NexPoint Residential Trust, Inc. (NXRT) on Q3 2021 Results - Earnings Call Transcript

NexPoint Residential Trust, Inc. (NYSE:NXRT) Q3 2021 Results Earnings Conference Call November 2, 2021 11:00 AM ET

Company Participants

Jackie Graham - IR Manager

Brian Mitts - EVP, Finance, Treasurer, CFO, Secretary

Matthew McGraner - EVP & CIO

Bonner McDermott - Vice President, Asset Management

Conference Call Participants

Amanda Sweitzer - Baird

Gaurav Mehta - National Securities

Buck Horne - Raymond James

Tayo Okusanya - Credit Suisse

Michael Lewis - Truist Securities

Rob Stevenson - Janney

Operator

Good day, and welcome to the NexPoint Residential Trust Inc. Third Quarter Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the call over to Jackie Graham. Please go ahead.

Jackie Graham

Thank you. Good day, everyone, and welcome to NexPoint Residential Trust’s conference call to review the company’s results for the third quarter ended September 30, 2021. On the call today are Brian Mitts, Executive Vice President and Chief Financial Officer; Matt McGraner, Executive Vice President and Chief Investment Officer; and Bonner McDermott, Vice President, Asset Management. As a reminder, this call is being webcast at the company's website at nxrt.nextpoint.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 most recent 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 any forward-looking statements. The statements made during this conference call speak only as of today's date, and except as required by law, NXRT 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 earnings release that was filed earlier today.

I would now like to turn the call over to Brian Mitts. Please go ahead, Brian.

Brian Mitts

Thank you, Jackie, and welcome to everyone for joining us this morning. Appreciate your time. I'm Brian Mitts. I'm joined by Matt McGraner for our prepared remarks. I'll kick off the call with some commentary on the quarter and year and cover our results, wrap up with guidance, which we are again revising upward.

I'll then turn it over to Matt to discuss specifics on the leasing environment and metrics driving our performance leading us to revise guidance and NAV upward.

With net migration continuing into our core Sun Belt markets and continued shortage of high quality affordable housing, NXRT continues to enjoy enormous pricing power with new lease rates increasing 23.8% for the quarter and renewal rates increasing 10.5% for the quarter across the portfolio.

Net migration into our markets continues pretty much unabated. This continues to track capital and some cap rates to historic lows in our markets, is reflected in our revised NAV calculations. We continue to find attractive deals despite competitive acquisition market and have acquired three assets this year.

The current environment also allows us to sell assets that have been fully renovated at a premium and recycle that capital into new value-add product, where we can achieve higher rates of return, move out of slower growth assets. Yesterday, we closed on the sale of two assets in Nashville achieving a combined IRR of 36.1% and a multiple on invested capital of 3.55 times.

As we've discussed before, our growth prospects are not dependent on acquisitions. We continue to achieve significant returns from our value-add strategy where we can move cap rates 75 basis points to 150 basis points over 3 years to 5 years from acquisition, which makes us less sensitive to absolute cap rate levels.

The ongoing and widening shortage of affordable housing in the US, which is more acute in our Sun Belt markets as new household formation outpaces new housing deliveries gives us plenty of runway to continue implementing our value-add strategy across the portfolio and on new acquisitions.

The increase in net migration, coupled with the shortage of housing throughout our portfolio to achieve all-time high occupancies and sets us up to continue to aggressively push rates for the remainder of the year and into 2022, while still maintaining high occupancies.

Net loss for the second quarter was $5.4 million or negative $0.21 per diluted share on total revenues of $56.4 million as compared to $29.6 million or $1.19 per diluted share in 2020 on total revenues of $51 million.

For the quarter, same-store rent increased 6.8% and same-store occupancy was up 40 basis points to 95.4%. This, coupled with an increase in same-store expenses of 5.2% led to an increase in same-store NOI of $1.9 million or 6.6% as compared to Q3 2020.

