Good morning and welcome to Residential Veris Inc's Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this event is being recorded. I would now like to turn the conference over to the General Counsel, Taryn Fielder. Please go ahead, ma'am.

Good morning, everyone and welcome to Veris Residential's third quarter 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're pleased to report another quarter of strong NOI and core FFO growth driven by the better than anticipated resolution of our non-controllable expenses and continued market rent growth; resulting in a 17% increase in core FFO during the first nine months of the year. We continue to build upon the strong results delivered in the first half of the year, making steady progress across a number of strategic initiatives aligned with our three-pronged value creation plan. We refinanced an additional $308 million of mortgages during the quarter utilizing the corporate facilities secured earlier this year, further reducing our property level debt and now have no remaining consolidated debt maturities until 2026. We continue to achieve strong operational results despite a wider market slowdown, realizing NOI growth of 6.7% and blended net rental growth of 4.8% for the first nine months of 2024. This resulted in core FFO per share of $0.17 for the third quarter as compared to $0.12 in the third quarter of 2023, an uplift of 42%. As we look toward the last few months of 2024, we remain confident in the performance of our highly amenitized newer vintage average age of eight years, well-located Class A portfolio. This is reflected in our raised guidance which Amanda will discuss in further detail. Looking more closely at our operational performance, our portfolio maintained 95.1% occupancy with retention increasing to 55% as we realized 4.6% blended net rental growth for the quarter or 4.8% for the first nine months of 2024. Portfolio-wide renewal growth remained stable at 6.5% and new leases grew by 1.3% above the national average of 0.9%. New York City recorded September's highest national year-over-year growth in asking rents at 5.4%, which has continued to drive demand for our waterfront assets. Historically, approximately 30% of our move-ins have come from the New York area, taking advantage of the compelling relative value proposition of our apartments, which offer generally larger units and a wider range of amenities. These factors, coupled with extremely limited new supply, have driven strong performance in our Jersey City and Port Imperial assets. Our Jersey City portfolio recorded blended net rental growth of 6.7%, accelerating from 5.7% in the second quarter, while our Port Imperial portfolio recorded equally strong growth of 6.3%. As rental growth remains strong, the average rent per home across our portfolio reached almost $4,000. Our portfolio's affordability ratio stands at 12%, underpinned by move-ins with an average income per home of $388,000, a 17% increase from the fourth quarter of 2023 or $180,000 per person. We remain focused on our ongoing pursuit of operational excellence as reflected in the further improvement in our operating margin which now stands at 67%, up from 57% at the beginning of 2021. In the same period, we've reduced our controllable expenses as a percentage of revenue to 17.6% from nearly 20%, well below the average controllable expense ratio of 19% across our public peers. These improvements are a testament to our continued optimization initiatives including the adoption of new technologies, operational enhancements and changes to our organizational structure and processes. Our AI-based leasing assistant Quinn continues to be highly effective in capturing demand at the top of our leasing funnel, effectively converting 31% of leads year to date and contributing to a 2% savings in payroll expenses compared to 2023. Along with engaging prospects, Quinn now interacts with residents on a day-to-day basis assisting with maintenance requests, renewals and a wide range of other resident inquiries. In September alone, Quinn sent almost 21,000 messages to residents and prospects, equating to over 1,700 staff hours. In addition to further improving our margin, these initiatives have had a positive impact on the overall resident experience across our portfolio, enhancing Veris' sector-leading reputational standing as reflected in our J.Turner Research ORA Score, which has steadily increased throughout the year, exceeding 84 in September, ranking well ahead of our public peers. We're incredibly proud of this achievement, and I'd like to thank our teams for their hard work and dedication in making it possible. In line with our three-pronged approach to value creation, we continue to look for accretive opportunities to recycle capital within the company, including investments in our own portfolio. Earlier this year, we commenced an extensive renovation of Liberty Towers, a 648-unit apartment building in Jersey City. We're pleased to share that the amenity floor renovations have been completed on schedule. During the quarter, we also unveiled a refreshed modern brand for Liberty Towers and began unit and corridor renovations. Upon completion, anticipated to take three to four years, we expect to generate a mid- to high teens return on invested capital. This project alone is expected to contribute an additional $0.06 of annual core FFO per share upon completion while significantly enhancing the value of the asset. To put this into context, the anticipated accretion from this asset would represent approximately 10% of the high end of our 2024 core FFO guidance range. Finally, I'm pleased to share that Veris has once again been recognized by GRESB for our ESG efforts, earning our third consecutive 5-star ESG rating with the highest listed residential score in the U.S. and the third-best listed residential score worldwide. As such, we've been designated as a regional listed sector leader in the residential category, a recognition highlighting the top performers in the Americas. As previously shared, we've met the sustainability KPI provisions included in our credit facilities, unlocking a 5-basis point margin saving. We're also proud to have been recognized by NAREIT with the MidCap Diversity Impact Award for our social responsibility policies. 