Q1 2024 Veris Residential Inc Earnings Call
Operator: Greetings and welcome to the Veris Residential first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Taryn Fielder, General Counsel. Thank you, Taryn. You may
Greetings and welcome to the various residential first quarter 2024 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero.
So on your telephone keypad.
As a reminder, this conference is being recorded its now my pleasure to introduce Taryn fielder General counsel. Thank you Karen you may begin.
Taryn D. Fielder: Good morning, everyone, and welcome to Veris Residential's first quarter 2024 earnings conference call. I would like to remind everyone that certain information discussed on this call may constitute forward-looking statements within the meaning of the federal securities law. 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 and 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's Chief Executive Officer, who is joined by Amanda Lombard, Chief Financial Officer.
Taryn D. Fielder: Good morning, everyone and welcome to various residential first quarter 2024 earnings conference call I would like to remind everyone that certain information discussed on this call may constitute forward looking statements within the meaning of the federal Securities law.
Taryn D. Fielder: Although we believe the estimates reflected in these statements are based on reasonable assumptions.
Taryn D. Fielder: Cannot give assurance that the anticipated results will be achieved.
Taryn D. Fielder: We refer you to the company's press release and annual and quarterly reports filed with the SEC for risk factors that impacts the company.
Speaker Change: With that I would like to hand, the call over to my button you have various residential chief Executive Officer, who is joined by Amanda Lombards Chief Financial Officer My Bad.
Mahbod Nia: Thank you, Taryn, and good morning, everyone. We're pleased to report a positive start to the year, during which we further advanced our strategic goals while delivering another quarter of solid operational and financial results. Last quarter, we announced the completion of Veris Residential's strategic transformation into a pure play multi-family REIT and outlined the three-pronged approach to value creation in this next phase, comprising Accretive Capital Allocation Initiatives, along with the continued optimization of our balance sheet, platform, and portfolio.
My Bad: Thank you Sharon and good morning, everyone.
My Bad: We're pleased to report a positive start to the year during which we further advanced our strategic goals, while delivering another quarter of solid operational and financial results.
My Bad: Last quarter, we announced the completion of various residential strategic transformation into a pure play multifamily REIT and outlined a three pronged approach to value creation. In this next phase comprising accretive capital allocation initiatives, along with the continued optimization of our balance sheet platform and portfolio, we've begun to implement them progressed a number.
Mahbod Nia: We've begun to implement and progress a number of these initiatives. We took steps to further strengthen our balance sheet, securing a new $500 million credit facility and term loan that provides us with substantial liquidity and financial flexibility going forward, as well as the potential for enhanced earnings this year, as reflected in our raised earnings guidance. Through these facilities, we've also effectively eliminated any perceived refinancing risk associated with our debt minorities through the end of 2025.
My Bad: If these initiatives.
My Bad: We took steps to further strengthen our balance sheet, securing a new $500 million credit facility and term loan that provides us with substantial liquidity and financial flexibility going forward as well as potential for enhanced earnings this year as reflected in our raised earnings guidance.
My Bad: Through these facilities, we've also effectively eliminated any perceived refinancing risk associated with all debt maturities through the end of 'twenty to 'twenty five.
Mahbod Nia: The high degree of interest and resulting commitments we received from a broad group of lenders for these facilities, and what remains a challenging credit environment, is a testament to the progress our company has made over the past three years and enables us to enter this next chapter from a position of strength. Amanda will discuss these transformative facilities in further detail.
My Bad: The high degree of interest and resulting commitments we received from a broad group of lenders for these facilities and what remains a challenging credit environment is a testament to the progress our company has made over the past three years and enables us to enter this next chapter from a position of strength.
Amanda will discuss these transformative facilities and thought the detail.
Mahbod Nia: On the capital allocation front, we continue to unlock idle equity within the company, including the sale of Harbourside 5, our last remaining office property, and 107 Morgan Street, as well as two land sites, 6 Becker and 85 Livingston in suburban New Jersey that are under binding contract for $28 million and expected to close in the next few months. We anticipate recycling the net proceeds from these sales to more creative use, at this time, the repayment of debt, as we seek to continue generating value for our shareholders.
