Hello, everyone. Thank you for joining us, and welcome to the NexPoint Diversified Real Estate Trust second quarter 2026 investor update call. I will now hand the conference over to Kristen Griffith , Investor Relations. Kristen, please go ahead.
Good day, everyone, and welcome to NexPoint Diversified Real Estate Investor update call. On the call today are Matt McGraner, Executive Vice President, Chief Investment Officer, Paul Richards, Executive Vice President and Chief Financial Officer, and John Good, Chief Executive Officer of NexPoint Storage Partners and Chief Executive Officer of VineBrook Homes Trust Inc. Before we begin, I would like to remind everyone that this update call and accompanying presentation 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, NXDT does not undertake any obligation to publicly update or revise any forward-looking statements. I would now like to turn the call over to Matt. Please go ahead, Matt.
Thank you, Kristen. Thank you to everyone for joining the call this morning for an update on NXDT's progress in the second quarter. I am joined today by Paul Richards, CFO, and John Good, CEO of our Storage and Single-Family Rental businesses. This morning, we will discuss NXDT's real estate markets, provide updates on our top holdings, and as always, focus on the steps we are taking to close the gap between our share price and the underlying value of the portfolio. First, I would like to spend a few minutes on the residential market and the supply picture, and then update you on the continuing progress of our Cityplace office to residential conversion. I will then turn the call over to John and Paul to cover storage, SFR, and our credit vehicles.
I'll close with our efforts to monetize assets, repurchase stock, and narrow our discount to NAV, which remains our key near-term focus. Turning to the multifamily supply picture. The inflection we described on prior calls is now beginning to show up in the data. Nationally, trailing 12-month absorption has overtaken new deliveries for the first time since early 2022. Vacancy posted its first meaningful decline in over a year, and asking rents have begun to grind positive. We continue to expect our Sun Belt markets to lag the national turn, given the supply still to be absorbed, but the direction is now unmistakable, and it is underpinned by the same four factors we have highlighted. Persistent structural demand. The cost to own a home remains roughly three times the cost to rent an apartment in our markets. A steep decline in new deliveries.
National completions have fallen from a 2024 peak of roughly 696,000 units to an estimated 421,000 units this year and continue to trend lower. Construction starts running well below their 2022 peak, locking in a multiyear supply trough. Finally, concession burn-off. With roughly 40% of units nationally still advertising a discount, the normalization of concessions flows directly through to gross potential rent. On our Cityplace Uptown submarket specifically, the supply picture is almost nonexistent, with just 232 units delivering in the submarket in 2027 and zero currently slated for 2028 and beyond. Our redevelopment of the Cityplace apron is now fully defined. Approximately 460 multifamily units across the roughly six-acre apron surrounding the tower, with a curated ground floor retail program anchored by a boutique grocer and a rooftop amenity oriented to the downtown Dallas skyline.
On the tower itself, residential design and programming continue, phased intentionally behind the apron. Now, in the second half of the year, we've turned our attention to tower financing, and we remain bullish on commencing this residential project as submarket supply falls off of a cliff. Now I'd like to turn the call over to John. John?
Thanks, Matt. Welcome, everyone. First, going to occupancy of our self-storage portfolio. At June 30, 2026, our physical occupancy was 94.1%, which was up 240 basis points from December 31, 2025, where occupancy was at 91.7%, and we're 30 basis points less than the 94.4% occupancy at June 30, 2025. Our occupancy levels have performed to normal seasonal expectations, and our physical occupancy continues to rank among the highest in the self-storage industry. As for rental rates, sector-wide rental rates inched forward as we completed the 2026 rental season. We generally outperformed the sector. Our portfolio's in-place rate on June 30 was $20.54 per foot, up 6.3% from the $19.33 per foot at June 30, 2025, and up 183 basis points from the $20.17 per foot at the beginning of the year.
Our average street rate increased 230 basis points from $21.88 at June 30, 2025, to $22.38 at June 30, 2026. Growth in our average web rate, which is the rate charged to customers who find units and rent via the internet, comprising the majority of our customers was up 330 basis points year-over-year from $15.73 at June 30, 2025, to $16.25 at June 30, 2026. We view these rates to be indicative of a return to steady, if slow, rent growth for the entire self-storage sector. Moreover, we expect these rate increases, along with stable occupancy, to support a 5%-6% increase in our same-store revenue for 2026, which is significantly ahead of what the public REITs are forecasting.
