Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to the Veris Residential Third Quarter 2022 Earnings Conference Call [Operator Instructions. Please note, this event is being recorded.

I would now like to turn the conference over to Taryn Fielder, the General Counsel of Veris Residential. Please go ahead.

Taryn Fielder

Good morning, everyone, and welcome to Veris Residential's third quarter 2022 earnings conference call. remind constitute certain meaning forward-looking federal laws. to this discussed of like securities may call statements would everyone information that on the I within the

company. based estimates that quarterly assurance anticipated reports annual SEC the results We the these Although company's cannot achieved. the reflected for be filed that you believe assumptions, we with the statements we impact risk and are refer on will press reasonable give and the in factors to release

I to Executive Mahbod Mahbod? like that, Nia, Veris to With you over would hand Residential's Officer. Chief

Mahbod Nia

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

of make despite across growth rental multifamily the we volatility, and portfolio. a market our During on quarter our delivering meaningful the continued strong significant strategic transformation to NOI while quarter, consecutive progress fourth

our evidenced completion approximately Street, As and now final X sell our XX% XXX to XX for will transactions Hudson up XX% months the of of of of agreement around Inclusive by X the HausXX, we're ago. represent from stabilization Harborside and X, multifamily and pro binding transformation. of in of forma sale NOI, these the the phase

sizable potential the liquidity and X, from anticipated in addition seek to will X, we as to the Harborside company transformation. ahead, further Looking sales, proceeds asset substantial nonstrategic X provide with our conclude

notwithstanding we continue macroeconomic capture quarter. in X% achieved the rents in XX.X% lease as backdrop. continue X,XXX-unit the reduced blended from net grow a loss Our challenging portfolio, Headline growth upside X% of to rental of portfolio and had to during portfolio our during multifamily rate XX% and quarter the the occupancy approximately to to the

businesses inflation some perspective, consumers we mounting to are and rising From due of on signs rates. a leasing seeing pressure interest and

are that A value compelling resilient particular should modern relative well proposition, we're and class to not New held whole, cooling properties in forces, to rents rate This to well while somewhat mid-teens, third quarter. characteristics. well unique A New their are net relative has is York and on in York given due from luxury such, prove our multifamily the somewhat located, segment blended possess strong They XX% the softened City. remained we October the comparatively growth believe the amenitized, rental our City compared immune these While achieved in but as especially that the limited evident supply. up note, the

residents who average on quarter the by year. pressures absorb Our and than quarter compared signed whole of a residents to more inflationary the period same evidenced the increasing the XX% income increase during to as of leases the positioned and the to second in increase seemingly rents are compared third well impact last the as

maintained XX% NOI resulting leasing this will that strong increased with in Amanda discuss momentum the quarter and in leased We occupied, XX% property at detail. now HausXX greater contribution

months taken to past to to expenses to anticipate bring controllable ongoing further Our increasing reflecting City. higher X,XXX same-store growth our and our steps by net asset concessions XX in our opportunities value. the regard pressures. reduce inflationary the REIT our line optimize of We expense upon Due a existing rate NOI we've we're unit during mid-cap expenses, the compared as and it to streamline X%, to able same-store operating XX%, of With taxes the of expenses, quarter. completion our Jersey in of steps a driven public operations to overheads same-store burn-off namely transformation. by of rental our costs, operating percentage declined to a over our corporate structure portfolio blended player gross and rightsized NOI taken Sequential noncontrollable growth with year the cut as prior also rents had occupancy year-over-year of XX% XX.X%, despite we've

X, front, disposal REIT. referenced agreement our We in quarter, sell $XXX proceed, the of sign a path pure-play Harborside reached with a moving is binding and this as million for to result multifamily milestones quarter significant to we million. in X $XXX earlier, X becoming The transaction on liquidity approximately providing expected the substantial in anticipated close net forward. and On XXXX to first

the net facility. of We These that of resulting $XX of also a deposit. $XX held pay our for announced in the million proceeds XXX used completion Hudson to million was Street sale $XXX as million, revolving including down credit total were proceeds,

Global Benchmark, our benchmark of XXXX quarter, were for one ESG, in the earn estate leaders infrastructure Star Estate in industry pleased our we performance for GRESB, and subsequent Sustainability real or the As to X rating ESG Real the to a investments. global

Star leadership X X,XXX Residential highest ESG score offered Veris highest performance, participant among rating for distinguish of to and the XX% this recognized achieving the rating, Our all companies.

