Veris Residential(VRE) - 2020 Q1 - Quarterly Report

Part I - Financial Information This section presents the unaudited consolidated financial statements, management's analysis, market risk, and controls for Q1 2020 Item 1. Financial Statements Unaudited consolidated financial statements for Mack-Cali Realty Corporation and its operating partnership are presented, with detailed notes Mack-Cali Realty Corporation Financial Statements Mack-Cali Realty Corporation reported a $39.9 million net loss for Q1 2020, reversing prior-year income due to property losses | Financial Metric | Three Months Ended March 31, 2020 (in thousands, except EPS) | Three Months Ended March 31, 2019 (in thousands, except EPS) | | :--- | :--- | :--- | | Total Revenues | $82,057 | $90,266 | | Income (loss) from continuing operations | $(32,091) | $267,366 | | Net income (loss) | $(37,844) | $275,594 | | Net income (loss) available to common shareholders | $(39,924) | $244,495 | | Diluted EPS | $(0.47) | $2.66 | | Balance Sheet Item | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | Total Assets | $5,285,532 | $5,292,798 | | Total Liabilities | $3,146,890 | $3,089,941 | | Total Equity | $1,632,160 | $1,699,475 | | Cash Flow Activity | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $43,663 | $46,037 | | Net cash (used in) provided by investing activities | $(83,098) | $28,888 | | Net cash provided by (used in) financing activities | $39,394 | $(91,857) | Mack-Cali Realty, L.P. Financial Statements Mack-Cali Realty, L.P. reported a $44.1 million net loss for Q1 2020, mirroring the Corporation's performance and balance sheet | Financial Metric (L.P.) | Three Months Ended March 31, 2020 (in thousands, except EPU) | Three Months Ended March 31, 2019 (in thousands, except EPU) | | :--- | :--- | :--- | | Total Revenues | $82,057 | $90,266 | | Net income (loss) | $(37,844) | $275,594 | | Net income (loss) available to common unitholders | $(44,139) | $272,175 | | Diluted EPU | $(0.47) | $2.66 | Notes to Consolidated Financial Statements Detailed notes cover accounting policies, the strategic suburban office portfolio sale, debt structure, and segment reporting - The company's Board decided to sell the entire suburban New Jersey office portfolio, totaling approximately 6.6 million square feet, classifying its results as discontinued operations[48][105][139] - In Q1 2020, the company recognized an unrealized loss allowance of $53.0 million on properties held for sale and land impairments of $5.3 million, citing recent sales contract amendments and COVID-19 economic challenges[108][180] - The company is actively developing three large multi-family projects with total estimated costs of approximately $711.8 million, expected to complete between Q4 2020 and Q1 2022[198][199][200] - The estimated future redemption value of the Rockpoint Preferred Units, classified as redeemable noncontrolling interests, was approximately $488 million as of March 31, 2020[217] - Subsequent to quarter-end, on April 24, 2020, the company signed an agreement to sell its 111 River Street office property in Hoboken, New Jersey, for $244.5 million[291] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, strategic direction, and liquidity, focusing on the suburban office sale and COVID-19 Executive Overview & Strategic Direction The company is transforming to focus on waterfront office and multi-family assets, divesting its suburban office portfolio - The company's primary strategic initiative is the sale of its entire suburban New Jersey office portfolio to pay down corporate-level, unsecured indebtedness and focus on its waterfront office and multi-family rental portfolio[301][303] - As of March 31, 2020, 17 properties from the suburban portfolio, totaling 2.5 million square feet, were under contract for sale for aggregate gross proceeds of $335.5 million[302] - The stabilized core operating commercial portfolio was 81.1% leased at March 31, 2020, compared to 80.7% at December 31, 2019, with rental rates on renewed leases increasing by an average of 19.7% in Q1 2020[309] Results of Operations The company reported a $37.8 million net loss in Q1 2020, a significant decline from Q1 2019 net income | Metric | Q1 2020 (in thousands) | Q1 2019 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $82,057 | $90,266 | (8.5)% | | Net Income (Loss) | $(37,844) | $275,594 | (113.7)% | | Realized/Unrealized (Losses) Gains on Rental Property | $(7,915) | $268,109 | (103.0)% | | General & Administrative | $15,818 | $13,319 | 18.8% | - Same-Store Properties revenue increased by $1.0 million (1.3%) while property expenses decreased by $1.9 million (5.4%) year-over-year[350] Liquidity and Capital Resources Liquidity relies on operating cash flow, credit facilities, and asset sales, with $2.9 billion total debt | Debt Summary | As of March 31, 2020 (in thousands, except interest rate) | | :--- | :--- | | Total Debt, Net | $2,877,121 | | Fixed Rate Debt | $2,331,612 | | Variable Rate Debt | $545,509 | | Weighted Average Interest Rate | 3.70% | - The company plans to use the estimated net sales proceeds of approximately $1.1 billion from its Suburban Office Portfolio sale to pay down corporate-level, unsecured indebtedness[373] - As of May 6, 2020, the company had outstanding borrowings of $326 million under its unsecured revolving credit facility[408] Funds from Operations (FFO) FFO available to common stock and unit holders was $29.7 million in Q1 2020, a decrease from Q1 2019 | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | Net income (loss) available to common shareholders | $(39,924) | $244,495 | | Funds from operations (FFO) | $29,671 | $39,541 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with significant fixed and variable rate debt exposure - A 100 basis point increase or decrease in market interest rates would change the company's annual interest costs on its variable rate debt by approximately $5.5 million[436] - As of March 31, 2020, the company's debt consisted of approximately $2.3 billion at fixed rates and $552 million at variable rates[436][437] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2020, following new accounting system implementation - Management concluded that disclosure controls and procedures were effective for both the General Partner and the Operating Partnership as of the end of the reporting period[439][441] - In January 2020, the company implemented a new accounting and reporting software system and updated its internal controls over financial reporting to accommodate the change[440][442] Part II - Other Information This section covers legal proceedings, updated risk factors (COVID-19), and a bylaw amendment for virtual stockholder meetings Item 1. Legal Proceedings The company is not a party to any material pending legal proceedings beyond routine litigation incidental to its business - There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business[445] Item 1A. Risk Factors This section updates risk factors to address material uncertainties and adverse effects of the COVID-19 pandemic - The COVID-19 pandemic is identified as a new material risk factor, presenting uncertainty that could have a material adverse effect on the company's business, operations, and financial condition[447] - Specific pandemic-related risks include deterioration in tenant financial health, reduced demand for office and multi-family space, difficulty accessing capital, and construction delays[448] Item 5. Other Information The company amended its bylaws on May 5, 2020, to permit annual stockholder meetings via remote communication - On May 5, 2020, the company amended its bylaws to permit the conduct of its annual meeting of stockholders solely by means of remote communication[451]