Thank you. I would now like to turn the call over to Kristen Griffith, investor relations. Please go ahead.
Thank you. Good day, everyone, and welcome to NexPoint Real Estate Finance conference call to review the company's results for the first quarter ended March 31st, 2026. On the call today are Paul Richards, Executive Vice President and Chief Financial Officer, and Matt McGraner, Executive Vice President and Chief Investment Officer. As a reminder, this call is being webcast through the company's website at nref.nexpoint.com. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs.
Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's annual report on Form 10-K and the company's other filings with the SEC for a more complete discussion of risks and other factors that could affect the forward-looking statements. The statements made during this conference call speak only as of today's date, and except as required by law, NREF does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company's presentation that was filed earlier today. I would now like to turn the call over to Paul Richards. Please go ahead, Paul.
Thanks, Kristen, and good morning, everyone. I'll walk through our quarterly re-results, cover the balance sheet, and provide guidance for Q2 before turning it over to Matt for a deeper dive on the portfolio and macro lending environment. For the 1st quarter, we reported net income of $0.42 per diluted share compared to $0.70 for Q1 2025. The decrease is driven by small mark-to-market declines on preferred stock and warrants, as well as a decrease in the change in net assets related to consolidated CMBS VIEs. Earnings available for distribution was $0.43 per diluted share in Q1, compared to $0.41 per diluted share in the same time period of 2025. Cash available for distribution was $0.58 per diluted share in Q1, compared to $0.45 per diluted share in the same period of 2025.
We paid a regular dividend of $0.50 per share in the first quarter, which is 1.16x covered by cash available for distribution. On April 28, 2026, the board declared a dividend of $0.50 per share payable for the second quarter of 2026. Book value per share decreased slightly by 0.3% from Q4 2025 to $18.96 per diluted share, primarily driven by unrealized losses on our preferred stock investments and stock warrants. Turning to new investments during the quarter. The company funded over $30 million on two loans that both pay a monthly coupon in the mid-teens. I want to highlight what is, in our view, the most important development of the quarter, and frankly, of this week.
We have successfully refinanced $180 million of senior unsecured notes that were maturing on May 1st. We replaced those 5.75% fixed rate notes with a new $242 million Total Return Swap facility priced at SOFR plus 375 basis points with a three-year term and one-year extension option. This transaction does several things. First, it removes the largest near-term liability overhang on our balance sheet. Second, the floating rate structure aligns with our floating rate asset base and gives us refi optionality as the curve evolves. Third, the upside gives us approximately $45 million of incremental capacity to deploy into our pipeline at the double-digit coupons we are seeing today. Fourth, the facility allows for back lever optionality on eligible positions, which expands our origination capacity without requiring additional unsecured note issuances.
We engaged more than 20 counterparties across bank and non-bank channels to optimize this structure. The SOFR plus 375 pricing came inside comparable mortgage re-executions in the high-yield baby bond and term loan markets. Importantly, we did this without diluting common shareholders at a discount to book. Combined with the $21 million we raised in our Series C preferred and the re-REMIC execution I'll discuss in a moment, we head into the back half of 2026 with one of the cleanest, most flexible capital structures in the commercial mortgage REIT sector. Capital recycling and book value accretion. We executed a re-REMIC of our FREMF 2017- K62 B-Piece during the quarter.
We sold the B-Piece to Mizuho at 92.7, having purchased it at 68.69 in 2021 and reinvested into the HRR tranche of the new structure at an 18.5% yield. That single transaction generated $0.46 per share of book value appreciation, reduced repo financing by $75 million, and is expected to drive approximately $0.34 per share of annual CAD accretion going forward. This is the kind of execution that does not happen by accident, and it speaks to the value we extract from a portfolio of seasoned, well-structured credit positions. Moving to the portfolio and balance sheet. Our portfolio is comprised of 90 investments with a total outstanding balance of $1.1 billion.
Our investments are allocated across sectors as follows: 39.4% multifamily, 35.9% life sciences, 17.1% single-family rental, 3.9% storage, 1.6% marina, and 2.1% industrial. Our fixed income portfolio is allocated across investments as follows: 19% CMBS B-Pieces, 22% mezz loans, 24.5% pref equity investments, 15.6% revolving credit facilities, 10.1% senior loans, 4.2% IO strips, and 4.6% promissory notes.