Reported Q3 core FFO of $16.4 million or $0.65 per diluted share compared to $0.53 per diluted share in Q3 2020 or an increase of 22.6%. Net loss for the 9 months ended September 30 was $15.7 million or minus $0.62 per diluted share, as compared to $48.2 million gain or $1.91 per diluted share over the same period in 2020.

For the year, same-store NOI has increased $2 million or 2.4% as compared to 2020. Year-to-date, we reported core FFO of $44.7 million or $1.78 per diluted share compared to $1.64 per diluted share for the same period in 2020 or an increase of 8.5%.

We continue to execute our value-add business plan by completing 290 full and partial renovations during the quarter and reached 349 renovated units, achieving an average monthly rent premium of $172,a 21.2% return on investment during the quarter.

Inception to date in the current portfolio is 930, and we’ve completed 5,979 full and partial upgrades, 4,554 kitchen upgrades and washer/dryer instalments, and 10,134 technology package installations, achieving an average monthly rent premium of $134, $47, and $43 respectively, and a return on investment of 21.5%, 72.7%, and 35% respectively.

Based on our current estimate, cap rates in our markets and forward NOI, we are reporting an NAV per share range as follows, $75.03 in the low end, $86.22 on the high end, and $80.62 at the midpoint. These are based on average cap rates ranging from 35-point - sorry, 3.5% on the low end and 3.8% on the high end.

For the third quarter, we paid a dividend of $0.34125 per share on September 30. The Board declared a dividend per share of $0.38 per share payable on December 31, representing a 11.4% increase over the prior dividend. Since inception, we've increased our dividend 84.5%. Year-to-date, our dividend was 1.74 times covered by core FFO with a payout ratio of 58% at core FFO.

In 2021, we’re revising guidance upwards as follows. Core FFO per diluted share $2.36 on the low end, $2.41 on the high end, for a mid-point of $2.38. Same-store revenue, 4.7% on the low end, 5.1% on the high end, 4.9% on the low end.

Same-store expenses 5.4% low end, 4.6% from high end, and 5% in the mid-point. And for same-store NOI, 4.4% at low end, 5.6% on the high end, and 5.5% on the mid-point. That's up from 4% from prior guidance, and our core FFO is up $0.03 from $2.35 per share previously. If we achieve our mid-point of 2021 core FFO guidance, this will represent an 8.2% increase over 2020 core FFO of $1.93 per share.

So, with that, I'll turn it over to Matt.

Matthew McGraner

Thanks, Brian. As those of you that follow our company know, our goal is to consistently generate high-single to low-double-digit growth in our same-store NOI, core FFO, and annual dividend. And as Brian mentioned, we're pleased to announce our sixth consecutive increase in our annual dividend as well as material increases in both same-store NOI and core FFO.

NXRT continues to benefit from our market and asset selection as well as on-the-ground operational performance. Population inflows into our Sun Belt communities continued to accelerate with net migration from California and New York dominating our leasing applications, year-to-date continuing to increase 20% year-over-year.

Low migration outflows from our markets and consistent resident retention also explained the material strength in occupancy. Our Q3 same-store occupancy ended at 95.4%, that's up 37 basis points from a year ago. And as of November 1st, our portfolio is 95.1% occupied, 96.8% leased with a 92.5% trend.

Renewal retention for the quarter was 58.4% and accelerated throughout the quarter with July being 55% and ending in September at 62%. These historically high occupancies and trends are driving material rate increases in revenue growth across all of our Sun Belt markets. Our same-store revenue growth, for example, exceeded 3.2% and 6 out of our 10 markets in Q3 with every market experiencing positive rental revenue growth.

In addition, both new leasing and renewal spreads remain elevated. New leases ended the quarter at a robust 24%, that's almost 10% higher than last quarter. Renewals finished at a positive 10.5% for our Q3 blended rental growth of just under 16%.