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 third quarter of 2024, net loss available to common shareholders was $0.10 per fully diluted share versus a net loss of $0.60 for the same period in the prior year. Core FFO per share was $0.17 for the third quarter compared to $0.18 last quarter and $0.12 for the third quarter of 2023. For the nine months ended September 30, we reported core FFO growth of 17%, driven by strong rental revenue growth, lower property expenses and lower interest expense. Same-store NOI growth was 8.4% for the quarter and 6.7% year-to-date. For the quarter, same-store revenues were up 4% as compared to last year, primarily driven by market rent growth. Year-to-date, revenues were up 5.9%, driven by market rent growth and approximately $1.6 million of other revenue in the first half of the year and outsized year-over-year growth from House 25 as the assets stabilized in the first quarter of 2023. On the expense side, total expenses declined 4.4% for the quarter and were up 4.2% for the year. This quarter is driving significant variability as we renewed property insurance and finalized Jersey City real estate taxes, both of which came in favorably relative to our expectations. Insurance expense is down approximately $1 million in the third quarter as compared to last quarter. However, of that amount, approximately $700,000 reflects adjustments to the first half of the year, leaving only around $300,000 related to the third quarter and bridging to the new insurance run rate. In addition, this quarter, we received the final tax bills for Jersey City, which resulted in a 1% reduction on a run rate basis from 2023. Similarly, we saw a sequential reduction in taxes of approximately $800,000, $600,000 of which relates to prior periods. Turning to overhead. After adjustments for non-cash stock compensation and severance payments, core G&A was relatively flat at $8.7 million. Consistent with seasonal expense trends, we expect that overhead will be higher in the fourth quarter. In addition, I'd like to draw your attention to two changes in our reporting. We have changed real estate services income to management fees and real estate services expenses to property management expenses. Management fees represent income that we earn from the four joint ventures that we manage, while property management expenses represent the costs we incur to manage those four joint ventures and all of our consolidated portfolio. We did this to align with the nomenclature of our peers, and there is no change in how we allocate our costs or revenues. Now on to our balance sheet. As of September 30, nearly all of our debt was fixed and/or hedged with a weighted average maturity of 3.3 years and a weighted average effective interest rate of 5%. Our net debt to EBITDA for the trailing 12 months is at 11.7x. During the quarter, we repaid mortgages for Signature Place and Liberty Towers with cash on hand, $145 million of draws on the term loan and a $157 million draw on the revolver. We have hedged all of the term loan and $150 million of the revolver with an interest rate cap with a strike of 3.5%. We ended the quarter with liquidity of $170 million, including $27 million of cash on hand. As Mahbod mentioned, we are raising our core FFO guidance range by approximately 7% or $0.04 at the high end to $0.59 to $0.60 per share, reflecting $0.02 of positive improvement in same-store NOI as a result of the favorable resolution of non-controllable expenses, $0.01 of multifamily outperformance and $0.01 of interest expense as a result of hedging the revolver, which we had previously assumed was unhedged. Looking to the end of the year, I think it's helpful to bridge from our Q3 results to our Q4 guidance. The third quarter benefited from $0.02 from the favorable resolution of non-controllable expenses and another $0.02 of interest expense from the combination of a full quarter of the Liberty Towers mortgage, a 3.4% coupon legacy loan remaining outstanding and a lower debt balance resulting from the $172 million of debt repayment in the second quarter. This, combined with typical seasonality in overhead and NOI expenses will result in core FFO for the fourth quarter being lower than in the third. We are also raising our same-store NOI guidance ranges from 3% to 5% to 5.4% to 6.2% reflecting the resolution of insurance and real estate taxes and continued rental revenue growth. The increase in our same-store NOI guidance is driven by tightening the same-store NOI revenue growth range by 60 basis points on the low end to bring our range up to 4.6% to 5%. We have also significantly improved our expense expectations to 2.5% to 3% from 4.5% to 5.5%. These changes result in an increase of 120 basis points of same-store NOI at the high end and 240 basis points at the low end. As we close on another quarter, we remain confident that the company is well-positioned for continued success. Veris offers 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. The strength of our portfolio combined with our vertically integrated best-in-class operating platform represents an extremely compelling value proposition. With that, operator, please open up the line for questions.

