VRE - Earnings call transcript Q2 2022 | Veris Residential, Inc.

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Operator

Good day, everyone, and welcome to Veris Residential Second Quarter 2022 Earnings Conference Call. Today's call is being recorded. I would like to remind everyone that certain information on this call may constitute forward-looking statements within the meaning of the federal securities laws, although we believe the estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. We refer you to the company's press release, annual and quarterly reports filed in the SEC for risk factors that impact the company. With that, I would like to hand you over to Mahbod Nia, Veris Residential's Chief Executive Officer. ahead. go Please

Mahbod Nia

welcome I'm and second XXXX quarter Good by to our call. joined CFO, earnings morning our Amanda Lombard.

forma the across to up again and we from We our added These XX% results occupancy across pleased announce stabilized significant strong occupied. quarter of XX%. continued NOI solid are over XX% quarter steps as by the now contribution X,XXX the our of pro the which by operational have growth enhancing of during of at approximately multifamily evidenced XX% over to our XXXX from our around is velocity leased taken driven demand been multifamily portfolio growth on during and sits at basis, XX have XX% representing units notably leasing posted HausXX, transform Today, NOI end XX% NOI rental is reflect assets, portfolio months and sector-leading past while the significant multifamily this first The maintaining portfolio at company, increase our nearly repositioning properties to platform. another which the time. and in a

Loss rental a was portfolio net unit that the the quarter The down at and to and strong during quarter rate remained HausXX a progress signing work, would from I X% our the XX assets. just blended approximately acquisition for closing X% and strategic quarter, rising like our first XXX X,XXX the occupancy fundamentals effort months. The James dedication across our multifamily last across sale from of continue Street, these nearly Main continued hard and a rents. the tremendous portfolio, to to made XX.X%, transformation, maintain Hyatt in was units operating in with at team including four of office also around despite definitive in up headline We their our the thank on July. for figure XX% and agreements through lease we to in growth first XX% our of that Hotel suburban remaining XX%,

strong trends. XX%, X,XXX operating to market and sector-leading during NOI Our same-store at grew Same-store with increase and also higher XX.X%, third continuing year year-over-year in NOI concessions rents occupancy consecutive quarter rents line lower occupancy by portfolio to while reflecting the growth relative increasing the quarter. of last unit maintained

is a minds two at has with As well in potential ripe and documented, uncertainty risks been an that being the inflation greatest recession. we investors' of forefront the economic are environment for the

item, stock. proximity should of values rising New Manhattan in downside of of supports should that it expenditure multifamily, critical a defensive support and is capital nature to namely immune, it rental shorter-term the inflation particularly A subdued supply and While The capturing positioned of homeownership to remains continue and that characteristics not we believe multifamily a well hedge that as our unique Class possesses continue the The provide standing replacement values of construction natural either costs in characteristics nondiscretionary to make a against leases of New these scenarios. outperform ability class in our expensive to our asset scenario. with properties thesis. Jersey provides degree and further with a growth, alternatives. And this particular, to half those being protection The York in approximately rents recession of portfolio provide

On Looking we the July housing tenant annualized for strong including approximately favorable $XXX.X basis. first in is per million. on $X.XX a in year share of anticipated market ahead, apartment to affordability newly the built XX, located of XXX-unit the contribute supply base, across transaction our a to FFO benefit key dynamics, to see XX.X% leased from James, building markets. closed Class our to and reduced limited continuing an acquisition we alternatives portfolio Ridge $X.XX A core The Park

Turning to sales. asset

Jersey and parcels quarter, in previously land Urby the a parcel disposal announced, we land during $XXX the in the completed total Port of of City million. As Imperial for

to Street, asset the for signed our company. sales million Hyatt and sell suburban definitive to of Together, XX proceeds office are to remaining Main release Hotel last We a million. net $XXX agreements of approximately expected $XX also these total the

the the volume leased waterfront As second market the leased. we the in XX,XXX office broader in approximately as New assets three-month end square waterfront of our portfolio, to feet, were We total look the leasing quarter, XX.X% of reflecting Jersey the period. of XX%

sustainable in in which way XXXX Scope are Initiative responsible, and also to a have to to we by inclusive a XXXX, efforts we progress and the May, become target Targets to emissions the We released by X achieving. In reducing X XX% committed and make we company. more Science-Based well we our by on continue meaningful report validated ESG that our

