Greetings, and welcome to the Veris Residential, Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Taryn Fielder, General Counsel. Thank you. You may begin. Good morning, everyone, and welcome to Veris Residential's first quarter 2025 earnings conference call. I would like to remind everyone that certain information discussed on this call may cause 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 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 Chief Executive Officer, who is joined by Amanda Lombard, Chief Financial Officer, and Anna Malhari, Chief Operating Officer. Mahbod?

Thank you, Taryn, and good morning, everyone. We are pleased to report a positive start to 2025, during which we began to make progress on the corporate plan announced earlier this year while delivering another quarter of strong operational and financial results. Over the past few months, we have closed on $45 million of non-strategic asset sales and entered binding contracts for an additional $34 million of land sales, making progress toward our goal of selling $300 to $500 million of non-strategic assets over the next twelve to twenty-four months, despite the elevated levels of market volatility and uncertainty that we are witnessing. Earlier this week, we completed the consolidation of our partner's 15% stake in the Jersey City Urby, previously our largest unconsolidated joint venture, for $38 million, including consideration for their share of the remaining tax credit and termination of their management contract. Since closing, we have assumed management of the asset, which we rebranded to Sable, and expect to achieve meaningful operational synergies as we integrate the asset into the Veris platform. While these recent transactions are expected to be accretive to earnings, they were not contemplated in our original guidance, and we have not seen any disruption to our business. We have decided to leave guidance unchanged at this time given the high degree of market volatility and economic uncertainty that persists as a result of the recently implemented tariffs and changes to trade policy. These changes have created the potential for a weakened economic outlook, elevating the risk of a recession and increasing inflationary pressures. Nevertheless, multifamily markets have seen a positive start to 2025, and the Northeast has continued to exhibit particularly strong fundamentals, underpinned by robust demand and constrained supply across most of our markets. Our Jersey City assets continue to outperform, benefiting…

Thank you, Mahbod. For the first quarter of 2025, net loss available to common shareholders was $0.12 per fully diluted share versus a net loss of $0.04 for the prior year. Core FFO per share was $0.16 for the first quarter, three cents higher than expected due to the early recognition of the Urby tax credit, which was accelerated as a result of the transaction. This compares to $0.11 in the fourth quarter of 2024 and $0.14 in the first quarter of 2024. Core FFO was higher than the fourth quarter by five cents, with two cents due to nonrecurring taxes related to sold land parcels, and three cents due to our annual sale of the Urby Tax Credit. Core portfolio in the first quarter is up $0.02 from the same quarter a year ago, due to several one-time revenue items last year offset by the Urby Tax Credit impact this year. Same-store NOI growth was 3.2%, broadly in line with our expectation. Rental revenue was up 2.4%, driven by an increase in occupancy and rental revenue growth, largely offset by a reduction in occupancy at Liberty Towers due to the ongoing renovations Mahbod had mentioned. Excluding the drop in Liberty Towers occupancy and the $1 million of one-time items last year, revenue growth would have exceeded 5% in the first quarter, demonstrating strong performance. On the expense side, expenses were relatively flat overall, up just 80 basis points from the same period last year, and down 2.7% from the fourth quarter. Year over year, we have lower non-controllable costs, mostly from insurance, offset by an increase in controllable expenses of 3.5%, primarily due to higher utility costs as a result of the relatively colder winter in the Northeast. Expenses in the first quarter versus the fourth quarter are down…

Thank you. At this time, we will conduct a question and answer session. Once again, that's star one at this time. Our first question comes from Steve Sakwa with Evercore. Please proceed.

Yes. Thanks. Good morning. Mahbod, I guess you and Amanda both threw out a lot of stats on the blended spread. And I just was hoping maybe you could give us a little bit of progression kind of January, February, March. And I think March was four, and April was four, eight. Want to make sure I had those stats right. And then, you know, maybe help us think about the cadence in the quarter. Obviously, the April acceleration is nice. And maybe add on to that, like, where are you sending out renewal notices to existing customers, you know, for kind of the May, June, July time frame?

Hi, Steve. It's Anna here. I'm actually going to take this one. Thank you for the question. So as we messaged last quarter, we have really seen new leases trade positive in February. And that's where the blend accelerated to around two and a half. And then it started exceeding four in March and with the 4.8% through April 21st as Mahbod mentioned in his script. In terms of sending out the renewals now through the end of the second quarter, it's around the mid-single digits where we're settling.

Okay. Thank you on that. Mahbod, maybe just on the demand side, you know, I think you mentioned that maybe over half the folks coming in are coming in from maybe out of town. Just maybe any color you could share on that and is there any, I guess, draw from Manhattan given the rent differential that has clearly been wide for a while? Are you seeing any kind of unusual patterns of folks, you know, maybe pulling away from the New York City market and, you know, coming back into kind of the Jersey waterfront?

