Veris Residential, Inc. Q2 FY2024 earnings call

• Strong operational and financial results in Q2, with 95.1% occupancy, 5% blended net rental growth, and 5.9% NOI growth in H1.
• Secured $500M credit facility and term loan, reduced debt by $168M using proceeds from non-strategic asset sales.
• Class A portfolio saw 5% blended net rental growth in H1, with net blended rental growth increasing from 4.6% in Q1 to 5.4% in Q2.
• Properties have a ~40% rent premium vs peers, avg revenue per home over $3900 (+22% last 2 years).
• AI-based leasing assistant Quinn effective, converting leads and saving staff hours. Introduced BILT rent payment platform.
• Closed sales of 107 Morgan Street and land sites, released $78M net proceeds to repay debt.
• Scope 1 and 2 emissions 66% below 2019 baseline, Scope 3 emissions down 22% from 2022, 78% of portfolio green certified.

As of June 30th, the portfolio was 95.1% occupied. Same-store occupancy was 95.1%, up 100 basis points from March 31. Class A portfolio realized 5% blended net rental growth in the first half of the year. Net blended rental growth increased from 4.6% in Q1 to 5.4% in Q2. Properties command a ~40% rent premium vs industry peers, average revenue per home over $3900 (+22% last 2 years). Affordability healthy with avg rent-to-income ratio ~12% in Q2. Port Imperial and Jersey City Waterfront properties outperform, East Boston properties show improvement. Operating margin at 66%, up from 57% 3 years ago. AI-based leasing assistant Quinn converted over 34% of leads to tours, answered over 60,000 messages, saved over 5000 staff hours.

• Raised core FFO guidance range by ~4% or $0.02 to $0.52 to $0.56 per share, reflecting nonrecurring items like early tax credit and real estate tax appeals.
• Revised same-store expense growth guidance range from 5%-6% to 4.5%-5.5% due to favorable initial indications for insurance and real estate taxes.
• Expect temporary impact on NOI from Liberty Towers unit renovations, with ~30 units offline on average.

Q: On July leasing updates, what's the blended rate?

A: Around 6% blended, with skew towards renewals but gap narrowing since年初.

Q: Color on same-store expense guidance, insurance and tax?

A: Tax side unclear till late Q3, but expecting less material increase than prior year. Insurance premiums surprising to upside this year, adjusted guidance accordingly.

Q: Sequential drop in core FFO between Q2 and Q3?

A: Second quarter core FFO had ~$0.04 of one-time items including early tax credit, higher interest income from cash balances, and real estate tax appeals. Third quarter expected to have no excess cash on deposit, leading to drop.

Q: Harborside 9 approvals and near-term investment?

A: Announcement on Harborside 9 was about approvals, evaluating potential investment but no immediate decision. Land bank assets pursued for entitlements.

Q: Drag at Liberty Towers from renovations?

A: Not in initial guidance, ~30 units offline on average with no impact in Q2.

Q: Prospective returns on Liberty Tower renovations?

A: High-teens return expected from extensive renovation including bathrooms, kitchens, flooring.

Q: Pulling equity offering and strategic direction?

A: Decision to not pursue incremental accretive transaction due to unintended signaling, more likely transformative strategic moves going forward