As for revenue and net operating income, same-store revenue for the quarter ended June 30, 2026, was $23.7 million, or 6.1% higher than the $22.4 million recognized in the second quarter of 2025. Net operating income for the second quarter 2026 was $14.9 million, or 15.2% higher than the Q2 2025 NOI of $12.9 million. These results were driven by strong occupancy, good rate growth, and strong expense control. Our results continue to lead the publicly traded storage REITs by a large margin, as those REITs are forecasting for the year approximately flat NOI growth and 1%-2% top-line growth. Demand in the self-storage sector has typically been led by housing mobility and life events. The housing market has remained very weak, which has continued to suppress self-storage demand in some areas.
However, our portfolio is the youngest portfolio of size in the storage sector, and our facilities are located in large, dense urban submarkets where demand is driven more by need and less by mobility. We believe our exceptional locations and strong demographic profile insulate us to a large degree from the continued slow housing market that is burdening the rest of the sector and has allowed us to substantially outperform our peers. Turning to the supply picture. Development remains limited nationwide due to high borrowing costs, land scarcity, significant inflation in materials costs, and permitting challenges, as well as a continued weak housing market that has weighed on self-storage demand. In other words, anyone who is underwriting a storage development now has a really hard time determining what future rents will be.
Most experts in the sector believe this dynamic will continue for the next several quarters, providing a potential tailwind to the storage sector in 2027 and 2028. We continue to believe we have the preeminent urban storage portfolio in the United States that will continue to outperform our peers and command a premium valuation upon any liquidity event. We continue to evaluate strategic alternatives for our storage platform. Turning to VineBrook Homes. Over the past two years, VineBrook's management team has focused on fortifying our balance sheet to reduce our capital cost and effectively eliminate threats from short-term debt maturities; right-sizing our G&A structure with a goal of $15 million of G&A annual savings; and beginning a very significant and impactful portfolio repositioning involving exiting underperforming scattered-site homes and markets and redirecting invested capital to newer, better located, and easier-to-manage built-to-rent homes in more dynamic markets and submarkets.
Our second quarter performance reflects the fruits of our efforts, including some pain mixed with gain. On the positive side, physical occupancy within our stabilized same home set continues to track over 95%, with June 30, 2026, occupancy at 95.2%, up from 94.9% at the beginning of the year. Our stabilized home count was relatively flat during Q2 2026 compared to Q2 2025, with the count being 15,611 for the 2026 quarter versus 15,588 homes for Q1 2025, a 23-home increase. Also, our blended rent growth continues to lead our larger publicly traded peers, with second quarter growth of 5.1% on renewal leases and 1% on new leases for a blended 4.2% growth rate.
On the negative side, our net operating income margin dropped 340 basis points for the second quarter compared to the same quarter in 2025 on account of an intentional focus on improving the quality of homes that turn over to new residents, a strategic decision that has resulted in longer turn times and higher turn costs and repair and maintenance expense, which has negatively impacted margins. We believe this short-term drop in NOI margin was necessary to accomplish a sustainable long-term enhancement of earnings and corporate value. Over the past two and a half years, we have reduced leverage, decreased our interest rate, and extended debt maturities. Our work on the balance sheet has produced a $500 million acquisition line of credit from JP Morgan, which we have continued to utilize to fund build-to-rent acquisitions.
Moreover, after quarter end on August 14, VineBrook closed on a $545 million five-year fixed rate term loan with Barings MassMutual. Proceeds were used to repay in full our floating rate syndicated credit facility with JP Morgan and other short-term debt. In addition, the refinancing resulted in a meaningful net capital inflow for BTR acquisitions and other corporate purposes. We completed this transaction at a 160 basis point spread to the five-year Treasury note, which is a tightening relative to other similar fixed rate executions that we've completed in the past. With this transaction, VineBrook's debt maturities are largely extended to the end of the decade, with limited near-term maturities. We believe our improvements in the balance sheet have placed us in a strong position to trim underperforming assets and reinvest capital into BTR homes in our core markets, where we see the most promising long-term growth.