Good morning, Steve. Thank you for the question. It's a good one. Yes, look, I would say we have seen consistently around 20% to 25% of the move-ins every quarter come from Manhattan, and that makes a lot of sense given the rent differential and then the quality of the offering over here. Generally, as I said, larger, newer units, very well amenitized. What we have seen more recently is more out-of-state move-ins. And we believe that that is linked to something of a return to office mandate more broadly, and really off the back of New York and Manhattan really seeing that positive economic trends that we have seen over there and hiring and return to office, we feel that we think it's probably short by that. But actually, the out-of-state move-ins are also people moving here to work in New Jersey as well. So it's a little bit of a mix, but I'd say our assets do still carry significant appeal for people working in Manhattan and choosing to live over here given the benefits of the rent differential. But also the fact that living here, you do not pay New York City tax, which itself is, you know, another 3% to 4%. And that, you know, that adds up when you consider the affluence of the resident base in general that we have.

Great. Thanks. Last question for me. Just on the capital market side, you know, it was nice to see you get some of the land sales done, got the Urby deal done. Just how are you thinking about that balance of that $300 to $500 million? And, you know, how, I guess, challenging in this capital market environment do you think it will be to get, you know, additional income-producing and/or land sales completed?

Yeah. That it's a great question again. I would say this team has a proven track record of navigating challenging market conditions. If you think about just starting off selling assets during COVID and then dealing with return to office and then inflation environment changing and rates moving in the way they did. And then now, obviously, the most recent changes that we have seen off the back of policy changes through the new administration. And so I think the team's been pretty good at navigating choppy markets, being resourceful, and tenacious. And delivering on our stated objectives. Generally ahead of expectations. So I wouldn't say we're, you know, we're not naive or complacent. We recognize that there's a lot of volatility and uncertainty and those things are not good for transactions. But as of today, we remain confident in our ability to continue making progress with our stated plan.

Great. Thanks. That's it for me.

Thank you, Steve.

Thank you. The next question comes from Jana Galan with Bank of America. Please proceed.

Thank you. Good morning. You know, maybe following up on that last question, congrats on the Sable transaction. I guess, just at this point in the company's transformation, where is your strategic focus as you think about the next chapter?

Good morning. Thank you for the question. I think at this point, the strategic focus is really the plan that we laid out last quarter, which is the sale of $300 to $500 million of non-strategic assets, generally smaller assets, and ones that may be less efficient for us to operate or more fringe in location, and land and recycling that capital, putting it to a higher and better use, which we've identified, royalties being four-fifths debt repayment and a fifth towards repurchasing our shares, which should leave trading at a significant discount to intrinsic value. That's really the stated plan at this time and the focus for the management team.

Thank you. And then just, you know, on the guidance, year to date, you're running ahead, and I understand there's a lot of macro uncertainty. But are you specifically seeing anything in your markets or in the portfolio in terms of kind of layoff and out like, like, more roommate applications that have you concerned?

It's a good question. No. At this point, as I mentioned in my script to my house, we do not really see any impact on the operational side of things. But these things tend to lag, and it's really what you mentioned that there's a lot of uncertainty in the economic outlook. There's a lot of uncertainty in the inflation outlook. While we believe that our assets are well-positioned to weather potential storms ahead, given the quality of the assets, the relative value proposition compared to Manhattan, given the affordability ratio of our resident, which is around about 12%. And we're not immune, and holding guidance at this point really is just reflective of the fact that we're only four months into the year with a considerable amount of uncertainty ahead of us, and the accretion from these transactions that we announced, which would amount to around about two cents relative to guidance, is a couple of million dollars. And for a company of our size, it's not inconceivable that given all that untouchables, uncertainty between the income side, given the economic outlook, the expense side, given the inflation outlook, potentially, you could erode that away in the next eight months. And so we think it's prudent at this time to hold guidance and monitor the situation, despite the fact that these very accretive transactions that we've announced today.

And, Jana, one thing I would just add on top of what Mahbod said is in terms of our same-store NOI guidance, you know, our revenue we expect with all the typical seasonal patterns peaking in the third quarter. But on the expense side, if you recall last year in the third quarter, we had a really favorable result with our insurance renewals as well as our Jersey City taxes, which reset in the third quarter. And so when we lapped those favorable adjustments, we will have lower same-store NOI in the third quarter, and so that does help to bring the numbers in line with our guidance ranges.

Yeah. So operationally, it's still very much on track with the original guidance. It's really just the transactions that would, in a more normal environment or more stable environment, would have probably led us to consider raising guidance, and we just think holding back at this point is the more prudent thing to do.

Mhmm. Thank you. Appreciate the detail.

Thank you.

Thank you. The next question comes from Eric Wolfe with Citibank. Please proceed.

Hey. Thanks. For the Urby acquisition, I think at one point you might have been considering selling the asset or other options there. Could you just talk about the process you went through with your partner and sort of how you ended up deciding to acquire it?

Good morning. Thanks for the question, Eric. I think it's fair to say that we assumed a range of options working with our joint venture partner. And it's no secret that today for larger assets, there's a pretty limited universe of buyers, and those buyers tend to have more of a value-add, opportunistic cost of capital, and so that's implications for pricing of any assets that are on the larger size. But also, there's a limited buyer universe generally for illiquid minority stakes in assets. And so it was really looking at a range of alternatives, and we felt that the opportunity for us to acquire a partner stake at this valuation given the accretion, the immediately realizable synergies, and the additional benefits of further simplifying and allowing us more operational flexibility and optionality with regards to the asset really represented the best path for us at this time and for our shareholders.