Our first question comes from Steve Sakwa of Evercore.

Mahbod, I guess I just wanted to start off with kind of your thoughts. You sort of touched on it in your prepared remarks, kind of the playing off of New York and maybe just some of the softness that we're seeing really across some of the multifamily operators with city exposure. And I'm just curious what maybe evidence you're seeing kind of either rent fatigue or just inability to push rents in certain parts of the Jersey portfolio.

Thank you for the question, Steve. As I mentioned earlier, we are still experiencing exceptionally strong growth, particularly in the New York area this quarter. The new offerings across the river are generally larger and come with high amenities at over a 30 percent discount compared to Manhattan properties. Additionally, the very limited new supply in our markets is providing significant advantages for our portfolio. Overall, we are very satisfied with our Q3 performance and are optimistic about Q4. While we are entering a seasonally slower leasing period and anticipate some slowdown, we remain positive about the outlook.

Secondly, you mentioned Liberty Towers. Maybe I missed it or don't have it recollected, but did you ever provide kind of like an overall, I guess, targeted dollar spend on that project? I mean I know you talked about mid- to high teens return, but what is the overall total capital budget for that project?

It's around $30 million on these renovation programs, maybe a touch above that, but around $30 million is what we're looking to spend over the 3 to 4-year period, Steve.

Great. And then just lastly, you sort of talked about trying to look for investment opportunities maybe outside of the renovations. Just curious, as you try and clean up maybe some of the JV structures and get more assets more consolidated, just sort of how is that process going? What are your expectations to maybe streamline the portfolio from an ownership perspective? And I don't know if that creates any more savings or synergies by having fewer JVs.

Yes. Look, at any moment in time and really that's been consistent with our approach over the last three and a half, four years, we're looking at a wide range of opportunities within the portfolio and externally. And so, Liberty Towers is a product of that, and we treat it like any other investment to the extent that there are other opportunities. And you've got to bear in mind, we've got a very young, relatively new portfolio. And so, there aren't too many opportunities. That's our oldest asset. But there may be some other opportunities for investment within the portfolio. And to the extent that we identify those, we evaluate them like any other capital allocation decision, what's the return profile, what's the risk? And then is it ultimately a good investment for our shareholders. With regards to the joint ventures, absolutely, it's possible that we've said in the past, some further simplification there would certainly benefit us in many ways. It's not always straightforward to effect or to execute on that simplification plan, but it's something that we're working on. Nothing to update today.

Our next question comes from Eric Wolfe of Citi.

In your supplemental, you give your multifamily NOI for NAV purposes. It saw a large sequential jump, which I guess is due to the lower expenses. So, I was just curious whether anything in that is more one-time in nature like tax refunds or true-ups from accrued expenses. I'm effectively just trying to understand whether that is a true recurring run rate? Or would it kind of go down next quarter?

A portion of that is one-time in nature. As you noted, it is influenced by the resolution of our non-controllables regarding insurance and taxes. As I mentioned earlier in my remarks, approximately $1.3 million of the $2 million change in NOI related to office and insurance can be attributed to prior periods. Therefore, on a run rate basis, we are looking at about a $500,000 reduction.

So, we could just take that number that's in there and then just take a $500,000 reduction to get to kind of like a recurring type number. Is that accurate?

I think you'd want to add $1.3 million to it on a quarterly number and then annualize that $1.3 million if you're looking at an annualized figure.

All right. And then as far as the insurance renewal, I guess, did you change anything in terms of coverage or increase self-insurance or anything like that? Or was it just really just lower pricing.

Yes, it's really driven by just improved pricing overall. That's it.

I believe we have experienced a couple of years of substantial growth. It's important to note that our margin has become quite respectable, increasing from 57% to 68% this quarter and 67% year-to-date. This places us favorably within the industry. However, we are still facing some penalties on the insurance front due to our concentration in Jersey City, which affects our margin by about 150 to 160 basis points. Therefore, we are pleased to see a slight decrease in those penalties rather than the significant increases we have witnessed over the past few years. While this trend is not universal across all regions, it is being observed throughout the industry this year.