Here are the numbers by month, which demonstrate another acceleration throughout the quarter and into October. July new leases were up 23.2% with renewals being 8.4% with a - for a blended increase of 14.2%.

August new leases were up 24.1% with renewals being 10.1% for a blended increase of 15.4%. And September new leases were up 24.4% with renewals being 13.5% for a blended increase of almost 18%.

Q3 new lease growth continues to be strongest in Atlanta, Tampa, Orlando, South Florida, Phoenix in Las Vegas with each of those markets clearing at least 25% new lease growth. Every market in the portfolio is up at least 14%. So far in October, new leases are up 26.9% with renewables being 15% for a blended increase of over 21% on roughly 1,000 leases.

On the transaction front, yesterday, we completed the sale of Beechwood and Cedar, generating $49 million of net proceeds. As a reminder, these dispositions generated roughly an 80 basis point positive cap rate or funded and completed our reverse 1031 into two new Charlotte acquisitions, Creekside and Matthews and the brand is at Lake Norman. Both of these replacement assets are performing ahead of our expectations and already being Q3 NOI budgets by over 10%.

On September 10, as Brian mentioned, we closed the previously announced Six Forks transaction in RTP for $74.8 million at a year one economic cap rate of 4.1%. In addition to generating a cap rate, we also upgraded our portfolio's location and quality with these transactions.

We recycled capital out of a Nashville submarket with $56,000 in annual median income average within a one-mile radius of the asset and into Charlotte and Raleigh submarkets with 118,000 annual median income within a one-mile radius of these assets.

As you might have noticed, we updated our cap rate range, as Brian mentioned, to be 3.5% to 3.8% from 4% to 4.3% last quarter. We continue to see aggressive capital compressed cap rates as demand for quality and affordable housing assets in our markets has never been stronger.

During Q3 '21, we ourselves underwrote many deals in our target markets and finish it up as a bridesmaid [ph] on several that went multiple rounds and ultimately culminated in a sealed bid process. During these processes, pricing often moved 20% from initial broker guidance, and in some cases, pricing went in the sub-3 cap rate land.

We witnessed the same process as a seller of Beechwood and Cedar, which culminated into a sealed bid ourselves and ultimately sold for a tax-adjusted 3.5% cap rate.

Given the underlying growth and fundamentals of Class B multifamily in Sun Belt markets, coupled with how resilient these assets perform during the pandemic, we don't see the investor appetite abating anytime soon.

On the redevelopment front, we completed 290 total rehabs in Q3. So far in October, we started 132 and completed 42. We're budgeted to complete an additional 253 full and partial upgrades as well as 141 washer and dryer installs during the quarter, and we stand ready to complete these upgrades that will adjust the number lower to the extent we retain more tenant with elevated pricing during the winter months.

This will allow some of the supply changes to [indiscernible] which are there, but investment are detrimentally material at the moment, at least for us, as they relate to delays and appliance [ph] deliveries and [indiscernible] both of which we can navigate over the near term.

As Brian mentioned, we're pleased to announce another meaningful increase in core FFO to mid point of $2.38 per share, this guidance improvement is largely driven by revenue growth and expense savings and not acquisitions, as was the case from prior quarter.

Our portfolios revenue components has been well documented here, but wanted to briefly provide an update regarding property taxes. We now received preliminary [indiscernible] for all assets and are presently feeling or filing suit on 24 of the 41 values, so largely concentrated in our Florida, Georgia, north Carolina, Tennessee and Texas markets.

We’ve seen some favarable [indiscernible] year to date and are continuing to aggressively pursue further tax expense reduction on the open protest property. Our approved full year 2021, thanks to NOI guidance forecast is corporating all loan reductions, refunds and settlements post to date. We’re still mildly optimistic about realizing a further reduction in the fourth quarter and early – into early 2022.

