Form 8-K/A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K/A

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): December 29, 2016

 

 

NEXPOINT RESIDENTIAL TRUST, INC.

(Exact Name Of Registrant As Specified In Charter)

 

 

 

Maryland   001-36663   47-1881359

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

300 Crescent Court, Suite 700

Dallas, Texas 75201

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (972) 628-4100

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Explanatory Note

In its Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 4, 2017 (the “Initial Report”), NexPoint Residential Trust, Inc. (the “Company”), reported that it, through its operating partnership, NexPoint Residential Trust Operating Partnership, L.P., acquired a two-property portfolio in Houston, Texas (the “Houston Portfolio”) for approximately $108 million. This Current Report on Form 8-K/A amends and supplements the Initial Report to provide the historical financial statements and unaudited pro forma information required by Item 9.01(a) and (b) of Form 8-K. This Form 8-K/A should be read in conjunction with the Initial Filing.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements.

 

Report of Independent Auditors

   3

Combined Historical Statements of Revenues and Certain Direct Operating Expenses for the nine months ended September 30, 2016 (unaudited) and the year ended December 31, 2015

   4

Notes to the Combined Historical Statements of Revenues and Certain Direct Operating Expenses

   5

(b) Pro Forma Financial Information.

 

Unaudited Pro Forma Financial Information

   7

Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2016

   8

Unaudited Pro Forma Combined Consolidated Statements of Operations for the nine months ended September 30, 2016 and the year ended December 31, 2015

   9

Notes to the Unaudited Pro Forma Financial Information

   11

(c) Exhibits.

 

Exhibit
Number

  

Exhibit Description

23.1    Consent of Aprio, LLP, dated March 14, 2017

 

2


INDEPENDENT AUDITOR’S REPORT

To the Board of Directors and Shareholders of

NexPoint Residential Trust, Inc.

We have audited the accompanying Combined Historical Statement of Revenues and Certain Direct Operating Expenses of The Houston Portfolio (the “Portfolio”) for the year ended December 31, 2015.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of this combined financial statement in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of this combined financial statement that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the combined financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require we plan and perform the audit to obtain reasonable assurance about whether the combined financial statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the combined financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the combined financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Combined Historical Statement of Revenues and Certain Direct Operating Expenses referred to above presents fairly, in all material respects, the revenue and certain direct operating expenses described in Note 2 of the combined financial statement for the year ended December 31, 2015, in accordance with accounting principles generally accepted in the United States.

Emphasis of Matter

The accompanying combined financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 2 and is not intended to be a complete presentation of the Portfolio’s revenues and expenses. Our opinion is not modified with respect to that matter.

 

LOGO

Atlanta, Georgia

March 2, 2017

 

3


HOUSTON PORTFOLIO

COMBINED HISTORICAL STATEMENTS OF REVENUES

AND CERTAIN DIRECT OPERATING EXPENSES

(in thousands)

 

     For the Nine Months Ended
September 30, 2016
     For the Year Ended
December 31, 2015
 
     (Unaudited)         

Revenues

     

Rental income

   $ 9,236      $ 12,120  

Other rental income

     764        939  
  

 

 

    

 

 

 

Total revenues

     10,000        13,059  
  

 

 

    

 

 

 

Certain direct operating expenses

     

Property operating expenses

     2,916        3,427  

Property taxes and insurance

     2,725        3,406  

Management Fees

     204        275  
  

 

 

    

 

 

 

Total certain direct operating expenses

     5,845        7,108  
  

 

 

    

 

 

 

Revenues in excess of certain direct operating expenses

   $ 4,155      $ 5,951  
  

 

 

    

 

 

 

See accompanying notes to historical financial statements

 

4


HOUSTON PORTFOLIO

NOTES TO COMBINED HISTORICAL STATEMENTS OF REVENUES

AND CERTAIN DIRECT OPERATING EXPENSES

Note 1. Business

The accompanying combined historical statements of revenues and certain direct operating expenses (“Historical Summary”) include the revenues and certain expenses of Old Farm, with 734 units and Stone Creek at Old Farm, with 190 units, both located in Houston, Texas (the “Portfolio”). NexPoint Residential Trust, Inc. (the “Company”) acquired both properties in the Portfolio on December 29, 2016.

Note 2. Basis of Presentation

The accompanying Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of the Portfolio’s revenues and expenses. The Portfolio is considered a group of related properties as the individual properties were under common control and management by the Seller, and the acquisition of a single property in the Portfolio was conditional on the acquisition of the other properties. Therefore, a single combined Historical Summary is being presented.

