Greetings, and welcome to the Veris Residential First Quarter 2024 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Taryn Fielder, General Counsel. Thank you, Taryn. You may begin.

Good morning, everyone, and welcome to Veris Residential's First Quarter 2024 Earnings Conference Call. I would like to remind everyone that certain information discussed on this call may constitute forward-looking statements within the meaning of the federal securities law. 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 and annual and quarterly reports filed with the SEC for risk factors that impact the company. With that, I would like to hand the call over to Mahbod Nia, Veris Residential's Chief Executive Officer, who is joined by Amanda Lombard, Chief Financial Officer. Mahbod?

Thank you, Taryn, and good morning, everyone. We are pleased to report a positive start to the year during which we further advanced our strategic goals while delivering another quarter of solid operational and financial results. Last quarter, we announced the completion of various residential strategic transformation into a pure-play multifamily REIT and outlined the 3-pronged approach to value creation in this next phase, comprising accretive capital allocation initiatives, along with the continued optimization of our balance sheet, platform and portfolio. We've begun to implement and progress a number of these initiatives. We took steps to further strengthen our balance sheet, securing a new $500 million credit facility and term loan that provides us with substantial liquidity and financial flexibility going forward as well as potential for enhanced earnings this year as reflected in our raised earnings guidance. Through these facilities, we've also effectively eliminated any perceived refinancing risk associated with our debt maturities through the end of 2025. The high degree of interest and resulting commitments we received from a broad group of lenders for these facilities, and what remains a challenging credit environment is a testament to the progress our company has made over the past 3 years and enables us to enter this next chapter from a position of strength. Amanda will discuss these transformative facilities in further detail. On the capital allocation front, we continue to unlock idle equity within the company, including a set of Harborside 5, our last remaining office property and 107 Morgan Street as well as 2 land sites, 6 Becker and 85 Livingston in suburban New Jersey that are under binding contract for $28 million and expect to close in the next few months. We anticipate recycling the net proceeds from these sales to a more accretive use at this point, the repayment of debt as we seek to continue generating value for our shareholders. Before discussing our continued efforts to optimize portfolio performance, I would like to briefly touch on the broader market. This quarter, the Northeast saw relatively strong rental growth rate of 2%, with New Jersey and Boston outpacing New York. The Jersey City Waterfront market, where nearly half of our properties are located, continues to be highly competitive compared to Manhattan and Brooklyn with Class A rents reflecting an approximately 30% and 12% discount to these markets, respectively. This is underscored by movements from Manhattan to our portfolio, which continued to exceed 20% in the first quarter. Within our portfolio, we continue to evaluate innovative technological solutions as well as our organizational structure and processes to continuously enhance our platform. We're beginning to see early signs of the positive impact on earnings from previously introduced initiatives. In parallel, we upheld our commitment to the creation of exceptional resident experiences combined with the pursuit of operational excellence with our customer service-oriented approach to building management. In March, we ranked as the #1 REIT in the U.S. for online reputation by J Turner Research, reflecting the unwavering dedication of our teams and the residents' recognition of their efforts. Turning to our operational results. Our same-store portfolio, which now includes Haus25 and the James, was 94.1% occupied as of March 31. While this is slightly below the year-end figure, the change can be largely attributed to the concentration of leases rolling at Haus25 related to the rapid lease-up of this recently completed property. Despite the beginning of the year being a typically slower leasing season, we achieved a 4.6% net blended rental growth rate during the quarter, driven by a 7.2% growth in renewals and 2% growth in new leases. We've also begun to see a slight pickup in new lease growth rates during the past few weeks as we entered the typically more active spring leasing season. Despite the continued rental growth across our portfolio, affordability remained healthy with an average rent-to-income ratio of 12% in the first quarter. Turning to ESG. I'm pleased to share that we have improved our ISS corporate rating, adding a subprime status and the highest rating achieved by a real estate company in the United States. Furthermore, we were named a gold Green Lease Leader by the U.S. Department of Energy and the Institute for Market Transformation. We also secured 3 awards from the International WELL Building Institute, the WELL Concept Leader award, Equity Leadership Award, and Commitment and Engagement Award, further validating our dedication to environmental and social initiatives. A comprehensive summary of our ESG report can be found on our new ESG website at vresustainability.com. With that, I'm going to hand it over to Amanda, who will discuss our financial performance and provide an update on guidance.