In closing, I wanted to address questions repeatedly asked by our investors regarding how long we can generate this degree of revenue growth. As those of you that follow us know our goal is to provide an affordable but upgraded housing experience, that post-renovation can still be at a price point comfortably underneath and express housing option in our markets, which mainly is a new [indiscernible] or single family rental. Today this delta is still unmaterial as it is ever been. We routinely analyse cost effective rent data from Axiometrics, and RealPage, as well as [indiscernible] platform.

NXRTs Q3 effective $4 [ph] portfolio rent is $1183 and our markets [indiscernible] Class A average rent if $1684 and invitations homes is $1974. That lease roughly a $500 and $800 per month effective rent differential respectively between our upgraded product and these next spend [ph] options. We believe this headwind in rental continue to provide a tailwind for our company’s revenue growth over the near and immediate terms.

That’s all I have for prepaid remarks. Thank you our team at NexPoint and be able to continue to execute, back to you Brian.

Brian Mitts

Thank you. We’ll turn it over for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We'll take our first question from Amanda Sweitzer with Baird.

Amanda Sweitzer

Thanks. Good morning. Can you provide an update on where you currently stand with loss to lease in the portfolio?

Matthew McGraner

Yeah. So hey, it's Matt. So we are currently - roughly at, call it, $824,000 cost of portfolio for the year.

Amanda Sweitzer

Absolute dollars? Just the GAAP?

Matthew McGraner

Yeah.

Amanda Sweitzer

Okay. That's helpful. And then as you think about same-store growth into next year, where do you stand at resolving some of those prior casualty events? And when do you expect those units to be fully online and no longer impacting same-store growth?

Matthew McGraner

Yeah. I think for us, we're expecting to have Cutter's be up and running during the first - probably toward the end of the first quarter; and then along that same time frame from the ice storm, the Houston assets and the Dallas assets should be hitting in the first quarter as well. So, kind of Q2, everything should be back in the pool.

Amanda Sweitzer

Okay. That's helpful. And then last one for me. You did talk in the press release about how you continue to evaluate the portfolio for additional capital recycling opportunities. Can you talk about the potential magnitude of that recycling activity and potential locations you're considering for sale today?

Matthew McGraner

Yeah. I think - I don't know if we said on the call that definitely in investor one-on-ones is that our probably next culling of the portfolio will occur in Houston, our three assets in Houston, specifically Old Farm and Stone Creek are probably the first two that would get.

The thinking there is, Houston has been a market that has sort of underperformed the rest of our core markets both on the revenue side and then the tax assessors and municipalities are very aggressive in terms of raising taxes. So, you kind of get the - the worst of both worlds.

And then we want to continue to overweight markets that have robust growth and lower property taxes and other non-controllables. So those markets for us right now are in North Carolina, Charlotte, and Research Triangle, which we're spending a lot of time there in especially [indiscernible]

And then Phoenix is another market that's probably performed as well as any for us with robust leasing growth. And then, obviously, they have the statutory limit on property tax increases, and so that's helpful there. So, I would say we continue to focus on those two markets.

Amanda Sweitzer

Thanks. Appreciate the time.

Matthew McGraner

You bet.

Operator

[Operator Instructions] We'll take our next question from Gaurav Mehta with National Securities.

Gaurav Mehta

Thanks, good morning. First question I have is on cost of material. I'm wondering if you could comment on what you're seeing as far as the cost of materials and if that's impacting your returns on redevelopment at all?

Matthew McGraner

Yeah. For us, the cost of materials is really probably focused in two areas, appliances and paint [ph] we're seeing the most increase. And it's not necessarily an increase that we can't pass along. It's just really getting access to the appliances and goods, which is about 8 weeks to 10 weeks behind schedule.

And I think in terms of - that's timing and in terms of cost, roughly 15% to 20% more. But again, we've been able to pass that on for the upgraded product and to the rents.

Gaurav Mehta

Great. And second question I have, maybe a big picture on the macro side. I was wondering what your view is on sustainability of the mid-3 cap rates in the event we are tightening monetary policy in 2022?