A Historical Summary is being presented for the most recent year available instead of the 3 most recent years based on the following facts: (1) the Property was acquired from an unaffiliated party; and (2) based on the due diligence of the Portfolio conducted by the Company, except as disclosed in these Notes to Historical Summary, management is not aware of any material factors related to the Portfolio that would cause this financial information not to be indicative of future operations.

Note 3. Unaudited Interim Information

The unaudited Historical Summary for the nine months ended September 30, 2016 has been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. In the opinion of the Portfolio’s management, all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation (in accordance with Basis of Presentation as described in Note 2) have been made to the accompanying unaudited amounts for the nine months ended September 30, 2016.

Note 4. Significant Accounting Policies

Revenues

The Portfolio contains apartment units occupied under various lease agreements with residents, typically with terms of 12 months or less. All leases are accounted for as operating leases. Rental income is recognized as earned over the life of the lease agreements on a straight-line basis. Some of the leases include provisions under which the Portfolio is reimbursed for certain operating costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to residents pursuant to the lease agreements. Other rental income consists of charges billed to residents for utilities reimbursements, administrative, application, and other fees and is recognized when earned.

Certain Direct Operating Expenses

Certain direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Portfolio. Property operating costs includes property staff salaries, marketing, utilities, landscaping, repairs and maintenance, and other general costs associated with operating the property. Costs such as depreciation, amortization, interest, and professional fees are excluded from the Historical Summary.

 

5


Use of Estimates

The preparation of the combined financial statements, as described in Note 2 and in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Note 5. Commitments and Contingencies

Litigation

The Portfolio may become party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition.

Other Matters

The Company is not aware of any material environmental liabilities relating to the Portfolio that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environment laws and regulations or other environmental conditions with respect to the Portfolio could result in future environmental liabilities.

Note 6. Subsequent Events

In preparation of the accompanying Historical Summary, subsequent events were evaluated for recognition or disclosure through March 2, 2017, which is the date the Historical Summary was issued.

 

6


NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma information should be read in conjunction with the Company’s historical combined consolidated financial statements and the notes thereto as filed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC on March 21, 2016, and the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2016, which was filed with the SEC on November 10, 2016. In addition, this unaudited pro forma information should be read in conjunction with the combined historical statements of revenues and certain direct operating expenses and the notes thereto of the Portfolio, which are included herein.

The following unaudited pro forma consolidated balance sheet as of September 30, 2016 has been prepared to give effect to the acquisition of the Portfolio, which occurred on December 29, 2016, as if the acquisition occurred on September 30, 2016.

The following unaudited pro forma combined consolidated statements of operations for the nine months ended September 30, 2016 and for the year ended December 31, 2015 have been prepared to give effect to the acquisition of the Portfolio as if the acquisition occurred on January 1, 2015.

These unaudited pro forma combined consolidated financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisition of the Portfolio been consummated as of January 1, 2015.

In the opinion of the Company’s management, all adjustments necessary to reflect the effect of the transaction described above have been included in the pro forma combined consolidated financial statements.

 

7


NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

As of September 30, 2016

(in thousands, except share and per share amounts)

 

     NXRT, Inc.
Historical (a)
    Purchase of
Houston Portfolio (b)
     Pro Forma Total  

ASSETS

       

Operating Real Estate Investments

       

Land

   $ 155,992     $ 14,571      $ 170,563  

Buildings and improvements

     652,342       88,682        741,024  

Intangible lease assets

     491       3,926        4,417  

Construction in progress

     2,690       —          2,690  

Furniture, fixtures, and equipment

     33,612       1,328        34,940  
  

 

 

   

 

 

    

 

 

 

Total Gross Operating Real Estate Investments

     845,127       108,507        953,634  

Accumulated depreciation and amortization

     (55,455     —          (55,455
  

 

 

   

 

 

    

 

 

 

Total Net Operating Real Estate Investments

     789,672       108,507        898,179  

Real estate held for sale (net of accumulated depreciation of $1,577)

     22,411       —          22,411  
  

 

 

   

 

 

    

 

 

 

Total Net Real Estate Investments

     812,083       108,507        920,590  

Cash and cash equivalents

     34,086       259        34,345  

Restricted cash

     34,110       2,473        36,583  

Accounts receivable

     1,750       514        2,264  

Prepaid and other assets

     4,189       67        4,256  
  

 