Amanda E. Lombard: On the capital allocation front, we continue to unlock idle equity within the company, including incentive homicides five our last remaining office property.
Amanda E. Lombard: Mm 107, Morgan Street, as well as two land sites six Becker 95, Livingston in suburban New Jersey.
Amanda E. Lombard: Binding contract for $28 million and expected to close in the next few months.
Amanda E. Lombard: We anticipate recycling that proceeds from yourselves to more accretive use at this time the repayments of debt as we seek to continue generating value for our shareholders.
Mahbod Nia: Before discussing our continued efforts to optimize portfolio performance, I would like to briefly touch on the broader market. This quarter, the Northeast saw relatively strong rental growth rates of 2%, with New Jersey and Boston outpacing New York. The Jersey City waterfront market, where nearly half of our properties are located, continues to be highly competitive compared to Manhattan and Brooklyn, with Class A rents reflecting an approximately 30% and 12% discount to these markets, respectively.
Amanda E. Lombard: Before discussing our continued efforts to optimize portfolio performance I would like to briefly touch on the broader market.
Amanda E. Lombard: This quarter, the north east so relatively strong rental growth rates of 2% with New Jersey, and Boston Outpacing New York.
Amanda E. Lombard: The Jersey city waterfront market, where nearly half of our properties are located.
Amanda E. Lombard: He needs to be highly competitive compared to Manhattan, and Brooklyn with class, a rents, reflecting an approximate 30% and 12% discount to these markets respectively.
Mahbod Nia: This is underscored by move-ins from Manhattan to our portfolio, which continued to exceed 20% in the first quarter. Within our portfolio, we continue to evaluate innovative technological solutions, as well as our organizational structure and processes, to continuously enhance our platform. We're beginning to see early signs of the positive impact on earnings from previously introduced initiatives.
Amanda E. Lombard: This is underscored by move ins from Manhattan swap portfolio, which continued to exceed 20% in the first quarter.
Amanda E. Lombard: Within our portfolio, we continue to evaluate innovative technological solutions as well as our organizational structure and processes to continuously enhance our platform. We're beginning to see early signs of the positive impact on earnings from previously introduced initiatives.
Mahbod Nia: In parallel, we upheld our commitment to the creation of an exceptional resident experience and combined the pursuit of operational excellence with our customer service-oriented approach to building management. In March, we ranked as the number one REIT in the U.S. for online reputation by Jay Turner Research, reflecting the unwavering dedication of our teams and our residents' recognition of their efforts. Turning to our operational results, our same store portfolio, which now includes House 25 and The James, was 94.1% occupied as of March 31st.
Amanda E. Lombard: In parallel we uphold our commitment to the creation of exceptional resident experiences combine the pursuit of operational excellence the customer service oriented approach to building management.
Amanda E. Lombard: In March we ranked as the number one REIT in the U S for online reputation by J Turner research, reflecting the unwavering dedication of our teams and our residents recognition of their assets.
Amanda E. Lombard: Turning to operational results, our same store portfolio, which now includes house 25 in the James was 94, 1% occupied as of March 31st while this is slightly below the ear and figure out the change can be largely attributed to the concentration of visa is rolling out house 25 related to the rapid lease up of this recently completed prop.
Mahbod Nia: While this is slightly below the year-end figure, the change can be largely attributed to the concentration of leases rolling at House 25, related to the rapid lease-up of this recently completed property. Despite the beginning of the year being a typically slower leasing season, we achieved a 4.6% net blended rental growth rate during the quarter, driven by 7.2% growth in renewals and 2% growth in new leases. We've also begun to see a slight pick-up in new lease growth rates during the past few weeks as we enter the typically more active spring leasing season. However, despite the continued rental growth across our portfolio, affordability remained healthy with an average rental income ratio of 12% in the first quarter.