Matthew McGraner

Yeah. I mean I think you kind of said it in the NAV table discussion, but we don't see investor appetite abating, and then just a wallet of share cash and capital out there for assets, notwithstanding inflationary pressures. Most of the world is in a negative interest rate environment, and we just think that, that - those issues, coupled with the cash, how well the growth is in these assets, double-digit increases, the ability to pass along inflation, reset on a monthly base for rent, and particularly how well these assets performed, specifically Garden [ph] affordable B assets and Sun Belt performed during sort of the worst of times over the past 18 months, had some bad debt issues and collection issues but generally performed well and were occupied and people paid rent and the revenue didn't turn materially negative. So, I think investors, from all aspects, from all capital allocation perspectives are too excited about that, and we're seeing it pour in the space right now.

Gaurav Mehta

Okay. Thank you. That’s all I had.

Matthew McGraner

Thank you.

Operator

We'll take our next question from Buck Horne with Raymond James.

Buck Horne

Hey. Good morning, guys. Curious, this new lease, I mean, the pricing power you guys are generating is just almost unprecedented right now. Certainly, incomes and wages across the economy seem to be improving quite a bit. But I don't know if they're keeping up with 24%, 25% new lease rate increases.

So, I wonder if you can provide some context around where your rent-to-income ratio stand for your new applicants who are coming in, maybe what the - what kind of income are those out-of-state applications bringing with them. How sustainable are these levels of rent increases given the credit quality of the applications?

Matthew McGraner

Yeah. I think our portfolio average is roughly, I think, 26% as it sits today, Buck. And that's been - it's usually been, I think, for us, 23% to 25%. So, it's a little bit, I think, elevated. It doesn't really tell the whole story, though, because, as I mentioned, from the capital recycling of the assets, our median household income is going up with the location upgrades, so $118,000 for Charlotte and RTP deal versus $55,000 for the Nashville deal. So, we've been upgrading our kind of demographic and our job quality throughout the past 3 or 4 years.

And I'd just harken [ph] it back to just the headroom and rents between what the options are. So again, like our rates are $1200. New Garden is $1700 and then SFR is $2000. I just think we'll have the ability - once we get, I think, $100 coin flip between us and the next best option, I'd get worried, but $500, $800, respectively. And those - and it's not like Class A and SFR aren't doing the same thing. I mean you see record increases in both of those property types as well. So I think it's sustainable over - certainly over the near term because there's just not going to be enough supply versus the demand for affordable housing.

Buck Horne

Great. That's great color. Thank you for that. And with the certainly improved cost of capital with how you're underwriting new deals, how are you thinking about where your current leverage targets stand? And as you're continuing to pursue new acquisitions, do you think about over-equitizing some of those new deals to bring the total leverage down?

Matthew McGraner

Yeah, I think so. The - I guess the dispositions are going to be probably the highest near term currency to the extent that we funded acquisitions on the Houston assets, for example, because I think that there's going to be at least a net-net cap rate especially if you look out through year one or year two and a new acquisition just given the drag in taxes and revenue growth in Houston.

And then as we've said, from our NAV table, we think we're relatively cheap right now, the private market values and transaction activity. And so we're not necessarily looking to raise a bunch of equity here. Again, we don't see that this is going to stop anytime soon.

So to the extent we found a new deal, we probably add less leverage on the replacement asset and over-equitize it that way instead of issuing equity but comfortable with where our swaps are, with where all-in interest rates are and where we're hedged over the next 4.5, 5 years. I don't know, Brian, do you have anything to add to that?

Brian Mitts

Yeah. Perfect.

Buck Horne

All right. Thanks, guys. Appreciate it.

Matthew McGraner

Thanks, Buck.

Operator

We'll take our next question from Tayo Okusanya with Credit Suisse.