Green As a wholly-owned approximately result equivalent. of or portfolio efforts, multifamily is certified, our LEED enhanced our ESG XX% today, of

policies two third measuring scoring more as enriched Additionally, sustainability property the sustainability-focused and environmental of corporate our take whom independent at disclosures. new, by levels our accredited both and approach corporate, as been social introduction and well to have environmental parties, disclosures of data-driven a

ISS people seeking With shareholders. And above who eight, will prior As the continued social XXXX. our the disclosures, compared of we in sector-leading in create hand XXth over saw of ESG it ratings planet July, to respectively, Amanda, that, score of to on our These Glass a from book, during the XX% you financial broader from putting properties, Veris reflect to in Lewis score towards S-Ray while past as and earned received our our year, for value nine the finance scores October partner rating June, as the both of sector. environmental to of I'm going our for Arabesque one, this a the quarter. update performance percentile us up and the commitment ESG increase QualityScore Residential from highest and

Amanda Lombard

Mahbod. Thanks,

in to a per parcels, fully $XX the million FFO for increase quarter-over-quarter income of shareholders common we in and fully Urby in a per diluted compared quarter. share share credit improvement net lower The Core of quarter approximately the second to due the performance per sequential XXXX, loss as the $X.XX per second share share $X.XX $X.XX this driven tax were James. fully the $X.XX $X.XXX residential available share. which, large by per diluted the contributed was fees $X.XX on was prior core $X.XX available FFO, $X.XX due per quarter. this of as diluted shareholders hotel acquisition For proceeds continue in ventures. it's do tax the equity gain common so further annually, to to used improved share, of a and per of of numbers to was and of quarter Core our diluted credit of quarter last per G&A primarily performance This now. to Net income the to receive sale share professional versus of reminder, up varies timing same-store for was which is thus, The earnings joint by quarter. from share fully land have and that recorded while historically we it Note unconsolidated excluded our

to a $X.XX a expense of per share of interest this by increase HausXX result is All due a interest reduction opening. as offset in capitalized in

rate the of three NOI driven of of a of below stabilized of XXXX during up by well modest quarter. lease-up The mentioned, the contributed in last million current expenses XX% the fourth Mahbod and net quarter-over-quarter is was respectively. that and same-store increase and up rental in inflation. increase from quarter, X.X%, properties XX% $X.X year-over-year quarter year-over-year growth As NOI X%, X.X% The

the in Looking are we burn ahead, expecting taxes quarter, our City. last significant COVID off increase real third in in concessions an will Jersey estate and

tax exemplified to we While evidenced remain which the million our incurred expenses our the well as the third with quarter. investments quickly excluding quarter, expect operations, our final, teams, the fashion. efforts assets us utilization identify XX.X% sales under this have to that allow property on in mitigating impact measures $X through increase, $X of In recently respond be in in conditions. XX.X% to million to customary of QX from fees the margins, will technology, of fourth controllable not timely project same-store subject and management a gone of to which, we recent two to contract, trends implement more as positioned This improving continue close by ESG-related in problematic will streamline of increase to our coupled inflation a quarter. the XXXX annualized is We and closing

remainder to core term the However, we FFO in no will tenant's lease same rate, impact through at the lease of through lease back XX expiration. the for resulting site Main, the

reaches we will its quarter of in to anticipate began our grow contribution as marks occupancy. the significantly property contribute and this period the HausXX This first which to ahead stabilized earnings also expectation,

to Finally, RiverHouse quarter the turning construction sheet. our balance loan subsequent end. refinanced on to We X

The We anticipate million also of land credit on our the $XX James, contract. acquisition of drew down binding which the parcels the to sale from we repaying proceeds under facility with fund

debt XX.Xx factors core first same Our relative versus to which quarter. in to the due adjusted quite sensitive higher net this EBITDA, quarter XX.Xx which earnings, fell to FFO the is quarter drove this

our ratio around company interest constant ratio at debt well net not relatively these By interest we through fixed XX% our rate remained Xx, recur of the to tax hedged is and/or we with as assets positioned rate transition. Urby adjusted average expect weighted weighted a EBITDA five some believe factors, balance portfolio as in of undepreciated X.XX% average quarter, respectively. interest environment, of contrast, debt debt As years. continue rising fluctuate We with XX% of of maturity the next at to our our coverage total a and the will a such work to to and

is Our and of we questions. that, are multifamily secured, primarily With cross none XXX% ready collateralized. for nonrecourse Operator? senior it think I is debt

Operator

you. Thank

begin go with [Operator Spahn question Brian now Evercore. session. Our the will Please comes We Instructions] first from question-and-answer ahead.