 

   

 

 

    

 

 

 

TOTAL ASSETS

   $ 886,218     $ 111,820      $ 998,038  
  

 

 

   

 

 

    

 

 

 

LIABILITIES AND EQUITY

       

Mortgages payable, net

   $ 404,915     $ —        $ 404,915  

Mortgages payable held for sale, net

     18,424       —          18,424  

Credit facility, net

     196,480       81,744        278,224  

Bridge facility, net

     —         29,874        29,874  

Accounts payable and other accrued liabilities

     5,122       39        5,161  

Accrued real estate taxes payable

     8,315       —          8,315  

Accrued interest payable

     971       —          971  

Security deposit liability

     1,195       141        1,336  

Prepaid rents

     1,211       22        1,233  
  

 

 

   

 

 

    

 

 

 

Total Liabilities

     636,633       111,820        748,453  
  

 

 

   

 

 

    

 

 

 

NexPoint Residential Trust, Inc. stockholders’ equity:

       

Preferred stock, $0.01 par value: 100,000,000 shares authorized; 0 shares issued

     —         —          —    

Common stock, $0.01 par value: 500,000,000 shares authorized; 21,293,825 shares issued

     213       —          213  

Additional paid-in capital

     240,921       —          240,921  

Accumulated deficit

     (10,022     —          (10,022

Accumulated other comprehensive loss

     (1,822     —          (1,822

Common stock held in treasury at cost; 81,214 shares

     (1,524     —          (1,524

Noncontrolling interests

     21,819       —          21,819  
  

 

 

   

 

 

    

 

 

 

Total Equity

     249,585       —          249,585  

TOTAL LIABILITIES AND EQUITY

   $ 886,218     $ 111,820      $ 998,038  
  

 

 

   

 

 

    

 

 

 

See accompanying notes to the unaudited pro forma combined consolidated financial statements

 

8


NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Nine Months Ended September 30, 2016

(in thousands, except per share amounts)

 

     NXRT, Inc.
Historical (a)
    Purchase of
Houston Portfolio (c)
    Pro Forma Total  

Revenues

      

Rental income

   $ 87,406     $ 9,236     $ 96,642  

Other income

     12,841       764       13,605  
  

 

 

   

 

 

   

 

 

 

Total revenues

     100,247       10,000       110,247  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Property operating expenses

     28,947       2,742       31,689  

Acquisition costs

     386       —         386  

Real estate taxes and insurance

     12,326       2,725       15,051  

Property management fees (related party)

     3,007       204       3,211  

Advisory and administrative fees (related party)

     4,944       —   (d)      4,944  

Corporate general and administrative expenses

     2,649       —         2,649  

Property general and administrative expenses

     4,473       174       4,647  

Depreciation and amortization

     26,363       2,588 (e)      28,951  
  

 

 

   

 

 

   

 

 

 

Total expenses

     83,095       8,433       91,528  
  

 

 

   

 

 

   

 

 

 

Operating income

     17,152       1,567       18,719  

Interest expense

     (17,372     (3,525 )(f)      (20,897

Gain on sales of real estate

     25,932       —         25,932  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     25,712       (1,958     23,754  

Net income attributable to noncontrolling interests

     4,047       —         4,047  
  

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common stockholders

   $ 21,665     $ (1,958   $ 19,707  
  

 

 

   

 

 

   

 

 

 

Other comprehensive loss

      

Net losses related to interest rate derivatives valuations

     (1,128     —         (1,128
  

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     24,584       (1,958     22,626  

Comprehensive income attributable to noncontrolling interests

     3,935       —         3,935  
  

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to common stockholders

   $ 20,649     $ (1,958   $ 18,691  
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding - basic

     21,282       21,282       21,282  
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding - diluted

     21,322       21,322       21,322  
  

 

 

   

 

 

   

 

 

 

Basic earnings (loss) per share

   $ 1.02     $ (0.09   $ 0.93  
  

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share

   $ 1.02     $ (0.09   $ 0.93  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma combined consolidated financial statements

 

9


NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2015

(in thousands, except per share amounts)

 

     NXRT, Inc.
Historical (b)
    Purchase of
Houston Portfolio (c)
    Pro Forma Total  

Revenues

      

Rental income

   $ 103,804     $ 12,120     $ 115,924  

Other income

     13,854       939       14,793  
  

 