combat Finally, in ongoing recently mitigate carbon we to change, climate our our footprint Jersey's effort Clean Buildings and Working Group. New joined

closely the task working help and Governor to we his achieve with As goals. member, its state a Murphy force forward to climate look

that, quarter. during will With financial going it over the on performance to to I'm who our you Amanda, hand update

Amanda Lombard

Mahbod. Thanks,

as by net was onetime For per a lower versus from fully diluted nominal share for share, $X.XX shareholders prior last million with recognized gain to and This available as up interest diluted HausXX the to for the on million another well the offset $XX was due $XX was approximately real available NOI amount Net taxes the includes $X.XX $X.XX estate of for expense full income NOI in quarter The in in sale Note a over of $X.XX per quarter. almost of quarter from the share land that share Harborside XXXX, quarter. on revenue to assets from and common related common second share, share down to a the diluted the fully of mark FFO the the fully a benefit on office interest completed contribution per the third parcels Core capitalized quarter. $X.XX while HausXX third quarter began per HausXX. quarter-over-quarter to of the holder period per James benefit interest expenses rising and $X.XX ramped was the line quarter share. due a from rates contributions impairment noncash equating quarter. of to We in

the run a NOI FFO rate. Year-over-year, quarter contribution such, reflect As yet up stabilized same-store not this XX%. was does

despite However, NOI City. strong down anticipated by X% rental growth, same-store in to had catch-up in taxes, sequentially we primarily real as the estate was Jersey due higher

be estate real fourth in this roughly quarter. rate a that quarter the basis total lower due increases expect We estate X% taxes expected will real on the than to further taxes run recorded

was for estate up Excluding the this taxes, real same-store adjustment X%. sequential NOI

expenses, marketing payroll is R&M increase in and seasonality. to largely due into Diving the deeper

year. Year-to-date, over controllable the inflation of down by Further this that Mahbod's in As lease the efforts prior comment team has just if ongoing of in approximately year. were past the X.X% full which X% in inflation, CPI streamline impact our is the expirations impact with enhanced summer around to a quarter, same-store most our are reflected peaked increase mitigated of under over resulting X%, associated over operations, technology invest assume recent largely our expenses and of reduction than XX% costs to lease the implies turnover. and the you costs, increased higher

anticipate As potential and Mahbod not yet our savings mentioned, we as expenses complete, for our efforts further optimize are transformation. complete we to

Turning severance million $XX $X.X million onetime After or on charges, G&A to approximately is our general for annualized and administrative adjustments basis. an costs.

reduction between of out a quarter's run in are business. significant which terms ongoing G&A and supplemental current included the including multifamily arrive decade. in day-to-day as changes The over to core company's reflects nominal platform professional costs, G&A have considerable office $XX fees. associated reorganizations lowest to at the reconciliation is structure, a the operating Annualized onetime million materials overhead well as in We the the in today our simplify that with the changes G&A in in strips of transformation cost required G&A to

is as a the third line and simplify nonstrategic to further of with While peers. percentage as REIT the in savings value business. our assets cost annualized continue exit quarter efficiencies anticipate gross mid-cap We and other we asset G&A

that will to I occur annual adjustments next QX in As in G&A prior higher due years, quarter's the slightly quarter. expect be that fourth typically than

made continue efforts as with streamlining have We structures property realized further cost transformation. be we and progress in our solid the corporate to

sheet. balance with a our requirement. cap a floating X% due springing debt to HausXX, we had rate quarter cap our largest to to On end, Subsequent

anticipated Further, We loans. interest in construction company expect to over of explore SOFR with XXX it and is X.X%. environment average none rate Hudson, maturity weighted senior as into multifamily hedged portfolio spread is current but that on hedge the basis years of secured, credit current average of lower is of account, well loan inclusive options is in it and collateralized. than nonrecore and/or on the stabilization a XX% to excluding and facility a positioned the approaches refinance the is the HausXX X.X on debt at Taking weighted points our this XXX rate cross primarily our interest total of debt revolving fixed XXX% HausXX, our

adjusted Our net in debt due at to versus XX.Xx up second lower G&A quarter increased and this the improved to the EBITDA XX.Xx quarter HausXX. to lease

vary represents to in to and sheet, this small metric given in sensitive balance effort continued noted changes is improvement may as this our While the earnings in quarters, strengthen prior any period.