Tayo Okusanya

Yes. Good morning, guys. Congrats on another great quarter. First question, could you just talk a little bit about Vegas, Atlanta and Charlotte, specifically kind of negative year-over-year and quarter-over-quarter occupancy trends and what may be happening in those three particular markets, just kind of given how strong everything else was?

Matthew McGraner

Yeah, you bet. So Vegas is primarily related to one asset, that's Bloom, in which there's - they're a little bit more concentrated late payers. So when you saw the kind of uncertainty in the eviction moratoriums, they stopped and started again stopped again in July and August.

I think that property, in particular, was hit hardest with. And so that's primarily the driver of that occupancy. Since then we've upgraded a ton of units there, we made the decision to go ahead and upgrade them all and then achieving new leases in the 20%, 20%, 25% range there, so that’s going to [indiscernible] to be a net positive.

Atlanta kind of same story with the Preserve at Terrell Mill concentrated issues, again, because of eviction moratorium [ph] was off and on again, and then off again. So had the same issue there. We put out a lot of the [indiscernible] again, same story 38%, plus new [indiscernible] At that asset – and then by the way, in those assets we’ve also received rental assistance that made the way - that will make their way through the income statement through the year.

Finally, Charlotte, primarily related to Timber Creek. So one - again, one asset there, same story, had some skips plus there's some bad or not bad debt but some units down there due to casualty. So those are all kind of the three, I guess, problem children, if you will, in those markets that caused, I think, overall, relatively minor issues but not anything that we're worried about long term.

Tayo Okusanya

Great. Okay. That's helpful. Then to the second question, I mean, then just from someone's prior comments, the spreads on the new leases and the renewals are pretty eye-popping.

I'm assuming the benefits from the tech packet upgrades and the unit upgrades are built into those numbers. And if they are, is there where we can just kind of separate the benefits from those rent jumps you get when you've done that versus this kind of standard kind of rent increases for renewals and new leases?

Matthew McGraner

Yeah. I mean you're talking about a kind of value-add

Tayo Okusanya

16% fallen, as you mentioned before, kind of x all the value add, if we're just kind of really looking at "similar unit", what would that number be?

Matthew McGraner

Yes. I think the best indicators are your renewal rate perhaps which is 10%, 12%, 15%. But then again, like we didn't upgrade as many units, we signed probably say probably 500 actually

Brian Mitts

390.

Matthew McGraner

390 new leases. And then for Q3 - or excuse me, 390

Brian Mitts

349.

Matthew McGraner

349 upgrades for Q3 but we signed 1,459 new leases during the quarter at 23.81% for an average rolling increase of $225. So I guess, backing out the premium, you're probably still in the mid to high teens, but that's something we can definitely call and get for you, following this call.

Tayo Okusanya

Irrespective of the numbers still - I mean there's some pretty aggressive increases. It's pretty impressive that there was any kind of impact on occupancy. So well done.

Matthew McGraner

Appreciate it.

Operator

We'll take our next question from Michael Lewis with Truist Securities.

Michael Lewis

Thank you. I want to follow up on the cap rate discussion a little bit. So the disposition cap rates, the two Nashville deals, I think I missed it. Did you say that was a 4.1% cap?

Matthew McGraner

No, those were 3.54% tax-adjusted cap rate.

Michael Lewis

Okay. And that's on - is that on forward 12-month NOI? Or is that in place?

Matthew McGraner

In play T3 - 12, T3 or T12.

Michael Lewis

Okay. So assuming that there's any loss to lease there, that's an even lower forward cap rate. Okay. I was going to see if I was comparing apples to apples with the cap rates you're using for your NAV analysis.

But I assume when you calculate your NAV, you're capping forward 12-month NOI as well? Or is that in place like the cap rate you just gave?

Matthew McGraner

Yeah, it's forward, but it's nominal. So it's sort of net-net neutral. So the nominal cap rates or the cap rates that we quote for the NAV table or nominal cap rates and are tax adjusted or CapEx adjusted. The cap rates that we disclosed at 3.54 for Nashville are tax adjusted and are post-CapEx.

