“NXRT appears to be an attractively-priced REIT with substantial upside potential.” Chris DeMuth.
Chris DeMuth was the first to write on NXRT and it took me around one-and-a-half years to follow his lead.
Although we’re not going “all in” for any small-cap REIT, I find NXRT to be one of the safest bets with the best runway for growth.
I’ll give Chris DeMuth (a.k.a. The Wizard of Oz) the credit for being the first to pounce on NexPoint Residential Trust (NYSE:NXRT). Back in June 2015, my fellow Seeking Alpha analyst penned an article in which he forecasted a 50% return. DeMuth wrote:
“NXRT appears to be an attractively-priced REIT with substantial upside potential.
Not bad for a hedge fund manager!
No sarcasm here, I was simply too busy chasing another small cap multi-family REIT by the name of Preferred Apartment Communities (NYSEMKT:APTS). On December 15, 2014, I wrote my first article on APTS and since that time, shares have increased by over 60%.
Both small-cap REITs have performed well and hopefully investors have dodged the other multi-family REIT that I’m not recommending now: Bluerock Residential (NYSEMKT:BRG). Back in February 2015 I warned:
“I’m not recommending BRG until such time that the company can demonstrate an earnings track record that consists of a few quarters of successfully covering its dividend. No target price recommended.
Since my article (on Feb. 17, 2015) shares have declined by over 3%:
We did recommend shares in BRG’s preferred series on October 2016; however, we are still not attracted to the common shares.
Although I don’t generally follow the lead of Hedge Fund Managers (in the REIT space), I decided that it was time for me to follow DeMuth’s trail in hopes of duplicating the same success that he has enjoyed to date with NXRT (nice work Chris). Maybe I’m too late to the parade (scroll down to the bottom for summary), but it doesn’t hurt to add another REIT to the research lab.
Starting From Scratch
In March 31, 2015, NexPoint Credit Strategies Fund (NYSE:NHF) spun-off NXRT to create a pure play multi-family REIT. In Q3-15, NHF acquired its first apartment community (in Dallas) and NXRT has since grown to 39 multifamily properties encompassing 12,276 units of apartment space. Here’s a snapshot of NXRT’s portfolio that is spread across 8 states:
NXRT is focused on acquiring, asset managing, and disposing of multifamily real property located in the Southeast and Southwest United States. The company focuses on value-add properties located in attractive job growth markets. From inception through the end of Q3-16, NXRT has completed renovations on 4,118 units, achieving 10.7% rental increase, which equates to a 21% return on investment.
Full Story – Here