Brian Spahn

good and if are you extent provide bids an changed this bid-ask update to out transaction wondering you you the months? the are to six morning. office has just for three there the on How over And last product? spreads I could there was today, any seeing market. Thank Mahbod, where

Mahbod Nia

markets so. environment it months primarily market a Brian. question. on the as It's in you the debt. make availability Thank saw think you implications have as quarter I'd driven by of the relevant we operating progress and rising progress to continuing that's and been market, over accustomed for say, certainly, somewhat the in are action three had rates transactional morning, we last a past XX I environments one. And make continue the that, and or challenging credit and the Fed and it's Having financing to very six of for been given to cost has sure. Good the to course and the this actually said challenging months, Well,

and forward transformation, but there. can market path a there's out that optimistic we continue still challenging transaction we're So it's a the

Brian Spahn

are pretty you buyers any interest at they this just are sidelines much So sitting seeing the levered from today? Or point? on

Mahbod Nia

multifamily? For office or

Brian Spahn

Office?

Mahbod Nia

the are you the type value-add class sitting opportunities. that of I think product be there's they've capital they And this and to. the undertaken and on and looking opportunity lot is the have certainly to risk – to sort and return an profile. sort sidelines a environment indeed, looking on depends that returns for asset at will But delivering deploy been of raised No, that's the certainly, of

Brian Spahn

front leasing Okay. just traction Thanks. some there? to just needs what, leasing I curious has lastly, obviously, on the mind, leasing, on Waterfront get I'm your And meaningful been just to slow. happen in guess the

Mahbod Nia

– second attracted Well, quarter, volume I even overall outperformed last you we've look whether to the terms look in or at year of certainly leasing that quarter you of think, we've the or Harborside. first if the percentage at

lease And market, volume of leasing far we was signed significant that in challenge The in market. feet that as is a MUFG the was transacted leasing in over and market it is or square is XX% a quarter then lumpy concerned. the half was So slightly this unpredictable the what the XXX,XXX as an flow XX,XXX very of quarter, feet. the quarter, portion good first the square around total

to as leases the And first so ourselves now able well and in did capture quarter, those in then you in positioning be we'll up, quarter be that need to arise it's to volume when really but we to the opportunities and and way the that second leasing really positioned that. pick about capture

Brian Spahn

the for color. Thanks okay. Yes,

Mahbod Nia

Brian. Thank you,

Operator

Joseph comes question Nicholas next with Our Please ahead. Citi. go from

Michael Bilerman

with Nick. Michael guess, lucky afternoon here here. Thank you. good Good Bilerman Mahbod, We're It's there. here. I morning

Mahbod Nia

Good morning.

Michael Bilerman

question. a had I

sort how it's you age, on you comments, like annually. I focusing And of a of concerns really And the portfolio, opening the your of multifamily and you being in leverage in is recession, its do relatively optimistic it's in Just you office that the rising other that lease terms the muscles picture a relative painted Veris's fact over The the rent floating as on Veris painted net vacant the how terms tone challenges Manhattan, the for very can about guess the The Amanda are people's to to the you relative REITs. where negative portfolio, corporation the high it again, interest about of contrast still inflation, of it talked high macro talked rates. total absorption development rate. sounded to XX% and relative debt quarter transaction you for is percentage side. of had

the if because this being there you of sort that where lot in trying been address wondering the a more that number transition. to recession, You it a I'm of the finally interest that bit But raising complexity. able still on there's I'm and of the undermining the are of to Rockpoint not little efforts And a to execute able seems of risks of just difficulty contrast things in transition. just could full do I'm seems event have be of company. a capital in and can still terms there in terms you've some it with that all

