NexPoint Residential Trust
NXRT intends to employ a value-add component at a majority of its acquisitions in an attempt to improve rental rates and the net operating income at its properties. Our value-add program will be implemented by BH Management Services, LLC (“BH”), our property manager, at the direction and supervision of NexPoint Real Estate Advisors, L.P. (“Adviser”). We seek to own and operate multifamily properties in areas that have:
- Major employment centers, parks and schools nearby;
- A stable work force, combined with positive net population growth;
- Well-paying jobs provided by a diverse mix of employers;
- A favorable cost of living;
- Reduced competition from larger multifamily REITs and large institutional real estate investors who tend to focus on select coastal and gateway markets; and
- A limited supply of new affordable housing.
We may also allocate up to approximately 30% of our portfolio to investments in real estate-related debt, mezzanine and preferred equity and other securities in situations where the risk-return profile is more attractive than investments in common equity. This strategy would be designed to minimize potential losses during market downturns and maximize risk adjusted total returns to our stockholders in all market cycles.
Delivering Value To Our Investors
NXRT invests in multifamily properties with a value-add component in markets with some of the strongest population and employment growth in the United States. We target undercapitalized or mismanaged multifamily real property where we can invest capital and asset management resources to deliver same store NOI growth that is historically atypical of publicly-traded multifamily REITs. We believe our strategy provides investors with development-like total returns without taking development risk.
Delivering Value To Our Residents
Our value-add programs seek to provide “life-style” amenities to “work force” housing while maintaining a reasonable cost of living for our residents. Typical upgrades at each of our properties include interior improvements such as black or stainless steel appliances, new kitchen cabinets and lighting fixtures, and faux-wood floors throughout living areas. We also invest a significant amount of capital improving community amenities such as: renovating and updating the leasing office and clubhouse, adding or upgrading fitness centers, building dog parks, and updating pool areas.
As of June 30, 2016, NXRT owns all or a majority interest in a portfolio of
multifamily properties, or the Portfolio, primarily located in the Southeastern
and Southwestern United States consisting of 39 multifamily properties
encompassing 12,276 units of apartment space. For more information on the properties we own all or a majority interest in, please see our most recent quarterly filing.
Under the Advisory Agreement we are externally managed by our Adviser, which will conduct substantially all of our operations and provide asset management for our real estate investments. We will not have any employees while the Advisory Agreement is in effect.
All investment decisions will be made by the Adviser, subject to general oversight by the Adviser’s investment committee and the Board of Directors of NXRT (the “NXRT Board”). The members of the Adviser’s management team are James Dondero, Brian Mitts, Matt McGraner, Matthew Goetz and Scott Ellington. The management team has significant experience across real estate investing, private lending and private equity. See “Our Adviser, the Advisory Agreement and Our Property Manager” for more information on the members of the management team and their backgrounds. The NXRT Board, which is comprised of a majority of directors who are independent for NYSE purposes and who would not constitute “interested persons” as defined by the Investment Company Act of 1940 (the “1940 Act”), will oversee and monitor the investment performance of NXRT. Our Adviser will be responsible for sourcing potential investments, conducting research and diligence on prospective investments, analyzing investment opportunities, structuring our investments and monitoring our investments on an ongoing basis.
Our Property Manager
We have entered into management agreements with BH Management Services, LLC (“BH”), the Company’s property manager, who manages the Company’s properties and supervises the implementation of the Company’s value-add program. BH is an affiliate of the noncontrolling interest member of the Company by virtue of ownership in certain VIEs through BH’s affiliates. The property management fee is approximately 3% of the monthly gross income from each property managed. Currently BH manages all of our properties. Additionally, the Company may pay BH certain other fees, including one-time setup and inspection fees and construction supervision fees. See latest filings for additional information on fees paid to our property manager.
BH has significant experience operating and leasing multifamily properties, having begun business in 1993 and currently operating and leasing approximately 60,000 multifamily units across the country.
Highland Capital Management, L.P. (“Highland”) is an SEC-registered investment adviser which, together with its affiliates, had approximately $14.8 billion in assets under management as of December 31, 2016. Highland is one of the largest and most experienced global alternative credit managers. The firm specializes in credit strategies, such as credit hedge funds, long-only funds and separate accounts, distressed-for-control private equity, collateralized loan obligations, mutual funds, closed-end funds, ETFs and non-traded products. Highland also offers alternative investments, including emerging markets, long/short equities, real estate and natural resources. The members of Highland’s real estate team, both during their tenure at Highland and in their previous roles before joining Highland, and BH have a long history of investing in real estate and debt related to real estate properties.