Got it. Makes sense. And then I think you said the cap rate is 6.1%. I guess the first question is, is that a year one cap rate? Then I think that implies like $27 million of NOI versus about $23 million last year or $23 or maybe $27 million total income versus $23 million last year. Can you just talk about the specifics of what's driving that increase?

Well, it's the Q1 annualized NOI plus the synergies that get you to that 6.1. And so we mentioned the $1 million of immediately realized synergies, there's another $400,000 in payroll savings on top of that, that's what gets you to the 6.1.

Got it. So when I look at the first quarter, it looks like it was up a little over 10% year over year. That's like a sustainable number. I mean, sometimes there can be, you know, in any quarter, right, there can be things that drive expenses down in a given quarter, but you would view that sort of 10% increase year over year as sustainable. Yeah. But yeah.

Yeah. Eric, hi. This is Amanda here. In the fourth quarter, there were some straight-line rent adjustments that slightly pushed down the fourth quarter NOI for Urby.

So it's not as exaggerated in it as that? Q4 was lower than it should have been given those straight-line adjustments.

Got it. Makes sense. Thank you.

Thank you.

The next question comes from Tom Catherwood with BTIG. Please proceed.

Thanks and good morning everybody. So maybe on the Metropolitan at Forty Park, kind of following up on the prior question on urban cap rates, I do a quick back of the envelope, I'm getting to, like, an 8.1% cap rate based on $600,000 for your 25% equity stake. Which seems high. Am I off there? And what was the valuation on that transaction?

Yes. I think the way we thought about that was it was part of a package transaction. And just given the illiquid nature of that and the other assets, we kind of thought of it more holistically. But, actually, how to get to that math, we can come back to you on how you could think about it on a cap rate basis. But really thought of it as a package deal and valued it as such. The other assets.

Got it. Understood. And then the last one for me is for the Wall land. So it was $31 million and as for its development entitlements, I think it was 228 units. Do you know if the final use for that is multifamily, or was the intended use something else? Because, again, that valuation seems rich for that level of entitlements.

No. The final use as we understand it is multifamily.

And is it 228 units, or is there more development potential on that site as well?

I would need to come back to you on that, Tom. Not sure.

Okay. That's it for me. Thank you, guys.

Thanks, Tom.

Thank you. The next question comes from John Pawlowski with Green Street. Please proceed.

Hey. Thanks for the time. First question is on Liberty Tower. Is the downward pressure on occupancy more pronounced than you would have expected at this point in the construction cycle? And where do you expect occupancy to drop?

When you drop it? Possibly slightly lower given, as we mentioned, we had to spend a bit more time on some of the structural work that needed to be done, and that slowed us down a little. In terms of completing the renovated units and releasing them. But that's been offset by strong rock occupancy actually across the other assets. And so not really concerning, and we're now through the worst of it with regard to the structural renovations that needed to be made at Liberty Towers and feel good about the go forward from here.

And so is 80.5% is that the bottom rock occupancy, or should we expect it to trend lower over the next, you know, year?

It's hard to say, but I think, you know, I would expect an improvement from here.

Okay. And then the final topic I want to talk about is just to better understand the properties that you don't have full operating control over. So I have a few quick hits on that. So can you just give me a sense for what percentage of the portfolio is excluded from these blended lease statistics? Is it just the six properties you unconsolidated JV properties you list on page twenty-one, or are there other assets excluded from the blended lease spreads?

So it's the two assets that we don't manage. Station House and the asset in Harrison, which are really immaterial to the overall portfolio.

Yes. Substantially all of the portfolios in. John.

Okay. And so I guess I'm a little surprised you didn't have full operating control over a property that you own 85% of. So I guess what specifically is the low where is the low hanging fruit that you can get to a million dollars synergies that you weren't able to pluck before.

Yeah. Like, this is one of a number of joint ventures, obviously, that we, you know, that we inherited. And probably the rationale was that at the time that this was put in place, this was an office company. And not an office company with a small multifamily developer. And so wasn't really well positioned to manage multifamily assets, and so outsourced the management to Iron State at that time. Obviously, that didn't make any sense for us at this point. The joint venture agreement didn't have clear exit rights right to party. And so really had to be negotiated, but really benefited us in the sense that it meant that we could internalize management, and that million dollars is really a saving of the fee that we used to pay annually for this asset to be managed by our partner. There's no incremental cost to us of internalizing the management of that property. If anything, there are further synergies, and we've announced another $400,000 in annualized payroll savings. We think there's actually more than that to come in terms of incremental benefit and synergies from there as well.

Okay. Thank you.

Thanks, John.

Thank you. At this time, I would like to turn the call back to management for closing comments.

Thank you, everyone, for joining us. We're pleased to report another strong quarter for Veris and look forward to updating you again next quarter.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.