Veris Residential(US:VRE)2020-11-08 08:16Financial Data and Key Metrics Changes - The company reported core FFO per share for Q3 2020 of $0.30, down from $0.38 per share in the prior year period, primarily due to asset sales and pandemic-related disruptions [16] - The office portfolio achieved a 2.1% GAAP same-store NOI increase and a 15.2% cash increase for same-store NOI in the quarter [17] - Rent collections averaged 96.9% in the office portfolio and 99.5% in the multifamily portfolio for the quarter [19] Business Line Data and Key Metrics Changes - The multifamily portfolio experienced occupancy pressures, with the Roseland portfolio finishing Q3 at 91.7% leased, down from 92.6% in the previous quarter [33] - The suburban office portfolio executed over 107,000 square feet of transactions with rental increases of 11.8% on a cash basis and 23.7% on a GAAP basis [22] - The same-store portfolio, excluding two assets under renovation, saw an 11.7% decrease in NOI due to a 3.3% loss in revenues and a 10.3% increase in expenses [34] Market Data and Key Metrics Changes - Investment demand for suburban office in New Jersey remains healthy, with year-to-date sales totaling approximately $2 billion [28] - The company has 9 suburban assets under contract totaling $395 million, with expectations to close 3 of these properties before year-end [31] - The company anticipates approximately 375,000 square feet rolling at the Waterfront next year, with significant move-outs expected [69] Company Strategy and Development Direction - The company is focused on three key initiatives: noncore asset sales, waterfront commercial asset focus, and optimizing the Roseland portfolio [6] - The strategy includes targeting New York City users, particularly tech companies, and repositioning waterfront assets to meet post-COVID demands [12][13] - The company is exploring life sciences offerings at Harborside to capitalize on Jersey's dominance in this sector [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by the pandemic but remains optimistic about the long-term value of the portfolio and the demand for multifamily assets [14] - The company plans to continue selling suburban assets at or close to NAV and is focused on strategic repositioning of commercial waterfront assets [15] - Management is optimistic about the execution of the disposition strategy, assuming financial markets remain stable [31] Other Important Information - The company suspended its third and fourth quarter dividends to preserve liquidity [25] - The net debt-to-EBITDA metric was 12.1x at quarter end, elevated due to multifamily development debt and negative impacts from hotel and parking operations [24] Q&A Session Summary Question: Interest in Permanent CEO Position - Management stated that the interim CEO is focused on current responsibilities and not on the search committee for a permanent CEO [43] Question: Selling Waterfront Assets - The focus remains on suburban asset sales, but the company is open to considering waterfront asset sales in the future [44] Question: Attracting NYC Tenants - The new team is targeting large users needing contiguous space and offering a range of alternatives to meet tenant needs [47] Question: Suburban Asset Sales Challenges - There is strong interest from private investors, but financing remains a challenge due to selective lending practices [53] Question: Timing for Suburban Sales Completion - Management expects to execute suburban asset sales throughout 2021, managing expectations due to external factors [56] Question: Construction Projects Yield Expectations - The company anticipates maintaining yields above 6% on construction projects, with strategies to utilize free rent during lease-up [57] Question: Pricing Discussions for Suburban Assets - Pricing discussions for assets remain within 5% of initial contracted numbers, with no significant cap rate changes [62] Question: Life Sciences Space Demand - The company is assessing capital requirements for transforming buildings for life sciences tenants and is in early discussions with potential partners [66] Question: Hoboken Office Asset Sale - The sale fell through due to a reduced purchase price that the company was unwilling to accept, but they remain confident in creating value from the asset [84]