With respect to the portfolio repositioning, during the quarter ended June 30, we sold an additional 638 homes for approximately $101 million of net proceeds. The proceeds were used to pay down debt and fund new built-to-rent acquisitions. During the quarter, we acquired over 150 units across three BTR communities pursuant to forward purchase contracts that we have with developers. We have another $100 million of BTR home purchases under contract and a robust pipeline of potential additional BTR acquisitions. With the adoption of the Federal 21st Century ROAD to Housing Act, which allowed for continued institutional investment in built-to-rent new housing, we expect to have significant additional opportunities to add high quality, built-to-rent homes to our portfolio over the coming quarters to replace the lower yielding housing inventory that we have disposed of or intend to dispose of.
Our net asset value at June 30, 2026, was $52.68, compared to $54.25 at June 30, 2025, a 289 basis point decline as the range of cap rates provided by Green Street Advisors, our third-party valuation firm, expanded. During the quarter, long-term mortgage rates rose again, contributing to the continuation of the worst housing market in two decades, and such rates have continued to rise since the end of the quarter. The shares of our publicly traded peers continue to trade at substantial discounts to their net asset values, reflecting these higher cap rates. Finally, we remain committed to providing liquidity to VineBrook common shareholders. Management and the Board continue to monitor the macro outlook as well as the performance of our peers.
A listing sometime in 2027 is still on the table, but our publicly traded peers continue to trade significantly below NAV, and we are mindful of conducting such listing in a manner where shareholder value is maximized. Moreover, with capital flowing back into the sector and an exemption now for investor-to-investor transactions under the new Housing Act, there is the possibility of consolidation in the industry, which could provide liquidity opportunities for us after we complete our portfolio transformation. Management, the Board, and NexPoint entities, including NXDT, remain the largest shareholders in the company, and we continue to be absolutely aligned with all shareholders in terms of seeking to maximize value. With that, I'll turn it over to Paul to discuss NREF.
Thanks, John. I will quickly hit on NREF's Q2 results and further guidance. As of today, NXDT holds shares in OP units of NREF worth approximately $108 million of net asset value or approximately $1.71 per NXDT share on a standalone basis. As a reminder, NREF is a publicly traded mortgage REIT focused on originating and/or purchasing credit investments in our key operating verticals of residential, both SFR and multi, life science, self-storage, industrial, and marina. NREF reported second quarter net income to common shareholders of $5.4 million or $0.29 per diluted share. Earnings available for distribution were $11.2 million or $0.46 per diluted share, which is up 7% from the first quarter and ahead of our guidance we gave in April. Cash available for distribution was $13.9 million or $0.58 per diluted share. Moving to the portfolio and book value.
Book value per diluted share was $18.60, down roughly 2% from $18.96 at the end of the first quarter, driven primarily by small unrealized loss on our stock warrant portfolio. The portfolio totals approximately $1.1 billion across 85 investments, 39.4 life science, 37.6 multi, and 15.1 single-family rental, with the balance of self-storage, industrial, and marina. Credit quality continues to sit at the top of our commercial mortgage REIT peer group, a weighted average LTV of 63.4%, a weighted average DSCR of 1.39 times, and 80.3% of our collateral is stabilized. NREF remains conservatively levered at 0.88x debt to equity, with $836.6 million of debt outstanding at a weighted average cost of 6.3% and a weighted average maturity of 2.6 years, which gives us flexibility and downside protection.
The stock closed at $15.81 on September 23rd, roughly a 15% discount to book value and an implied dividend yield north of 12%, an attractive entry point relative to intrinsic value. Next, a few comments on capital allocation and activity. On the most significant transaction of the year to date, we closed a $375 million drawable term loan facility with Mizuho Capital Markets and used it to repay our $180 million of 5.75% senior unsecured notes at the May 1 maturity. Concurrently, we entered into a total return swap with Mizuho that reduced our net effective interest cost to SOFR plus 245 basis points. As of the August earnings call, $362.2 million was outstanding on the facility.