The asset collateralizing our investments are allocated geographically as follows: 28.7% Massachusetts, 17.6% Texas, 5.9% Florida, 4.9% Georgia, 5.2% California, and 4.7% Maryland, with the remainder across states with less than 4% exposure, reflecting our heavy preference to Sunbelt markets, with Massachusetts and California exposure heavily weighted towards life science. The collateral on our portfolio is 81.2% stabilized with 59.9 loan-to-value and a weighted average DSCR of 1.32x . We have $665.2 million of debt outstanding with a weighted average cost of 5.2% and has a weighted average maturity of 0.8 years.
Our secure debt is collateralized by $571.3 million of collateral with a weighted average of 3.8 years and a debt to equity ratio of 0.7x . Moving to our guidance for the second quarter. Earnings Available for Distribution, $0.43 per diluted share at the midpoint with a range of $0.38 on the low end and $0.48 on the high end. Cash Available for Distribution, $0.54 per diluted share at the midpoint with a range of $0.49 on the low end and $0.59 on the high end. With that, I'd like to turn it over to Matt for a detailed discussion of the portfolio in the current market environment. Matt?
Appreciate it, Paul. I'm excited to walk through another strong quarter for NREF and to thank our team and our partners for executing in what continues to be a noisy macro backdrop, including and especially the exciting and accretive financing completed with Mizuho that Paul just mentioned. On to the verticals. On the residential front, this is where we have our largest exposure at roughly 56% of the portfolio between SFR and multifamily. We are now firmly in the supply trough that I've been describing on these calls for several quarters. The thesis is playing out. We're coming off a record national multifamily supply cycle. Net deliveries peaked at approximately 695,000 units in the trailing 12 months, ended Q4 2024.
For context, that compares to roughly 282,000 units of average annual deliveries since 2001. CoStar now forecasts 2026 deliveries to fall approximately 49% from their 2025 levels, with another 20% decline forecast for 2027. 2027 and 2028 forecasts have been revised down meaningfully from prior estimates as well. On the supply side, multifamily construction starts are running approximately 70% below their 2022 peak, that is locking in a multiyear supply trough. On the demand side, the structural backstop has not changed. The cost to own a home in our markets remains roughly three times the cost to rent, there's no reasonable mortgage rate scenario that closes that gap quickly. Our on-the-ground leasing data is consistent with the inflection thesis.
Putting it all together, we believe the second half of 2026 and 2027 will be meaningfully better than 2025 for residential operators and by extension, for the residential debt collateral on our balance sheet. On to life sciences. I want to spend a minute on here because I know it's a sector that has attracted some discussion, and I think the conversation deserves a little more nuance than it's, than it's been getting. Our exposure is concentrated, intentional, and increasingly de-risked. Our Alewife project is now 71% leased, anchored by Lila Sciences, a pioneering backed AI and life science company, on a long-term lease for 245,000 sq ft with options to expand. The active pipeline of RFPs, LOIs, and leases on the project today represents approximately 92% of the remaining vacant square footage.
This is a high conviction underwrite into a project where the leasing momentum and credit improvement are visible in the data, not aspirational. An additional and increasingly relevant point I want to drive home is the demand funnel of our life science collateral has widened materially because of AI, not in spite of it. AI companies need exactly the same purpose-built infrastructure that traditional lab tenants need. Power density, cooling capacity, structural floor loads, ventilation, and vibration tolerances. They cannot retrofit older converted assets at any rent. They need the bones, and they will pay for the bones. Alewife is exactly that asset in the right sub-market adjacent to MIT and the broader Cambridge cluster. Our life science exposure is not a generic bet on the sector. It's a concentrated bet on first to fill infrastructure-grade assets in elite educational districts that are now also AI corridors.
The credit profile of these assets is improving, not deteriorating, as the tenant universe widens. Moreover, our capital was largely placed in the last 12 to 18 months at a reset basis that primed billions of dollars of equity versus loans originated in the go-go days of post-COVID liquidity craze, where capital was much less discerning. On to self-storage. Storage is in a cyclical bottoming process. Industry-wide, second quarter earnings for the public REITs were consistent with guidance and largely in line with sell-side estimates. Expectation for the full year is roughly flat revenue and 50-150 basis point declines in NOI. Supply remains muted also. According to REID, facilities under construction are less than 3% of existing supply. That's the equilibrium benchmark.
Forecasted deliveries over the next several years could be as low as 1% of existing stock, combined with the difficulty of bank financing for new development, the cost of land and materials at a higher rate environment than the 2015 to 2020 development cycle, we expect supply discipline to persist and pricing power to return. Our NSP portfolio continues to outperform the industry meaningfully. Occupancy in the low 90s near the top of the industry, with rent growth and NOI performance materially ahead of the sector decline, almost 300-500 basis points. Moving to our pipeline.