Amanda E. Lombard: Betsy.
Amanda E. Lombard: Despite the beginning of the year being a typically slower leasing season, we achieved a four 6% blended rental growth rate during the quarter.
Amanda E. Lombard: Driven by seven 2%.
Amanda E. Lombard: Growth in renewals and 2% growth in new leases.
Amanda E. Lombard: We've also begun to see a slight pick up in new lease growth rates. During the past few weeks as we entered the typically more active spring leasing season.
Amanda E. Lombard: Despite the continued rental growth across our portfolio.
Amanda E. Lombard: Portability remained healthy with an average rent to income ratio of 12% in the first quarter.
Mahbod Nia: Turning to ESG, I'm pleased to share that we've improved our ISS corporate rating, giving us prime status and the highest rating achieved by a real estate company in the United States. Furthermore, we were named a Gold Green Lease Leader by the U.S. Department of Energy and the Institute for Market Transformation. We also secured three awards from the International Well Building Institute, the Well Concept Leader Award, the Equity Leadership Award, and the Commitment and Engagement Award, further validating our dedication to environmental and social initiatives.
Amanda E. Lombard: Turning to U S. G. I'm pleased to share that we've improved the ISS corporate right thing I think it's a prime status and the highest rating achieved by real estate company in the United States.
Amanda E. Lombard: Furthermore, we were named a gold green lease leader by the U S Department of energy and the Institute for market transformation. We also secured three awards from the International well building Institute, the well concept meter award.
Amanda E. Lombard: Equity leadership award.
Amanda E. Lombard: The commitment and engagement award.
Amanda E. Lombard: Further validating our dedication to environmental and social initiatives, a comprehensive summary about yesterday or book can be founded on U S. D website at V or a sustainability dot com.
Mahbod Nia: A comprehensive summary of our ESG report can be found on our new ESG website at vresustainability.com. With that, I'm going to hand it over to Amanda, who will discuss our financial performance and provide an update on guidance.
Amanda E. Lombard: With that I'm going to hand that over to Amanda who will discuss our financial performance and provide an update on guidance.
Amanda E. Lombard: For the first quarter of 2024, net loss available to common shareholders was $0.04 per fully diluted share versus a net loss of $0.27 for the same period in the prior year. Core FFO per share was $0.14 for the first quarter as compared to $0.12 for the last quarter and $0.15 for the first quarter of 2023. Core FFO this quarter is up two cents relative to the fourth quarter, driven primarily by continued same-store NOI growth of 14.2% year over year.
Amanda E. Lombard: Thank you my bad.
Amanda E. Lombard: For the first quarter of 2024 net loss available to common shareholders was four cents per fully diluted share versus net loss of 27 cents for the same period in the prior year.
Amanda E. Lombard: <unk> per share was 14 times for the first quarter as compared to 12 since last quarter and 15 cents for the first quarter of 2023.
Amanda E. Lombard: Or if at all this quarter is that two sense relative to the fourth quarter driven primarily by continued same store NOI growth of 14, 2% year over here.
Amanda E. Lombard: This is in line with our expectations and 2024 guidance and comprised of 5% growth from House 25, was that property stabilized in the second quarter of 2023? and 1% from a lease termination fee in addition to rental revenue growth of 8%, and Flat Expenses, as cost-saving initiatives implemented in the fourth quarter offset inflationary price increases. sequentially, same-store NOI was up 4%, driven primarily by a 5% improvement in expenses. Our same-sort NOI growth will continue to moderate from its 2022 high.
Amanda E. Lombard: This is in line with our expectations and 2020 for guidance and comprised of 5% growth from House 25 was that property stabilized in the second quarter of 2023 and.
Amanda E. Lombard: And 1% from a lease termination fee. In addition to rental revenue growth of 8%.
Amanda E. Lombard: Flat expenses as cost savings initiatives implemented in the fourth quarter offset inflationary price increases.
Amanda E. Lombard: Sequentially same store NOI was up 4% driven primarily by a 5% improvement in expenses.
