NexPoint Residential Trust, Inc. (NXRT) stock intrinsic value fair value estimate & owner earnings analysis

NexPoint Residential Trust owns 36 apartment communities, mostly in Sunbelt markets (Texas, Florida, Georgia, the Carolinas, Nashville, Arizona), and earns rent from roughly 94% occupied buildings. It is externally managed and pays advisory fees to an affiliate. It carries about $1.6 billion of mortgage and credit-facility debt against roughly 25 million shares. How we measure earnings. We start with cash from operations and remove working-capital swings, subtract stock compensation as a real cost, and subtract the capital spending needed to keep the buildings competitive. That gives owner earnings of about $1.24 per share in 2025 and $1.27 in 2024, but only about $0.40-$0.50 in the years before the 2021-22 rent boom and $0.51 in 2023 (heavy renovation spending of $71 million). Growth capex was treated as zero because revenue fell in 2024 and 2025, so all spending counts as upkeep. Why we do not use the recent $1.2 or the five-year median (about $0.92). In 2023-2025 operating cash flow was flattered by cash received on interest-rate swaps: $49.7 million, $53.3 million and $31.1 million. Those swaps fixed the company's floating-rate loan costs at about 1.1%-1.6% while the floating rate was around 4%-5%. The filing shows $717.5 million of that protection ended on September 1, 2026 and another $100 million on June 1, 2026. In its August 2026 call, management said the loss of that protection adds a $14.6 million headwind in the remainder of 2026 and raised full-year 2026 interest expense guidance to $71.2 million (2025: $60.7 million). Rebuilding a full year of interest without the swaps (using 2025 cash interest of about $54 million and 2026 guidance) implies roughly $18 million a year more interest, about $0.70 per share. Taking 2025's owner earnings of $1.24 less that step-down gives about $0.55, which is our starting level. As a cross-check, 2025 property net operating income of $151.7 million less about $72 million of cash interest, $18 million of corporate costs, $7 million of advisory fees and about $40 million of capital spending also lands near $0.5-$0.6 per share. Last year's owner earnings fell about 3% ($1.274 to $1.237); we start year one at -3%, in line with first-half 2026 same-store operating income down 2.9%. Base case, about $9 per share. Owner earnings of about $0.53 in year one, then flat. We credit no growth: rents and occupancy are recovering (new-lease rents were -5.0% in Q2 but +0.3% in July) but that has not yet shown up in earnings, and the company's acquisitions depend on raising new debt or equity, which is not a self-funded, repeatable process. The buildings continue to earn after year ten because the upkeep spending is already deducted each year, so we value the flat stream as continuing. Bear case, about $2 per share. Same-store operating income keeps falling about 2.5% a year for three years (the low end of management's 2026 range; Nashville, with expenses up almost 15%, accounts for 85% of this year's decline) and a further half-point of higher rates on the unhedged debt. With about $1.6 billion of debt magnifying each dollar of lost operating income, owner earnings drop to around $0.10 per share and stay there. Value stays positive but thin. Bull case, about $13 per share. Nashville expenses normalise and the same-store decline reverses (worth about $0.17 per share), and a $22.1 million bridge loan to a third-party fund earning a fixed 10% adds about $0.09, lifting owner earnings to roughly $0.80-$0.85, held flat. We do not credit market-wide rent recovery or new acquisitions. What to watch and what could make this wrong. The dividend ($0.53 a quarter, about $2.12 a year) is far above our owner-earnings figure of about $0.55 and is likely to be pressured; a cut would not change our value but would surprise income holders. Debt is largely long-dated (only a $33.8 million loan matures before 2030 and the $90 million credit-line borrowing in 2028), which limits refinancing risk. We could not reconcile management's non-GAAP FFO measures to our owner earnings and did not use them. If interest rates fall well below the forward curve, or if rents rise faster than expenses, the base case would be too low; if the company sells assets at prices near its own reported net asset value of about $47 per share, asset value could exceed our earnings-based estimate, but we credit only what the earnings support.