Today, it consists of approximately $190 million of NREF investment across 11 active deals, three closed and eight under executed LOI, plus an additional $275 million of structured product opportunities, specifically across multifamily senior loans and CMBS pools. These are real deals at real spreads. The pricing power remains very much in our favor of disciplined capital providers like us. The pipeline's blended return profile is well in excess of our cost of capital in the new TRS facility that Paul mentioned, which is already driving modest increases in CAD, which we expect to see continuing throughout the back half of 2026. Before I close, I want to take a moment on something that I believe will be a meaningful differentiator for NREF over the next several years.
We are deploying AI across our underwriting portfolio monitoring credit risk and operations functions, and we believe we are ahead of the commercial mortgage REIT peer group on this. On the underwriting side, we're piloting AI-assisted deal screening and diligence across CMBS, mezzanine, and preferred equity originations. The system ingests rent rolls, comps, market data, and our target is a 50% reduction in underwriting cycle time. That means more deals are being evaluated, sharper credit work, faster execution, all without expanding headcount. On the portfolio monitoring side, we're deploying always-on surveillance across all 92+ investments. Machine learning-driven signals on occupancy, rent growth, debt service coverage ratios, and sponsor health flag risk before it shows up in the financials. We believe this will result in earlier identification of watchlist assets and meaningfully tighten the feedback loop between credit underwriting and portfolio surveillance.
We're also building predictive credit models for borrower default probability, LTV stress pass, and loss given defaults. This reinforces our existing discipline underwriting with data data-driven early warnings. It does not replace our investment committee process. On operations and reporting, we're using generative AI to accelerate investor reporting, SEC filings prep, earnings supplemental drafting, and internal research, freeing our team for higher value analytical work. Our roadmap is sequenced, foundation in Q2 and Q3 of this year, scale across the full portfolio by Q4, and full optimization throughout 2027. We expect this to translate into faster decisions, sharper risk management, and a more scalable platform for growth. A few closing points on capital and the balance sheet. Net debt-to-equity continues to run below one time among the lowest in commercial mortgage REIT space.
Combined with the Re-REMIC execution that Paul just mentioned and the new TRS facility, we do indeed have the capital structure flexibility to be opportunistic on origination and on our own stock. Speaking of which, at current levels, we continue to trade at a meaningful discount to book value of approximately $19 per share. We've been clear that we view buybacks at this discount as an accretive use of capital, and you should expect to see us continue to buy back stock opportunistically alongside the funding the pipeline I just walked through. Given our liquidity position and having successfully refinanced near-term maturities, the two are not mutually exclusive. Our Series C preferred programs continue to provide flexible non-dilutive capital. Our book value is stable, our dividend coverage is sound, leverage is low, and the portfolio's credit profile is improving.
That is a setup we feel very good about heading into the second half of 2026. To summarize, a strong quarter on earnings and credit, a transformative refinancing on the liability side, a continuing supply-driven tailwind in the residential space, a de-risking and broadening demand picture in life science, a robust pipeline of accretive deployment, and an AI platform initiative that we believe will set NREF apart over the coming years. As always, want to thank the team here for their hard work, and now I would like to turn the call over to the operator to take your questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from the line of Jade Rahmani of KBW. Please go ahead.
Thank you very much. Rates are trending higher year to date, and was wondering what you think the impact to the CRE recovery outlook will be, particularly around multifamily as bridge loans taken out during the COVID years are up for maturity.
Yeah, it's a good question. What I can say is in terms of like the last, I'd say four to six weeks, with rates going up as a result of geopolitical tensions, the processes that we've seen that started, you know, prior to that time in terms of the capital markets transactions, both on loan sales and investment sales, they've all continued without, I would say, material disruption. There have been, I'd say, some slight walk backs in terms of, you know, buyers underwriting, you know, a 5.5% all-in rate on a Freddie or Fannie agency and then, you know, the tenor moves against them, and so they'll seek a little retrade.
There's, I would say, a little disruption in the capital markets, but nothing that would halt it or I would say, you know, liquidity is still very, very plentiful on the, on the multifamily side. And I think what's even more important than that is, you know, we and I think the broader public REIT universe in their reporting yesterday and today are really starting to see the fundamentals in multifamily sector turn and firm up. You know, concessions are getting weaker. In our own portfolio, for example, concessions are down 100 by 50% from Q4. All that is kinda offsetting, I think, any near-term, you know, interest rate rise as it relates to multifamily.