Michael Lewis

Okay. Got you. That's helpful. And I wanted to ask about the Raleigh acquisition. I assume that's probably a market that you wouldn't mind growing in. Maybe thoughts on looking to do more there.

And I'm also wondering other target markets, how many markets are kind of in your in your play plan here that you would - that you kind of survey and are poking around.

Matthew McGraner

Yeah. I mean, Raleigh is the biggest focus for us. Right now, we're spending a lot of time after energy money and resources in that market. The latest research we've seen in being on the ground there, there's over 10,000 jobs over the next 12 months with an average median income of $150,000 or more and only minus 3,000 units of new stock delivered. So that's an incredible dynamic that just doesn't exist in most places -- promised capital there. Our capital is also seeing the same thing as we are. So it's just a tough market to enter.

Other than that, frankly, there's not a ton of new places or new markets that we're focused on. We've studied Salt Lake City a little bit in the Mountain West region probably not get to spend a ton of time there, but other than Raleigh, where we are spending time and Salt Lake could be interesting later in the future. We're really happy with our core markets.

Michael Lewis

Okay. Great. And then just lastly for me, following up on an earlier question about the leverage. It looks to us like the leverage did come down a little bit this quarter. But got, I think, two -- you ended the quarter, I think, with $275 million drawn on the credit facility. It sounded like maybe you would use some sale proceeds to pay that down a little bit. But how do you kind of think about sometimes you run a little bit tight on the facility.

How do you think about what it might be worth you to free up a little bit of dry powder or thoughts on the way you use that facility or how you might do some permanent funding and bring that balance down. I don't know.

Matthew McGraner

Yes. I'll start and I'll let Brian finish. I think for us, we -- I think we will -- first of all, we just paid a $50 of it down yesterday. So the balance is a little bit lower from our dispositions. But you're right, we do run generally drawn and hot on the revolver and then the portfolio's currency. We started to do that when we issued a little bit of stock on the ATM, but didn't realize the market environment where we were in stops because we just saw pricing that was going to run incredibly far. We still believe that.

So we're not in a mad dash hurry to issue equity and pay down 2.5% debt right now when our growth rates are increasing. So I think the current thinking is if we can reach a position where our new NAV table is, then we might utilize the AGM to delever, otherwise that it's going to be the disposed.

Michael Lewis

Thanks a lot.

Operator

We’ll next question from Rob Stevenson with Janney.

Rob Stevenson

Good morning, guys. The guidance had same-store expense growth coming down from 5.6% down to a midpoint of 5.0% now. Is this just timing of year-over-year comps? Are you really starting to see any material relief in the expense increases on the big items like taxes, people and insurance as we move into 2022?

Matthew McGraner

Yeah. I think, Rob, it's largely taxes. We realized a pretty good reversal, the second half of the year in Houston taxes, I think it's almost $0.5 million. And so we think that Houston, optimistic on some [indiscernible] assets in Dallas and Atlanta. I think those are - those are the main drivers.

Rob Stevenson

Okay. And so as we start thinking ahead, I mean, is it likely to be in the sort of high 4s is where same-store expense growth is likely to be given the current market environment and the inflationary pressures across the board?

Matthew McGraner

Yeah. I mean I think we're optimistic it can come in lower, but it wouldn't be - I don't think it will be largely driven by a big number in repair and maintenance savings or payroll, I think it's largely tax.

Rob Stevenson

Okay. Thanks, guys. Appreciate it.

Matthew McGraner

Thanks, Rob.

Operator

[Operator Instructions] I'm showing we have no more questions in the queue at this time. That concludes today's question-and-answer session. Speakers, at this time, I will turn the conference back over to you for any additional or closing remarks.

Brian Mitts

Yeah, I appreciate everyone's time. We'll talk after year-end. Thank you.

Operator

That concludes today's call. Thank you for your participation. You may now disconnect.