Amanda E. Lombard: Our same store NOI growth will continue to moderate from 'twenty to 'twenty two highs.
Amanda E. Lombard: And we expect that this will be the last quarter, we report double digit growth for some time.
Amanda E. Lombard: In the second quarter, we may potentially see negative same store NOI growth in line with our original guidance as we lap the recognition of the 'twenty two 'twenty three tax appeals.
Amanda E. Lombard: And we expect that this will be the last quarter we report double-digit growth for some time. In the second quarter, we may potentially see negative same-store NOI growth, in line with our original guidance, as we await the recognition of the 2023 tax appeals. In addition, our insurance and real estate taxes are reset in the second half of the year. That being said, as Mahbod mentioned earlier, supply remains muted in our markets, and our rent to income ratios are healthy. Our New Jersey waterfront rents are still at a 30% discount to Manhattan.
Amanda E. Lombard: In addition, our insurance and real estate taxes are reset in the second half of the year.
Speaker Change: That being said.
Speaker Change: Bob had mentioned earlier.
Speaker Change: <unk> remains muted in our markets our rent to income ratios are healthy.
Speaker Change: Our new Jersey waterfront rents are still at a 30% discount to Manhattan.
Speaker Change: And we believe this will continue to differentiate our portfolio's performance given the significant value quotient, we offer relative to this market.
Speaker Change: Turning to G&A after adjustments for noncash stock compensation and severance payments core G&A was $9 $5 million.
Amanda E. Lombard: And we believe this will continue to differentiate our portfolio's performance given the significant value quotient we offer relative to this market. Turning to G&A, after adjustments for non-cash stock compensation and severance payments, core G&A was $9.5 million, lower than the fourth quarter, as expected due to certain expenses that typically occur at the end of the year. Now on to our balance sheet. As of March 31st, virtually all of our debt is fixed and or hedged, with a weighted average maturity of 3.5 years and a weighted average coupon of 4.4%. Our debt to EBITDA for the trailing 12 months was 12 times.
Speaker Change: Lower than the fourth quarter as expected due to certain expenses that typically occur at the end of the year.
Speaker Change: Now onto our balance sheet.
Speaker Change: As of March 31st virtually all of our debt is fixed <unk> hedged with a weighted average maturity of three and a half years and a weighted average coupon of four 4%.
Speaker Change: Our net debt to EBITDA for the trailing 12 months, it's 12 times.
Speaker Change: In April.
Speaker Change: Robert already mentioned, we closed on a new $500 million senior secured delayed draw term loan and revolver with a three year tenor and a one year extension option.
Amanda E. Lombard: In April, as Mahbod already mentioned, we closed on a new $500 million senior secured delayed draw term loan in the Revolver with a three-year tenor and a one-year extension option. We intend to utilize the facilities, along with $145 million of cash on hand and $28 million from the land parcels recently announced under contract, to refinance $528 million of mortgage debt this year, further improving our overall leverage metric. Throughout the course of the year, as each mortgage becomes eligible for repayment, we will first draw from cash on hand, then the delayed draw term loan, and finally partially on the revolver to complete the plan's refinancing.
Speaker Change: We intend to utilize the facilities along with $145 million of cash on hand, and $28 million from the land parcels recently announced under contract to refinance $528 million of mortgage debt. This year.
Speaker Change: Further improving our overall leverage metrics.
Speaker Change: Throughout the course of the year as each mortgage becomes eligible for repayments, we will first draw from cash on hand than the delayed draw term loan and finally, partially on the revolver to complete the planned refinancings.
Speaker Change: We expect that upon completion of the refinancing at the end of the third quarter. The term loan will be fully drawn at $200 million and the revolver balance will be approximately $160 million, reducing outstanding debt by approximately $170 million by year end.