The life science update has been quite impressive. I was wondering if you could give some thoughts. Do you view the Alewife exposure as unique to NREF, or are you also seeing green shoots elsewhere in the portfolio? Overall, do you view NREF's exposure as, you know, better than the market? You know, one of the commercial mortgage REITs took a, you know, downgraded a loan to risk five and took a quite large reserve on that. They're also expecting an REO in life science, and much of it is vacant in the sector. Just looking for some additional thoughts there.
Yeah, you bet. I think the important point on our project in Alewife is again, it's brand new. It's purpose-built with incredible infrastructure. The land that the asset's built on was assembled over years, you know, three to five years. Not, you know, it wasn't just a spec build. It was very intentional, and in a cluster built, you know, submarket. I think that for one is unique. Our own investment in terms of the loan-to-cost, it's roughly, you know, 30%.
You know, that is our unique, you know, sponsor relationship there and the ability for us to provide capital at a time, like I said, in the last, you know, kind of 12 to 18 months where there was literally no capital available in the life science sector. I think the loans, you know, that I've seen as well that you're referring to, were again, I think, you know, originated in a more speculative environment, you know, with more hope to, you know, to lease, you know, on the outskirts of the cluster markets that we have exposure. Again, you know, the Cambridges and the, you know, the Longwood and Fenway districts. These assets are.
These locations are gonna be the first to fill locations, and we're seeing real depth in the project leasing, in terms of the marketing, you know, coming out of big pharma and in the venture space. I think the green shoots you can point to or the biotech index is, you know, nearing cyclical highs. Venture capital is, I think at a high since 2021. You know, again, the AI spend and the assets that AI needs just widens the demand funnel for our assets in particular.
We're in the right locations where they wanna be, and they have the critical infrastructure that's demanded by their, you know, their compute and other, and other, you know, real estate needs. I do think we are different. I do think our exposure's different. I think it's again more recent at a reset basis versus, you know, loans that were originated perhaps in 2020, 2021, and 2022.
Thanks very much.
Thanks, Jade.
Your next question comes from the line of Gabriel Poggi of Raymond James. Please go ahead.
Hey, guys. Thanks for taking the question. I wanna actually piggyback on what Jade was just asking. It, you know, sounds like Alewife is doing great. Some other exposures, you know, Holly Springs, Vacaville, California, you guys have low attachment points. It looks like the senior mortgages are due maybe kind of by the end of the year. Just any color you can give on expectations for the underlying asset, whether it's a refi or a sale, et cetera, I think would be helpful as it pertains to life science exposure away from Alewife.
Yeah, great question. Thanks for it, Gabe. Holly Springs and Vacaville are both advanced manufacturing assets, which, if anything, is stronger, you know, in the last, you know, six months it's that versus life science. The Holly Springs underlying collateral, I believe is now topped out, has a tenant and I think will likely be refied out of those out of that deal. It's actually the tenant's a battery manufacturer for the Department of Defense, they're seeing a ton of growth right now, and I think that I see that exposure being reduced by a loan payoff at some point this year. Same thing goes to Vacaville.
It's got, I think, you know, eight to 10 project names in and around both semiconductor manufacturing and advanced manufacturing in the pharmaceutical side. To your point, the detachment's very low there, so I think there's a lot of ways to win, and I would say that we'd probably be taking out of that asset in the next 12 months as well. One thing that is on the horizon that could be good and bad is, you know, Alewife being repaid.
I think, you know, with the success of leasing there, going from, you know, 0 to 71% leased, and the tenant quality and then the clustering that's happening, like I said, there's RFPs and LOIs on that asset that almost get it to 100% full. You know, we could see that capital come back to us in the next 12 months as well.
Got it. That's really helpful. Then one more kind of just on the accounting side. In the other income, right, the $17 million, can you guys break out kind of the components of that, Paul, just for us before we get to Q, or do we need to wait for the Q for that?
Again, great question. I think we wait till the Q for that one. It'll give you know, a good breakdown of the other income. You know, we can provide a breakdown of the supplement as well too going forward for, you know, for better analysis.
Okay, cool. Thanks, guys.
Thanks, Gabe.
There are no further questions at this time. With that, I will now turn the call back over to the management team for final closing remarks. Please go ahead.
Yeah, thank you again for everyone's participation this morning, and look forward to speaking to you next quarter and providing another good update. Have a great day. Thanks.
Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.