand. So I think that there are trade-down effects in these organically strong markets with $1,000 affordable rent.

Analyst
Alex Kubicek

Yes, that's helpful and then just a follow-up there. Have you adjusted your internal hurdle requirements that you guys are underwriting on renovations? Or how do you guys kind of adjust your expectations going forward as you kind of evaluating opportunities?

Executive
Matt McGraner

Are you talking about in terms of adjusting what ROIs we would need to test and upgrade or?

Analyst
Alex Kubicek

Yes, correct or yes -- or kind of both on the current products that you guys own or the future acquisitions as you're underwriting and then kind of call it the next six, 12 months in the runway area?

Executive
Matt McGraner

Yes, sure. We haven't adjusted our internal expectations for the current pipeline and the full and partial interior rehabs that we plan to complete. We still think we can get the consistent 20% to 25% ROIs on that stock. And then going forward in terms of the new acquisitions that we do, if any, it will be interesting to see, but I think that will hone in on markets that are showing or demonstrating the growth that we're seeing right now like Phoenix and South Florida, Charlotte, etc.

Analyst
Alex Kubicek

That's helpful and then just one more quick one. Just on the accounting side, how do you guys recognize bad debt? Is it, certain months of delinquency? Just wondering how you guys judge collectability going forward here?

Executive
Brian Mitts

Yes, it's a good question. And that's exactly how we do it. Once -- and we think there is a little bit given the payment plans we put in place for COVID, once you put somebody on a payment plan in their 60 days or more out, that's when we start to write it off pretty aggressively. And then once we get past up to 120 days, it's completely written off unless they've been making payments towards it. If they're not on a payment plan, it's just kind of typical what we've been doing historically. So, your write that off much quicker and as Matt mentioned, there is not many of those that are out there, but that's getting flushed out pretty quickly.