 

   

 

 

   

 

 

 

Total revenues

     117,658       13,059       130,717  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Property operating expenses

     34,252       3,188       37,440  

Acquisition costs

     2,975       —         2,975  

Real estate taxes and insurance

     15,231       3,406       18,637  

Property management fees (related party)

     3,501       275       3,776  

Advisory and administrative fees (related party)

     5,565       —   (d)      5,565  

Corporate general and administrative expenses

     2,455       —         2,455  

Property general and administrative expenses

     5,401       239       5,640  

Depreciation and amortization

     40,801       7,376 (e)      48,177  
  

 

 

   

 

 

   

 

 

 

Total expenses

     110,181       14,484       124,665  
  

 

 

   

 

 

   

 

 

 

Operating income (loss)

     7,477       (1,425     6,052  

Interest expense

     (18,469     (4,775 )(f)      (23,244
  

 

 

   

 

 

   

 

 

 

Net loss

     (10,992     (6,200     (17,192

Net loss attributable to noncontrolling interests

     (160     —         (160
  

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (10,832   $ (6,200   $ (17,032
  

 

 

   

 

 

   

 

 

 

Other comprehensive loss

      

Net losses related to interest rate derivatives valuations

     (391     —         (391
  

 

 

   

 

 

   

 

 

 

Total comprehensive loss

     (11,383     (6,200     (17,583

Comprehensive loss attributable to noncontrolling interests

     (93     —         (93
  

 

 

   

 

 

   

 

 

 

Comprehensive loss attributable to common stockholders

   $ (11,290   $ (6,200   $ (17,490
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding - basic

     21,294       21,294       21,294  
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding - diluted

     21,294       21,294       21,294  
  

 

 

   

 

 

   

 

 

 

Basic loss per share

   $ (0.51   $ (0.29   $ (0.80
  

 

 

   

 

 

   

 

 

 

Diluted loss per share

   $ (0.51   $ (0.29   $ (0.80
  

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma combined consolidated financial statements

 

10


NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

Balance sheet adjustments

 

  (a) Represents the unaudited historical consolidated balance sheet of NexPoint Residential Trust, Inc. and subsidiaries (the “Company”) as of September 30, 2016. See the historical combined consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2016.

 

  (b) Reflects the acquisition of the Portfolio as if it occurred on September 30, 2016.

Income statement adjustments

 

  (a) Represents the unaudited historical combined consolidated operations of the Company for the nine months ended September 30, 2016. See the historical combined consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2016.

 

  (b) Represents the audited historical combined consolidated operations of the Company for the year ended December 31, 2015. See the historical combined consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

 

  (c) Represents the historical operations of the Portfolio acquired by the Company. See the combined historical statements of revenues and certain direct operating expenses and the notes thereto of the Portfolio, which are included herein.

 

  (d) Does not include advisory and administrative fees that may have been payable to the Company’s advisor in connection with the acquisition had the Portfolio been acquired on January 1, 2015.

 

  (e) Represents depreciation and amortization expense (not reflected in the historical combined consolidated statements of operations of the Company) as if the Portfolio was acquired on January 1, 2015. Real estate-related depreciation and amortization are computed on a straight-line basis over the respective estimated useful lives of the assets.

 

  (f) Represents interest expense (not reflected in the historical combined consolidated statement of operations of the Company) as if the borrowings attributable to the Portfolio were borrowed on January 1, 2015. In connection with the acquisition of the Portfolio, the Company:

 

    drew $67.75 million on its $300 Million Credit Facility, which has a current annual interest rate of one-month LIBOR plus 2.40%;

 

    drew $30.0 million on its 2016 Bridge Facility, which has a current annual interest rate of one-month LIBOR plus 4.00%; and

 

    drew $15.0 million on its $30 Million Credit Facility, which has a current annual interest rate of one-month LIBOR plus 4.00%.

Additionally, the adjustment reflects the amortization of deferred financing costs incurred in connection with the aforementioned loans.

 

11


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

NEXPOINT RESIDENTIAL TRUST, INC.
By:  

/s/ Brian Mitts

  Name:   Brian Mitts
  Title:   Chief Financial Officer, Executive VP-Finance and Treasurer
   

Date: March 14, 2017

 

12


EXHIBIT INDEX

 

Exhibit
Number

  

Exhibit Description

23.1    Consent of Aprio, LLP, dated March 14, 2017

 

13