Thank you, Mahbod. For the first quarter of 2024, net loss available to common shareholders was $0.04 per fully diluted share versus net loss of $0.27 for the same period in the prior year. Core FFO per share was $0.14 for the first quarter as compared to $0.12 last quarter and $0.15 for the first quarter of 2023. Core FFO this quarter is up $0.02 relative to the fourth quarter, driven primarily by continued same-store NOI growth of 14.2% year-over-year. This is in line with our expectations and 2024 guidance and comprised of 5% growth from Haus25, as that property stabilized in the second quarter of 2023, and 1% from a lease termination fee in addition to rental revenue growth of 8% and flat expenses as cost savings initiatives implemented in the fourth quarter offset inflationary price increases. Sequentially, same-store NOI was up 4%, driven primarily by a 5% improvement in expenses. Our same-store NOI growth will continue to moderate from 2022 highs, and we expect that this will be the last quarter we report double-digit growth for some time. In the second quarter, we may potentially see negative same-store NOI growth in line with our original guidance as we lap the recognition of the 2023 tax appeals. In addition, our insurance and real estate taxes are reset in the second half of the year. That being said, as Mahbod mentioned earlier, supply remains muted in our markets, our rent-to-income ratios are healthy, our New Jersey waterfront rents are still at a 30% discount to Manhattan, and we believe this will continue to differentiate our portfolio's performance given the significant value quotient we offer relative to this market. Turning to G&A. After adjustments for noncash stock compensation and severance payments, core G&A was $9.5 million, lower than the fourth quarter as expected due to certain expenses that typically occur at the end of the year. Now on to our balance sheet. As of March 31, virtually all of our debt is fixed and/or hedged with a weighted average maturity of 3.5 years and a weighted average coupon of 4.4%. Our net debt to EBITDA for the trailing 12 months is 12x. In April, as Mahbod already mentioned, we closed on a new $500 million senior secured delayed draw term loan and revolver with a 3-year tenor and a 1-year extension option. We intend to utilize the facilities along with $145 million of cash on hand and $28 million from the land parcels recently announced under contract to refinance $528 million of mortgage debt this year, further improving our overall leverage metrics. Throughout the course of the year, as each mortgage becomes eligible for repayments, we will first draw from cash on hand, then the delayed draw term loan, and finally, partially on the revolver to complete the planned refinancing. We expect that upon completion of the refinancing at the end of the third quarter, the term loan will be fully drawn at $200 million, and the revolver balance will be approximately $160 million, reducing outstanding debt by approximately $170 million by year-end. I'd like to thank the Veris team for their hard work in closing this new facility, and yet another testament to the dedication of our team. We have intentionally designed this facility to provide strategic flexibility, allowing us to further repay debt over time while retaining availability on the line, providing valuable liquidity to the company. As we seek to manage our balance sheet holistically, we are comfortable carrying a balance on the revolver as there is no cost differential between the term loan and revolver through the 4-year extended term of these facilities. These new facilities represent a shift in the company's approach to managing its balance sheet. Moving away from an asset-focused financing strategy to a more flexible corporate-focused strategy, a strategy that paves the way for the potential to significantly reduce our cost of capital and enhance optionality over time. This quarter, we increased our core FFO guidance range to $0.50 to $0.54 per share, reflecting our new corporate credit facilities and higher anticipated debt repayment from sales proceeds. Importantly, we are reaffirming our original operational guidance issued for the year at this time. Veris continues to advance its 3-pronged approach to optimization with the continued strong performance of our portfolio and the recently announced facilities representing another step forward. As we round out another strong quarter, Veris represents an extremely compelling value proposition. The highest quality and newest Class A multifamily properties located in established markets in the Northeast, commanding the highest average rent and growth rate among peers. With limited near-term supply and high barriers to entry managed by our vertically integrated best-in-class operating platform. With that, operator, please open the line for questions.