and at to constant interest coverage XX% respectively. our debt ratio and ratio undepreciated relatively Xx, Our assets around remained

assumption adjustment, recent original the cost XXX the absence the million our buyer's net Hudson approximately originally clarify additional price quarters announced of held, asset to X recently to that due projected and was the transaction accounting our of activity, were of which in-place $XX FFO would the in the proceeds expected the after for relation in mortgage. I equal defeasance to the Finally, of like from to proceeds sale of

annualized expense $X.XX approximately basis, the the of proceeds. only revolver contributed was repaid inclusive with of $X.XX AFFO, but of the on that core On QX interest a Hudson sales of FFO, incurred balance XXX

had the our the upon recent of XX% leverage metrics. which loan-to-value addition, sales improved an price, based the buyer, the In implied loan of overall assumption approximately by

color X, and lease, commissions Collectors funding sale tenant some In customary the transfer X received and proceeds well addition, the expected $XX add versus of approximately the improvements include Type Veris plus for in is X. to of fee Harbor capital closing I'd remaining as net the taxes. and costs the These Universe between as adjustments primarily difference closing QX, $XX from million for in termination which on million upon like gross improvements leasing deductions

we will to before With it Mahbod for that, I questions. the line turn open back

Mahbod Nia

Amanda. Thank you,

address viewed Q&A, of Kushner would Veris to to Kushner take a the proposal on Veris release, Before can turning morning, which responded we to This unsolicited be made Residential. press has to moment website. like I Residential to via Companies the Companies

able earlier disclosed today. situation was beyond we answering related to such, what provide be any or be the questions any will As to further detail not

for open please Operator, line the Q&A.

Operator

[Operator from Evercore from Sakwa Instructions] Stephen The first question comes ISI.

Stephen Sakwa

company the streamlining and wondering almost give the a the still, simplifying do you and hotels saw guys a an guess, into on I I'm to to multifamily sort progress X, and have a for remaining Obviously, process update company. and made not X? guess, you you And There's could of that assets lot Harborside plan? of few sell. I pure maybe just multifamily becoming are that if us the disposition where X X, X fit the demand Harborside And marketing

Mahbod Nia

Thanks, Steve.

year. the on still is as end relevant those that contract the the the close of of I given regard hotels, actually have impact this tail tied will you to the and in under With up scheduled them, towards of think end and of question to Hyatt, a the assets transformation. one that's it's the equity know, amount

pretty, exercise over As to timing for I assets. further would we'll we pragmatism to of remainder pretty historically think, and level do balanced, the which realization haven't challenging XX, particularly tenaciously also the of that pragmatic of the XX is move through as assets, we guidance But have the got of really and our same we the sales. really to watched non-strategic that past imprudent any all on in comment transformation a be forward, months done conditions way measured the I continue sale nonstrategic given, it other remaining be to any asset, market conditions would make and of across

Stephen Sakwa

that any trying fairly win might out with is buyer color the on didn't X a if process come the environment for for looking pool I capital office there and you X. And that get back pool folks just and Or opportunistic who's guess, to sort were I'm X, guess X can the bidder they and I in sense depth of were that a provide of just X? market today. difficult for the shallow? bid, Harborside

Mahbod Nia

the of we Well, around and Harborside then to we for and also earlier around subcomponents whole portfolio, decent the year, started we process portfolio. this interest had had interest

the So sort the are repositioning to opportunities classify are the office space. buyers they value fairly of varied, them as in generally I'd looking but adds

of that buyer and potentially Friday we time. is our or And around during no this spoke the more that conceivable to for on a could the one so that But X at it determination be announcement process buyers X.

Stephen Sakwa

And then just me. another question for

for us the but get to sense give time had on out renewal renewal what to sending growth, are for, big December, multifamily, you've you January, I'm a a realize sense trying say, where for December? of and got leasing, can November, those you've Just kind frame? pretty spreads I extent maybe new just notices the for shaking February the out today you're on some increases where

Mahbod Nia

come somewhere peers, normalize we growth lower. really is October, mentioned, expect not And As we -- sustainable see it other as see In to we we look, net that with do XX% anywhere. blended it's going -- you rental should low could be come the mid-teens. this down of down sort you I the referenced period forward, range. -- in the in to the to expect think double-digit that And for

Operator

next Instructions] comes [Operator The from Citi. Joseph from Nick question

Nick Joseph

How provide supplemental, these the the in you to are you cap updated for components today? rates, NAV rates about when thinking New And in how in Jersey cap apply value moved the of you multifamily if company? have terms NAV market the the

Mahbod Nia

transaction too we're out huge I are the discovery, Well, have about say would there. in much of volume a early amount it's of definitive very still landed. The really make think period any seeing where I rates and cap price not to statements markets

seeing So think think say would say really in the assets rates offering own What are the cap still wider prime, quality growth. NOI I that were, cap with and very nature question the market, don't and than in it's but stabilize. assets that strong where too are early I no community to they the scarce highest such the youngest rate we I best is

assets no in And so somewhat more immune be environment. I but to resilient, the these would expect current is asset

Nick Joseph

from cap then are maybe NAV were where think And an or just just perspective, you given either rate today?