Mahbod Nia

Right. There's there, Michael. quite a lot

of So in it, well to go – to I or dissect may that recession. the upside, form try going to but the in inflation going storms to best said, lie ahead environment I'm a back we to very positioned any capturing are continue weather to as I'm my

been look to the course you try sold XX, bonds We've next, we to the and that we at Those this deleverage, the forma, due XX% multifamily. have over repay of gone. pro were of proceeds well refinance XX% recourse bonds, where a XX estate year this billion ago year the that to were the mature we corporate ago, with months, had focused $X the a at If were point. past outstanding we're now unsecured during those to that challenge at year now predominantly are A debt, real would used multifamily, company.

a that's assets that extremely that. room lower office, that's It mentioned, give any engine now and us to cause on not multifamily, is the well, all that loan-to-value I'd The multifamily concern you debt it's loan secured the doesn't leverage around well. So side. sits than senior undepreciated basis, performing it's mortgage on of XX% argue

disproportionately night. see to portfolio have? nothing metrics agree away today, But that despite making the I there's to concern. in do. that that we equity reallocate a sense been market. making cause We've capital higher we Yes, operating, still nothing at relative to So us mentioned then we terms land I to the – that do And keeps better of making strides and capital continue that a us ought But with you continue progress think we of in up that chipping think more to I we've than allocation, large and challenging development and And business have that. been the the probably as being we'll gives the and rebalance, use, reallocate rebalancing at improve.

Our is and contribute which leasing will earnings. a very one to project HausXX, complete construction rapid also at continue pace to is those and

we were anything very keeps said, nothing I a night. than positioned better and positioned much very So what that I ago me I think is ahead, the for well stand up well company by at that year lies

Nicholas Joseph

is this Michael. just the multifamily on And with Maybe side. Thanks. Nick

either effective seen any the and seeing or where seasonality from obviously, strength on strong current or that the that you days leases there demand either signing more or leasing out, talked slowdown as net Is you're look you're XX in rents. about, XX normal anything the you've You today?

Mahbod Nia

Nick. morning, Good Not yet.

to As those sustained. still I that's blended are the strong think see as figure rental do growth to is Do XX%. forward? I the continue that July. levels net and you the sustainable momentum a – very was being in XX% not. I term longer stands, it going saw close the through rent level quarter, we that And

be think industry, so, that rental we'll see at a normalize the will we the We've very over we that across year from level. see last think lower that. strong and I or growth had I won't moving and

Nicholas Joseph

you. Thank

Mahbod Nia

Thank you.

Operator

Catherwood ahead. comes question Tom Please next BTIG. from with Our go

Tom Catherwood

couple good On morning Thanks and everybody. HausXX, questions. of a

much overall? yield your the leasing continued? occupancy, building your of stayed has you versus how mentioned now of confidence approaching First, pro XX% you boosting second, you XQ? July on progress two in And forma? moved Mahbod kind project kind how does expectations And And thirds that of that the rents the that trend does leased of in, saw give on in then with

Mahbod Nia

Yes, been out Good product have really there want consider us. team phenomenal, Tom. – pretty that and pushing to particularly of that I carrying within has rents, the higher so – and or that effective higher been a velocity leasing of the morning, started putting setting It's terms credit we the bar and you rents. week leasing that to when do net back and even more so in of for much gate the given out concessions

offering seeing and where it, XX%, And to but has continues of terms where where in So everything it unique, that figures in product seeing terms square rent. – we property. XX%, is demand we're the space building. state-the-art to strong that continued of else for very the that and XX,XXX comes going foot unique with sought after, of I'm And is say above the in of velocity started internal amenity a it or started double-digit terms how we of great just north budget of terms demand. today, in over around we're expectations It still relative

Tom Catherwood

about performance positions given comments all. about sheet And Got question, But the tough this HausXX give the it any does multifamily overall of and you given given well land and it. the starting you balance think that. before development? in bank consideration to and the strength? changes is specifically, And City the said Appreciate of the additional there? sell in your an Jersey zoning inclusionary maybe land strength others Or market, then you to do impact with do into that, in that along land the about build

Mahbod Nia

actually Thanks, both Tom. questions. great Yes.