Our first questions come from Steve Sakwa with Evercore ISI.

Maybe, Mahbod, just starting on kind of the guidance. I understand it's sort of early in the year, and you want to maybe let spring leasing season play out a bit. But it seems like the top line has grown exceptionally well here in the first quarter, realizing that 8%, 9% growth might not be sustainable. But if I recall, your guidance for the year is much lower than that. And so obviously, you're either being very conservative in that forecast on top line or maybe there's some tougher comps. Maybe can you just speak to the top-line component first?

Sure, Steve. No, look, we've obviously started to see net rental growth rates come in a bit at 4.6%, and we are now starting to lap a tougher period given that we have had now a sustained period of strong rent increases. So there's an element of that, there's an element of obviously just macroeconomic uncertainty as well ahead. And so that's factored in. But we're also entering what is typically a stronger leasing season in the spring. We're seeing for the next couple of months on a blended basis, blended net rental growth rates that are right in that sort of mid-single-digit area. And so when you look at our overall guidance for the year, it actually still fits. I wouldn't say it's conservative, but I'd say it's very reflective of where we see revenues for the full year landing up and also where we see expenses landing up where we're in the first quarter. There's also just an element of distortion overall in this first quarter from a number of things which and they will be going forward. Haus25 being added, for example, to the same-store pool, which drags up both the revenue side of it pretty significantly, given that it wasn't fully occupied in the first quarter of last year. And then on the NOI side, some seasonality factors, the tax appeals, the fact that non-controllable expenses don't come in until the second half of the year. So looking into a single quarter, particularly with it being the first one, you might look at that and say, well, the guidance looks conservative, but it's early, and there is some volatility through just some of these factors like Haus being added to the equation, the tax appeals. But when you look at it on a full year basis, smoothing all that out, we're still very much confident in the guidance range that we've given.

I have a follow-up question about the balance sheet and the financing strategy. Typically, companies aim to reduce their exposure to floating rate debt. I understand we may be at the peak of the Fed's tightening cycle, making the risk of taking on floating rate debt lower than it was 12 to 25 months ago. I'm trying to grasp the strategy here and whether opting for floating debt and a line of credit term loan provides more flexibility for potential monetization opportunities compared to securing mortgages. Is that the line of thinking?

It is a more flexible financing strategy that enables us to reduce our debt over time if we decide to prioritize that. It also provides a way to access not just more flexible but also cheaper capital, especially as we look to secure unsecured financing in the future. Currently, our net debt to EBITDA ratio is around 12x, and we would need to lower it to below 10%. However, there is a way to achieve this through the growth of our portfolio and by unlocking idle equity still within the company. For instance, we have $200 million in land that, if released, could effectively reduce our debt by two turns. The flexibility this brings allows us to pursue cheaper debt options going forward. Regarding interest rate exposure, while our debt is currently floating, we plan to implement a hedging strategy. Although this strategy is not in place yet, we will take measures to hedge the term loan and possibly a significant part of the credit facility when we access it to reduce any associated risks, likely using interest rate caps.

Our next questions come from the line of Eric Wolfe with Citibank.

You mentioned that part of your guidance upside was due to the new secured facilities. Can you just talk about what you were assuming in guidance before versus now in terms of timing of debt paydowns, the average rate you were expecting to achieve versus what you actually ended achieving? Just trying to understand how you got to the upside in that guidance.