Mahbod Nia

to really to never look will, sure that's you a judgment such, disclosed at not think NAV going I disclose and you question come as we've on as to a I'm for today.

Nick Joseph

when would and that transformation And it? to expect G&A then get G&A, on you costs the longer no to have normalized associated with

Mahbod Nia

Yes, it's a good question.

steps ago, several to would that two I independent cost thing really we've the is, history structures say streamline one company, one obviously core over that in effectively steps. structure sort have months of here, companies And side to side, the bit rate we and cost seasonally first the down. of And those G&A, two you G&A. the we've begun we've is taken a really single look, benefits run So taken remember by to had initial which single into see XX

that. is for of is with of One the you concludes, of pretty been -- also clear as point. well. we completion drive this Going be the forward, from room but transformation, see timing that the transformation a has what proceeds That see as we've we implications room that the do couple to the factors going savings greater linked to the

from definitely more I amount a So to done more point we've so think We this decent efficiently. see far. run room

we I with think Board based be transformation, the And anticipate as and an been in of once… way a ultimately scenario the all savings been proceeds, exercise with managed conclude range pretty same we've that continue we of also the on savings, any from we'll environment determined what varying and the there'll cognizant we've as in to but that's here working know, use inflationary prudence. further the SLC, has we in expenses quite

Nick Joseph

committed solicitation? morning it from indicating But that I kind but capitalized Board kind probably all and of that fully the finally, alternatives, committed. recognize it of just to perspective, say, to individual Board your this Kushner can just and this looks then you is And is letter just you strategic there's limited a regardless responded of like committed exploring stuff or are

Mahbod Nia

been haven't I is be have assuredly on this tell said, comment Look, I wouldn't I Board seen can't can we I that. looking say And that specifically to that that's I of independent, aware comment and management and to transparent value we'll are has and highly What an as you, we proposal. value we opportunity on to a beginning, responsibilities have team. on the I that. undock as would as from evaluate create any focused for creation and/or continue fiduciary acutely And their shareholders.

Operator

[Operator Instructions] The next Catherwood Tom question comes from BTIG. from

Tom Catherwood

for would Jersey got downward probably what that lower in value of like pretty I quality some good comp land expectations in Maybe and What's portfolio. your portfolio. land through your sub, Mahbod, you've sale recently in is driving on which looks We resi the values the your City, a really a -- planned of estimates? I office it going and down side think location was the you of the than a should argue adjustment for taken

Mahbod Nia

say -- rapid conservative would of prudent, expect seen one we've We've rise I some you say, a impact. located, in sort obviously, I is, ultimately, downing just that, approach well But faster Well, is, land see the as some land as extremely fashion high that and have. very taken marking scarce. they what we'll just as seen would And quality, to well. tell think that you you've the rates might really

in be values. so at to And nothing in approach environment, super think we But take this to safe. looking comes when it of conservative something always I a

Tom Catherwood

a and or pricing And to assessment? both? of we general market is downward kind these that's have specific now it Or adjust value -- is combination -- of we a so that have more a on

Mahbod Nia

of same environment the it's we're conservative that not value we view a taking on generally that in, were in course… just No, given

Tom Catherwood

about as the a special dividend closing dividend can to But and we when given the having proceeds and sale Harborside these pay more Hudson, little -- without either net comes much the to gross Amanda, broadly your recent to from commentary specific think pay X. I down asset of the maybe maybe, dividend proceeds? a on XXX appreciate reinstitute shield X, how sale And X that you roll or a it

Mahbod Nia

a much So the you be think Tom, if that. question I is I think, within there sales our the on mandatory then required, -- take much those, be question that assets REIT. the The to, extent in that's with very I'll But, and pay -- any obviously, of consistent timing very realized don't those is dividend obligations as a could mind, given the for value to to period. we will future going that linked

Your on expectation case. based announced that not what should we've far that be so is not that -- the