Amanda E. Lombard: We expect that upon completion of the refinancings at the end of the third quarter, the term loan will be fully drawn at $200 million, and the revolver balance will be approximately $160 million, reducing outstanding debt by approximately $170 million by year-end. I'd like to thank the Veris team for their hard work in closing this new facility and yet another testament to the dedication of our team. We have intentionally designed this facility to provide strategic flexibility, allowing us to further repay debt over time while retaining availability on the line, providing valuable liquidity to the company.
Speaker Change: I'd like to thank the Barrick team for their hard work and closing this new facility on yet another testament to the dedication of our team.
Speaker Change: We have intentionally designed this facility to provide strategic flexibility.
Speaker Change: Allowing us to further repay debt overtime, while retaining availability on the line providing valuable liquidity to the company.
Speaker Change: As we seek to manage our balance sheet Holistically, we are comfortable carrying a balance on the revolver.
Speaker Change: There is no cost differential between the term loan and revolver through the for your extended term of these facilities.
Speaker Change: These new facilities represent a shift in the company's approach to managing its balance sheet.
Amanda E. Lombard: As we seek to manage our balance sheet holistically, we are comfortable carrying a balance on the revolver as there is no cost differential between the term loan and the revolver through the four-year extended term of these facilities. These new facilities represent a shift in the company's approach to managing its balance sheet. Moving away from an asset-focused financing strategy to a more flexible, corporate-focused strategy that paves the way for the potential to significantly reduce our cost of capital and enhance optionality over time.
Speaker Change: Moving away from an asset focus financing strategy to a more flexible corporate focused strategy a.
Speaker Change: Our strategy that paves the way for the potential to significantly reduce our cost of capital and enhance optionality overtime.
Speaker Change: This quarter, we increased our core <unk> guidance range to 50 cents to <unk> 54 per share.
Speaker Change: Reflecting our new corporate credit facilities and higher anticipated that repayment from sales proceeds.
Speaker Change: Importantly, we are reaffirming our original operational guidance issued for the year at this time.
Amanda E. Lombard: This quarter, we increased our core FFO guidance range to $0.50 to $0.54 per share, reflecting our new corporate credit facilities and higher anticipated debt repayment from the sale process. Importantly, we are reaffirming our original operational guidance issued for the year at this time. Veris continues to advance its three-pronged approach to optimization, with the continued strong performance of our portfolio and the recently announced facilities representing another step forward. As we round out another strong quarter, Veris represents an extremely compelling value proposition.
Speaker Change: <unk> continues to advance its three pronged approach to optimization.
Speaker Change: With the continued strong performance of our portfolio and the recently announced facilities representing another step forward.
Speaker Change: As we round out another strong quarter various represents an extremely compelling value proposition.
Speaker Change: The highest quality and newest class eight multifamily properties located in established markets in the northeast.
Speaker Change: The highest average rents and growth rate among peers.
Speaker Change: With limited near term supply and high barriers to entry managed by our vertically integrated best in class operating platform.
Speaker Change: With that operator, please open the line for questions.
Speaker Change: Thank you we will now be conducting a question and answer session.
Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad.
Amanda E. Lombard: The highest quality and newest Class A multifamily properties located in established markets in the Northeast, commanding the highest average rent and growth rate among peers, with limited near-term supply and high barriers to entry, managed by our vertically integrated, best-in-class operating platform. With that, Operator, please open the line for questions.
Speaker Change: Confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.
Speaker Change: Our first question is come from the line of Steve <unk> with Evercore ISI. Please proceed with your questions.
Steve: Yeah. Thanks, good morning, maybe mom, but just starting off kind of the guidance.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Steve: I understand it's sort of early in the year end and you know you went up maybe let spring leasing season play out a bit.
Steve: But it seems like the top line you know has grown exceptionally well here in the first quarter. Realizing that you know eight 9% growth might not be sustainable, but you know if I ever recall your your guidance for the year is much lower than that and so you know obviously you are either being very conservative in that forecast on top.
Operator: One moment, please, while we poll for your questions. Our first questions come from the line of Steve Sakwa with Evercore ISI. Please proceed with your questions.
Steve: Top line or maybe there's some tougher comps maybe can you just speak to the the topline component first.