Good question. So we had or have a significant amount of debt that's either maturing this year or facing a rate reset or that we want to now in the case of Front Street, refinance to simplify, consolidate our debt. And so the original guidance really reflected the considerable uncertainty in the credit markets, which remain challenged and volatile, and the raise is really a consequence of derisking that maturity profile for this year but also actually for next year and the uncertainty that came with these refinancings through securing these facilities. And in addition, securing another $28 million of nonstrategic asset sales, which if you think about that from an earnings standpoint, given just the earnings potential from that capital, that's worth about $0.02 a year, and the expectation is that we close those sales around midyear. So that equates to about $0.01 of the upside. So you're selling more assets, another $20 million of assets, most likely that will be used to pay down debt, to pay down the RCF, that saves you the cost on that, that's worth than other centers as well.

If you were considering selling the properties linked to the debt facilities, would that debt and any associated swaps be transferable, or is there a way to replace those properties in the facilities? I'm curious whether this impacts your ability to sell those properties, as you've mentioned wanting to increase your options. I want to understand if you'll still have the chance to sell some properties or exchange them, or if the buyer can take on that debt.

Yes. I wouldn't say it's presumable; raising $500 million for a company of our size is challenging. It's very much dependent on relationships, but it is fully repayable and does not involve the friction costs that would come with a more rigid financing structure.

I just would add one thing here. We're going to use to hedge and not swap. So there'll be no termination costs with those.

Got it. So if someone wanted to buy, they would just effectively put their own mortgage on it and then that debt would get.

Correct.

Our next questions come from the line of Joshua Dennerlein with Bank of America.

I want to come back to a comment you made in your opening remarks. You mentioned there was an earnings benefit from some company initiatives in 1Q results. I guess could you elaborate further on that? And then is there anything else baked into guidance for the year from initiatives hitting? Or if not, is there anything that could be a potential source of upside?

Yes, we've started to implement several initiatives. Last quarter, I mentioned that our operational optimization focuses on three main areas: maximizing revenue, reducing expenses, and strategically investing in certain properties based on our return on invested capital approach. One of our recent initiatives is Liberty Towers, which is just beginning. We've begun to see some benefits from these initiatives, like our new AI-based leasing assistant, which has already saved us over 1,200 hours of human capital time, allowing our leasing agents to concentrate on more valuable tasks. We're collaborating with a provider to extend the use of technology, particularly AI, to address existing resident requests. While I won't quantify the potential earnings impact of each initiative within a specific timeframe, this is about gradually optimizing our platform over time. We've demonstrated our ability to mitigate expenses even with inflation at elevated levels, reflecting our team's efforts to counteract inflationary pressures through processes, technology, structural changes, and new methodologies that help us manage costs effectively. This approach harmonizes revenue maximization, expense management, and property investment.

And then sorry if I missed it, but did you mention what leasing spreads or how leasing spreads are trending in April or where you're sending out renewals today?

Yes. On a blended basis, we're in the mid-single-digit ballpark and we're sending out renewals a touch higher than that. It's early, but as we're entering the spring leasing season, you are seeing new leases climb a little bit a touch above that. But on a blended basis, I'd say, around the mid-single digit, maybe a touch higher. Got it. Thank you.

Our next questions come from the line of Tom Catherwood with BTIG.

Maybe for Amanda, you mentioned paying down, I think, roughly $170 million of principal as you refinance 4 mortgages this year and put them on the line and the revolver. For sources of those funds, it looks like you'll have roughly that much cash once you close on the $28 million of contracted land sales. But outside of that, how much more capital do you need or how much more do you have to sell to execute the rest of your 24 business plan, including spending on asset upgrades?

I'll address part of your question and then pass it to Mahbod. First of all, your calculations are correct. We currently have about $140 million in cash from recent sales, and if you add the $28 million from the newly announced asset under contract, that brings us to the amount needed for debt repayment. Mahbod, I'll let you respond to the second part of the question.

I agree with your assessment regarding where additional cash flow can come from for property investment. First, now that we've emerged from the transformation and rebuilt our earnings, we are generating a significant amount of free cash flow. Therefore, the business is once again cash flow positive, which is not included in your earlier calculation. Additionally, we have liquidity available through our line of credit for investing in our properties. We also possess around $200 million in other land, which we may choose to monetize to unlock additional equity. Considering these factors, I believe we are in a strong position. It's important to highlight that the business is generating a considerable amount of free cash flow.