The transaction removed the largest near-term liability overhang on our balance sheet, replaced fixed-rate unsecured debt with floating-rate asset-based financing that better matches our preference for prepayment flexibility and provides a back-leveraged solution that enhances returns on new investments. On capital structure positioning, combined with $22.6 million we raised in our Series C preferred during the quarter, we head into the back half of 2026 with what we believe is one of the cleanest, most flexible capital structures in the commercial mortgage REIT sector. On to new investments. We funded a $42.6 million mezz loan secured by a life science property at a 14% coupon, a $20.2 million preferred equity investment in a multifamily property at a 14% coupon, $7.3 million on a loan paying SOFR plus 900 basis points, and an additional $31.9 million on existing commitments.
More than $70 million of the pipeline we outlined in April at double-digit coupons. On Allele Life . Our Allele Life Sciences science campus is now tracking to 85% leased, up from 71%, anchored by a long-term lease with Lyla Sciences for 245,000 square feet. The sponsor is running a recapitalization process, and we would expect a substantial amount of capital back, potentially in the fourth quarter, to redeploy primarily into residential assets. On dividend coverage. We paid a regular dividend of $0.50 per share in the quarter, which was 1.16 covered by cash available for distribution. The board declared another $0.50 per share for the third quarter, payable September 30th. Lastly, our future outlook and guidance. Looking forward, third quarter guidance, earnings available for distribution of $0.43 per diluted share at the midpoint, with CAD at $0.55 per diluted share at the midpoint.
With a debt-to-equity ratio of 0.88x , a dividend covered of 1.16 by CAD in the second quarter and guided at 1.1x for the third, and residential and life science fundamentals inflecting in our favor, we believe NREF is well- positioned to sustain its distribution and create durable shareholder value. Our affiliates and long-term investors maintain significant skin in the game alongside our shareholders. Our structure we view as a meaningful differentiator. Now I'd like to pass it back to Matt.
Thank you, Paul. Again, we are making operational progress across all of our platforms as we look forward to a more liquid transaction market and waning supply in 2026 and 2027. We also continue running a variety of processes to monetize assets at fair market values in this environment. One example is MidWave Wireless, formerly TerreStar Corporation, which remains one of the largest independent wireless spectrum license holders in the U.S. MidWave holds the entire 1.4 gigahertz band, making it the largest contiguous wide-area band not controlled by a national carrier. It also holds an indirect interest in 18 AWS-3 licenses spanning many of the largest U.S. metropolitan markets.
The company continues to explore strategic options to monetize this position, and we are encouraged both by the regulatory and standards work completed over the past two years and by a wave of large cap demand that has materially repriced the asset class. Emerging use cases, such as direct-to-device and supplemental coverage from space, only deepen that demand. We believe this backdrop is a positive indicator for value realization over the next 12 months and would note that NXDT's current valuation ascribes very little of this embedded value to the position. The accretion in our monetization efforts, coupled with the ongoing amortization of our preferred holdings, continues to fund our repurchase program, and our pace has accelerated meaningfully. During the second quarter, we repurchased approximately 109,000 shares of common stock.
Subsequent to quarter end, from the beginning of July through late September, we repurchased an additional 1,009,000 shares shares at an average price of approximately $5.33. By a wide margin, our most aggressive stretch of buying since the program began. In total, we have now repurchased approximately 2.28 million shares under the program for roughly $10.4 million at a blended average price of about $4.58 per share. We intend to keep repurchasing common for as long as that discount persists and to make real, measurable progress on closing it over the balance of 2026 while we continue the operational work within our key operating verticals. To summarize the near-term catalysts we are focused on, completing the capitalization of the Cityplace apron and advancing tower financing. Continuing to progress the monetization processes underway across the portfolio. Pursuing value realization on our MidWave spectrum position over the coming year.
Continuing to repurchase common stock at a discount to NAV, all in service of the demonstrable progress in narrowing our discount. That's all we have today for our prepared remarks. I'd like to thank everyone again for joining today's call and look forward to providing further updates on our progress next quarter. Thank you, and have a good day.
This concludes today's call. Thank you for attending. You may now disconnect.