The next question comes from Tom Catherwood of BTIG.

Maybe Mahbod or Amanda, now that you've executed on the strategy you laid out earlier this year for your balance sheet, what is the plan for kind of the next phase of that overhaul? Kind of what other tools and options do you have on the table?

In adopting this new approach to financing our debt, we are leaving a lot of flexibility and options on the table for the company to manage its balance sheet over time whenever we have the capital available. Now that we have completed the transformation, and after seeing earnings decline as expected while transitioning from high-yielding office properties to multifamily, we are now in a cash flow positive position. Our portfolio is expanding, generating cash flow. With our current structure, we can utilize any idle cash to pay down the revolving credit and reduce interest expenses. We still have a significant amount of equity tied up in unused land, and as that becomes available over time, we will discuss capital allocation with the Board. If it is decided to pay down debt, we will have the flexibility to continue on that path by recycling that equity. Additionally, as mentioned earlier, we still have joint ventures that may be streamlined over time, providing another avenue with several hundred million dollars in equity. If that equity is released, we will also have discussions about the best use of those proceeds. If debt repayment is identified as the priority, we are positioned to strengthen our balance sheet without incurring significant costs.

Maybe following up on your comment on the idle equity in land. The impairment that you took this quarter, is that a change in hold period for an asset that you're looking to sell near term? Or was it a JV asset where the impairment rules are more stringent and don't necessarily tie to a change in hold period?

Tom, this is Amanda. So, that impairment that we took this quarter is related to a land asset. And I would say it's due to actually clarification on the market value and information we have from negotiations on that asset. And it's not a joint venture.

I'm sorry, what was the last one?

It's not in a joint venture.

Got it. Thank you, Amanda. I have one last question. Regarding the sale of the shops at 40 Park that occurred in October, did you lead that effort? I understand you only held 25% of that asset. Was it driven by your partner, or was it a reverse inquiry? Could you give us more details about how that sale came about?

As you correctly say, Tom, we're a minority partner in that joint venture. So, I wouldn't say we led the charge, but we were supportive of that transaction.

Our next question comes from Michael Lewis, Truist Securities.

My first question is about the transition of core FFO from the third quarter to the fourth quarter. It appears that your guidance suggests a range of about $0.10 to $0.11 for the fourth quarter, which is a decline from $0.17 in the third quarter. I understand there were positive adjustments from the previous period contributing around $0.01 or $0.02. You also mentioned overhead, but I'm uncertain about the interest expense. I would have thought that would positively impact the fourth quarter as well. Could you break down the factors that lead from the third quarter to the fourth quarter again?

Michael, sure. I can walk you through that. In the third quarter, we reported a core FFO of $0.17, which includes about $0.02 from the resolution of non-controllables, a one-time item. In terms of interest expense, Q3 had a lower amount since we benefited from repaying our debt at the end of June and in May. We also have the older mortgage rates on Liberty Towers at a 3.4% coupon compared to the new term loan and revolver. This situation adds around $1.6 million to our interest expense, which accounts for roughly $0.02. Consequently, that brings us down to $0.13. To reach our guidance, it really hinges on the seasonal variation in both our operating level expenses and our corporate overhead, which is not something we typically see. We expect to see those costs rise slightly in the fourth quarter.

Okay. I got it. That makes sense. And then my second question, I don't know if you've seen this, but I saw anybody who lives in New York and has rented an apartment knows that the renter will pay broker fees. I saw that the city council may be close to reversing that. Now if that happens, my first guess would be that rents kind of just go up in New York and eat that up. I don't know if you've seen this or have any thoughts around it, whether that change in who pays the broker fee could have any positive or negative impact in New York relative to, again, the value proposition of your portfolio?

Yes, I think that could be one factor, but there are many other elements influencing rents in New York, which, as we mentioned, continue to perform exceptionally well. There is some correlation and effect on what this means for our markets. However, as a standalone factor, I wouldn't consider it likely to significantly impact rents beyond the existing trends that are already causing rents in New York to increase as they are.

Ladies and gentlemen, that concludes our question-and-answer session. I will now hand over to the CEO, Mahbod Nia, for closing remarks.

Thank you, everyone, for joining us. We're pleased to report another very strong quarter. I'd like to thank our teams for all the hard work and commitment that allow us to be able to post results like this, and we look forward to updating you again next quarter. And Happy Halloween.

Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.