Tom Catherwood

maybe ticked maybe we asset. metric is on to come then comment not about as the portfolio the these company, it's stabilized multifamily assets, through into been at has well. just we maybe that your last in one since on the year? down looks trajectory as like when it me NOI the look rate. being and of there yet of the has stabilized for what the year we direction James run And that get next from is first obviously materially HausXX, expectation And a But debt-to-EBITDA for expectation from this for as more into obviously That quarter think its NOI coming on pickup balance the

Mahbod Nia

brought of it's a you've largely and think asset date I to with have And repaid good that the down. proceeds observed, debt we question. Look, as sales really

to which that given transformation. fluctuating earnings, is mentioned, Amanda as sensitive are number that the somewhat a well As is

future be have proceeds driven think reduce really able to to at say timing to this because of it's be would those so and us, any to we guidance date. the something sales. for I the a it largely certainly of been going been asset on from use that's point by sales, to give But trajectory focus inappropriate

Tom Catherwood

directionally? Yes. guidance. downward it it, can it stable? does we to but Is is trending definitely the move early it it? anything I -- read? just it too not totally understood. take and I for get Is Is can there quarter-to-quarter looking kind guess Or totally get away from is, question of a from it

Mahbod Nia

generating you there's you that, remainder the that think said -- X, I of The of additional so it, between we've look, this it's Harborside think the got, got potentially The income point. James lands I income and there. not and some in if we've contribution you any X consider at really assets nonstrategic if HausXX, mean about

number So it's because your meaningful not EBITDA. not or it's really any generating helping net debt-to-EBITDA

I significant rate. Harborside in land said there's trapped why of a X the that's but amount the those on that's on for So there's equity fund, assets equity debt -- because no X,

or So of we're of of or X ultimately a that's it and at ultimate yielding and the of amount and But sales carrying, something debt little that's ultimately, the proceeds case that repayment function those is the very is insignificant X. Harborside of what say why in the I not use is timing moment, else accretive. any not equity EBITDA

Operator

The Green next John comes from from Street Advisors. question Pawlowski

John Pawlowski

chances sense X. for or now much Mahbod, the next sense transaction quarter to could and Harborside between get of the you just falling how give for a gold deposit X, year. for how X first us and through nonrefundable a that down I'm is just large of that, a trying

Mahbod Nia

actually to the disclose of under of the buyers. We're contract permitted the the identity or terms that not

is our during investments. quite and three based a buyer it. pretty So including that we and I'm diligenced conditions we've lifts heavy transacted challenging repositioning value and I what can't including afraid would has I buyer advisors you on what market But decades, that the that disclose it's office tell over understand

about sitting here the as of likelihood good the Obviously, the but that about we here closing. there, that today, is done, so and until good today. it's feel out feel sit done transaction pretty uncertainty given we we nothing And challenges

John Pawlowski

color Could put work? back will reduction apartment you can going but et think a to stand debt these on case little help you're as how now lot acquisitions, you I on us the get sales redeployment reasonable give through towards the bit targeted when office can of think of on this how cetera. us of base to what you proceeds, capital between proportion know a be you today, cash versus change and you the a

Mahbod Nia

it's would that be to those the little closer think as you I a real-time basis, then realize to for we happy a forward the discussion alternatives best capital said, with John, what be strategic to bit and that you determine highest Board to bit use to early. that evaluate I mean, closer will is and on the and coming that that's and need a as are on we're a go. we updating based and available review proceeds committee the ultimately to look us, you the time

John Pawlowski

Two quick modeling and in. occupancy. but questions, then communicated not guidance, 'XX have if quite them them. I can And giving expenses slip been you're you've know October I variable

So can that you sense XQ growth just give expect? a for us expense you

Mahbod Nia

been start. strategy the I between there really be we're a say store meaningful I'd would was compromised which you somewhat in now to to -- push directionally, Well, honestly change year-end. see has -- expecting occupancy, this and year started and say rents the would occupancy

full and so has look, still in today pretty As environment managed controllable year impact uncertain a higher think in in and taxes inflation way But term what's side this City. is challenging of noncontrollable been more to other rise to expenses, out mitigate disproportionately on obviously is our in actually the past how I that we've pretty Jeremy seen the the we've here anybody the cost. thoughtful on where I than areas the in expenses, inflationary for some equation, the expenses try say been would clarity shapes we've of and it's next year

Operator

conference over session. This to Mahbod like to Nia remarks. I the for back turn question-and-answer would concludes closing our

Mahbod Nia

for pleased again announce everyone, us. great joining to in forward and quarter Thank to you, another you due updating We're course. look

Operator

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

your disconnect now may You lines.

Veris Residential (VRE) 3 Nov 222022 Q3 Earnings call transcript