a one, be of cash be it leverage given has capital, that priority to. to a focus on our first potential as and flow referred the reduction on the cannot but table So it we've use

joint to to accretive accretive during and NAV we can take So asset. capital venture no time equity with won't contributing highly still the the land, develop land we could it form we're within up then years to it. further four someone some develop. that's and say and and earnings three stabilize ultimately, it an you would capital the would that And for be, maybe anything yield consider, you capital we is but But believe, contribute the when own frame, in tied the that there and and requirement, of that And time. requirement

And adding a in us. is more where But challenges concentration the are, you prudent exposure. for there just market thoughtful so risk be extremely more And from are performing develop, if company, we perspective, you're the as that should well given then adding also doing probably that. about we

that impact pipeline approval. general we certainly market of that – sense, and But selling on it are, it not anything is yet manage lot at of on an I a where say, IVO, this it's received in something yes, the by whole, developing. has the in makes not could that You priority is And the would given just has but probably time. terms and a properties

that X, impacted. X one concerned, into two not context, As far impacted. our there Harborside be it be But portfolio put is sites to are Harborside would as would or

good is bank And in we're and IVOs. so think of in impacted area, this value the a position, of majority not the terms I land by in remaining

Tom Catherwood

that. Appreciate then me. one And it. for Got last

last think the closing have updated risk third have line? as quarter, in to real with doesn't and Do XXX there I the had that What been your expectations? buyer? expectations get sometime mentioned been quarter. deal you Hudson, this you the finish of a far as is And the conversations it the

Mahbod Nia

buyer as structure securitization that's and And we today still have the expectation over and and is that largely the including place question, hoped get Yes, it or clearly, to was that My in line. related transaction adopted opposed to line get been than the to a taking valid expected. over that funding longer taken has and we that very closed the repaying refinancing over the delays that. the

over close. nothing things So done, we is along has is time, risk. there way a said on those done expectation bit so general have largely some that, procedural it's that take little the been in view of until environment, just and my life transaction this Having always and we're there's that

Tom Catherwood

out Thanks of We'll That for for it me. keep a makes sense. it. look a That's lot everyone.

Mahbod Nia

Thank you.

Operator

question Our Street John Green from next ahead. Please comes with Pawlowski Advisors. go

John Pawlowski

time. for much taxes quarters. coming I over appreciate the the very color property Thanks the on

the Just can total expenses a give multifamily the for hoping sense for this of us you half second in same-store portfolio year.

Mahbod Nia

in Well, be we're not than honest, controlling in guidance give to good the our job a keeping say and contained. on would a I over them But course most expenses job, that. of any to we've controllable of year last the position better very terms done

we the noncontrollable saw You continue year-over-year. X.X% to half. do out by we do control, in that – And the expect as expenses as second our of that up is What we'll around remarks, Amanda primarily said we're we whole, his a identify taxes. increase place being in good feel manage terms of expenses. an in controllable scripted that in and able on to in But the

John Pawlowski

moderation not major any But in unusual items balance unusual outside for of year? some expecting you're Okay. the line pressure of or the expense taxes, the

Mahbod Nia

be the is and No. that might bit another substantial seen I we've happen insurance increase, that where taxes. would one see an industry, we the across one we but expect mean of the a potentially

John Pawlowski

concessions two at retention comments ago that Okay. point given remind recently? concessions me what you the Could trended multifamily years stabilized how months two over? or And customers one on in XXXX or the of A portfolio. were year any has a basically question in on were for

Mahbod Nia

Yes, sure.

corporate year. the at we later second last or or of on back offer that one properties scale We the up we part, most out then did the we had year. into third concessions did towards where relatively a for two have and pace move quarter early leasing So concessions

still and rates those stabilized that are rates But retention So sort trended And portfolio, will of this we're of on remainder high XXs off level. absolute in through today, minimal also are up from burn the the the occupancy mid-XXs concessions numbers year. the now. seeing to in

John Pawlowski

it. where one the you Amanda, to a to the for you is give you Great. on fluctuate. of debt to rough Got Last mentioned expect sense me. EBITDA debt me going Could EBITDA by end to year? land