And then maybe Mahbod sticking with you. You've previously discussed your joint ventures as a potential avenue for capital allocation. Is that a near-term opportunity? Or is something like that more than likely further down the line?

Well, difficult to comment on the timing because I would say it's certainly an area where we may seek to for want of a better word, clean up a little bit more. And what I really mean by that is determine whether for certain joint ventures, there may be a higher and better use for our company and whether we can access the equity that's locked in those joint ventures. But there's always a path. The question is how long it would take to get through that path, which makes it difficult to really put a time frame around it, but it is another potential area of optimization on the capital allocation side of our 3-pronged approach that could be unlocked over time.

And then last one for me. Just over on Haus25. How much NOI upside is there as you stabilize the storefront commercial space at the building?

I wouldn't say it's significant. It's going to be around $2 million from it being fully leased.

Do you have any insights on the progress towards this, or is it a matter of timing? Are we discussing a 25-event situation?

I'd say, overall, we're seeing some really positive signs on the retail side. The team is doing a fantastic job of making sure we're in the flow and definitely seeing a little bit of an uptick in inquiries and tours. And so we hope to be able to make some progress there.

Our next questions come from the line of Michael Lewis with Truist Securities.

As far as additional noncore dispositions, how much of that is land versus targeted properties that you have to sell?

We haven't announced any additional sales at this point. So other than $28 million that's under binding contract, but what is available is $190 million of land, and then it's really the multifamily properties. So those decisions will be, again, keep using the word, but capital allocation decisions is the equity that's tied in those assets being put to its highest and best use within the company. Is there a higher and better use for it? Can it be unlocked and over what time frame? So we're constantly evaluating, as I’ve said in the past, every dollar of equity that's tied up in the business and making those decisions working closely with the Board, but no decisions have been made at this point with regard to the remainder of the assets.

Okay. I guess I'm thinking not just the yield on this kind of source of capital from sales, but also should we expect that most of this land is eventually going to be sold? Or do you think you're a material developer going forward when that makes sense?

Well, there's clearly a long-standing DNA at Veris for developing very high-quality products here in terms of let's say multifamily assets and that stands. But as I said, no decision has been made yet with regard to the land bank.

And then you talked a lot about this, but as far as the debt repayment, the specific pieces here, right? So you think the plan Liberty Towers have maturities this year on much larger than the other. Should I expect that you'll use some of these proceeds and then put the balance on the line that you're not going to refi either of these?

This is Amanda here. Yes, that's correct. So the way we're looking at it is we'll tackle each maturity/refinancing at the date that is required to be done. And the order of operations is, first, we'll repay using cash on hand. Once we do that, then we'll draw on the term loan. And then after that, we'll draw on the revolver.

Is there any other debt that you're going to get at the fear, right? Because you don't have another maturity, it looks like until '26. So are those kind of the 2 main pieces I assume?

So those are the two that have maturities this year, that's correct. But there's also in July, SoHo loss, which is a $158 million mortgage, the rate resets to above market. We will repay that with the cash on hand, and then there's one other loan, 145 Pat Street, which we'll repay and add to the pool in May.

So the way I would think about it is between loans maturing, the SoHo loan, which has a rate reset, and one other in Front Street that we would like to just consolidate into this financing because it's effectively cost-neutral and clean things up. That's $528 million of debt that will be repaid with the combination of the facilities and proceeds from asset sales. And the net effect of that is you go from $528 million of debt to around $360 million of drawn balance under the term loan in RCF.

We have reached the end of our question-and-answer session. I would now like to turn the floor back to management for closing remarks.

Thank you, everyone. We're pleased to report another extremely positive quarter and look forward to updating you again next quarter.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect at this time. Enjoy the rest of your day.