Release Date: February 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Veris Residential Inc (VRE, Financial) successfully pivoted away from office exposure, executing large-scale asset sales at advantageous pricing.
- The company delivered NOI growth of 6.9% and blended net rental growth of 4% for the full year 2024.
- Veris Residential Inc (VRE) raised its dividend by approximately 60% year over year.
- The company refinanced over $526 million of mortgages, reducing indebtedness by over $180 million.
- Veris Residential Inc (VRE) plans to use proceeds from asset sales to buy back up to $100 million of stock and pay down debt, reducing leverage below 9 times.
Negative Points
- The intrinsic value of Veris Residential Inc (VRE) is not accurately reflected in its current share price.
- Ongoing economic uncertainty and inflationary pressures are expected to result in a higher-for-longer rate environment, impacting the multifamily investment market.
- The company anticipates a slight decline in occupancy due to a return to ordinary seasonal trends.
- Veris Residential Inc (VRE) faces challenges in the investment market, with 2024 investment volumes 35% below the historical average.
- The company has no consolidated debt maturities until 2026, which may limit flexibility in financial planning.
Q & A Highlights
Q: Under what conditions does the Board think pursuing a larger sale would be more favorable? Is it more about the economic outlook or the rate environment?
A: Mahbod Nia, CEO, explained that the decision is based on a combination of factors, including economic outlook, rate environment, capital flows, and buyer readiness. The Board and Strategic Review Committee continuously evaluate these factors to determine the best path for maximizing shareholder value.
Q: Can you provide more details on the $300 million to $500 million asset sales, particularly regarding land sales and buyer interest?
A: Mahbod Nia, CEO, stated that the land bank is valued at approximately $180 million, with $45 million under binding contract. The buyers are a mix of developers, and the company aims to sell these assets at or near intrinsic value, which will be accretive to earnings and aid in deleveraging.
Q: How much of the land bank is currently in the market, and are there efforts to update entitlements to maximize value?
A: Mahbod Nia, CEO, mentioned that about $100 million to $130 million of the land is part of the $300 million to $500 million sales plan. The company continuously works to enhance land value through entitlements, similar to past efforts with Harborside 8 and 9.
Q: What is the rationale behind the decision to repurchase $100 million in shares and pay off debt with asset sale proceeds?
A: Mahbod Nia, CEO, explained that the decision is driven by the current dislocation between the company's trading price and intrinsic value. The company aims to exploit this arbitrage opportunity by buying back stock and deleveraging, as opposed to the previous equity raise attempt for a strategic acquisition.
Q: How are you thinking about pricing for smaller, less efficient assets relative to the market?
A: Mahbod Nia, CEO, indicated that the expectation is to sell operating assets in the low 5% cap rate range. The focus is on smaller assets outside the New Jersey Waterfront, including those in Massachusetts, Westchester, and DC, as well as joint ventures.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