Mahbod Nia

others No, to are I did appreciate I I'm we that sure it's pieces moving that's know some that the this in out impact just company, and for this, materially movements and challenging the can looking in of various say, to company of number. given very timing – these but model difficult the is that even the there and just are transformation, a you I

And quarter, really And I based you year, should numbers think above measure below. to another the potentially I one The progress. say are of quarter beginning us at on be fluctuate. this year, and the so going expectations

I'm So difficult at to afraid. point, guidance you give this that

John Pawlowski

problem. care. Okay, no Take

Operator

question go Joseph comes next Citi. Nicholas from Our Please ahead. with

Michael Bilerman

It's Mahbod. Hi, again. Bilerman

had party pike Just then with they with state a where you Can you feasible in had obviously to to alternatives encourage COVID, possibility BofA to right the do revisit been them And it where to potential just the relationship interest in But have all this given referred can And a we has company the engaged pandemic should or this point? though you before which was what stands Or and so. – at a wouldn't you the at coming with about back indicated you in bidder, also A obviously, us is is highly involved. as special proxy reputable that of company making guys strategic the that would the an highly and an your expressed back? potential of market market the reputable even acquire potential the the question the management as given down Party a they A, think potential Party give and strategic BofA with the and your with whether the stabilize, just it bidder that time. and had XXXX. go company done update was transaction of and on as proposal the coming committee

Mahbod Nia

summer the think, referring prior Michael, of I joining XXXX Board my with the Board to in that of occurred that today. are rest you're in the the place to events

to to going not tell you But I'm who I the what have believe... would is, you're me So A tell Party I sure. Board afraid, I'm is

Michael Bilerman

Mahbod. pretty Sorry, sure... I'm

Mahbod Nia

Okay, you answer courtesy of and asked the a you'll if question, do Michael, but you me may, me it. letting

that. and that joined, rest board their is we you since in So Review I myself to also everyone is Strategic Committee the there the can and Board a highly tell create focused and of our the that. members place, joined that's and understand fiduciary obligation create do the at has primarily done a value for will believe team, We, through level, entity operations. the job is as any I evaluate we've to to management that's for value maximize and and opportunity shareholders shareholders And and

three was the relative a on the pivoted think the I XX where we're and operations which reflect growth which year. of that. in the in secure it NOI I XX% think same-store the company multifamily rental business, balance side, last now via seeing operations, place now year, in And multifamily seen the constitute quarters months. sheet more primarily business, to is in sector-leading

not exclusive we'll from is our that the SRC and evaluates that level strategic what and efforts. mutually a continue that's Board of focusing on. on independent And the So anything

Michael Bilerman

the for thing loop new on when Right. which But now, important you're and just it's as a this this, had to of close well been Board member obviously the just trying – I'm board... an

Mahbod Nia

I any company the was are Michael and time. is evaluated and on to know I'm it. or – will presented to because to is, those there don't To proposals extent it strategic party considered. the they relevant not that be before the Michael That to who that the are my SRC, going and extent, comment Board that the

Michael Bilerman

Okay.

had portfolio the I think obviously NOI part portfolios. much back the sunbelt and residential the XXXX, and decline a relative of On national to is excess growth, more severe coastal in

And XXXX quite growth that. portfolio your the of is it more XXXX, partially is and of in so geographic in obviously, locations. terms and concentration unique reflective recent And

think a portfolio I that and recognize to just levels, little having pre-pandemic back So some the and is but history there, oranges. of it's the slide comparing bit on apples whole I not going

Mahbod Nia

it's think not. I Well,

thank performed think just same year, looking last looking course that I we our it, it's comments. looking are I'm at how but and of you at way the peers for at the the over your

Michael Bilerman

you. Thank

Operator

like Mahbod session. turn I conference sir. Nia Please any concludes closing over back for would the remarks. ahead, to question-and-answer This our go to

Mahbod Nia

everyone, It's quarter. today. for working terrific you really to joining tremendous all quarters. I'd us coming for forward you, like the results, efforts we their in updating team look in to thank and been these generate Thank another to us with

Operator

conference now The concluded. for Thanks presentation. attending has today's

disconnect. now may You

Veris Residential (VRE) 6 Aug 222022 Q2 Earnings call transcript