Stephen Thomas Sakwa: Yeah, thanks. Good morning.
Mahbod Nia: Maybe, Mahbod, just starting on kind of the guidance, I understand it's sort of early in the year and you want to maybe let spring leasing season play out a bit, but it seems like the top line has grown exceptionally well here in the first quarter, and you realize that 8%, 9% growth might not be sustainable. But if I recall, your guidance for the year is much lower than that. And so, you know, obviously you're either being very conservative in that forecast on top line, or maybe there are some tougher comps. Maybe you can just speak to the top line component first?
Speaker Change: So morning, Steve No no no. The we've obviously started to see a blended that rental growth rates come in a bad at four 6% and we.
Steve: We are now starting to sell.
Speaker Change: A lot a tougher period.
Steve: But given that we have had now.
Steve: A sustained period of of strong rent increases so there's an element of that doesn't elements of all this the just macroeconomic uncertainty is well ahead and so that's factored in.
Steve: But we're also entering what is typically a.
Mahbod Nia: Sure. Good morning, Steve.
Mahbod Nia: No, look, we've obviously started to see blended net rental growth rates come in a bit at 4.6%. And we are now starting to... to lap a tougher period relative given that we have had now a sustained period of strong rent increases, so there's an element of that. There's an element of, obviously, just macroeconomic uncertainty as well, ahead, and so you know that's factored in, but we're also entering what is typically a stronger leasing season in the spring. We're seeing results for the next couple of months on a blended basis. Blended Net Mental Growth Rates that are right in that sort of mid-single-digit area
Steve: Stronger leasing season, and the spring we're seeing.
Steve: So the next couple of months on a blended basis.
Steve: Our blended net rental growth rates at all right and not sort of mid single digit area and so when you look at all overall guidance for the year are actually still fence I Wouldnt say its conservative I'd say, it's very reflective of where we see revenues for the full year flattening off.
Steve: And also why we see expenses tightening up where were in the first quarter.
Steve: It's also just an element of distortion overall in this first quarter.
Mahbod Nia: And so when you look at our overall guidance for the year, it actually still fits. I wouldn't say it's conservative; I'd say it's very reflective of where we see revenues for the full year landing and also where we see expenses landing, where we are in the first quarter. There's also just an element of distortion overall in this first quarter, from a number of things, which... And there will be going forward, you know, House 25 being added, for example, to the same store pool, which drags up the revenue side of it pretty significantly, given that it wasn't fully occupied in the first quarter of last year.
Steve:
Steve: From a number of things which are.
Steve: And they will be going forward past twenty-five being added for example to the same store pool, which what strikes up both the revenue side of it pretty significantly given that wasn't fully occupied in the first quarter of last year.
Steve: And then on the NOI side, some seasonality factors the tax appeals. The fact on uncontrollable expenses don't come in till the second half of the year, So looking into a single quarter, particularly with it being the first one you might look at that and say well.
Steve: Looks conservative the guidance looks conservative, but it's early and there is some volatility through.
Mahbod Nia: And then on the NOI side, some seasonality factors, tax appeals, and the fact that non-controllable expenses don't come in till the second half of the year. So looking into a single quarter, particularly with it being the first one, you might look at that and say, well, it looks conservative, the guidance looks conservative, but it's early, and there is some volatility through just some of these factors like houses being added to the equation, the tax appeals. But when you look at it on a four-year basis, smoothing all that out, we're still very confident in the guidance range that we have.
Steve: Just some of these.
Steve: Factors like house being added to the equation and the tax appeals, but when you look at it on a full year basis smoothing all that out we're still very much a confident in the guidance range that we've given.
Speaker Change: Okay. Thanks, and then the second question I just wanted to go back to the balance sheet and the financing strategy you know normally you know.
Speaker Change: Companies are looking the somewhat minimized floating rate debt exposure and I realize we're kind of at the peak of the of the maybe the fed's tightening cycle. So taking on floating rate debt, probably poses less risks risk today than it did 12 to 24 months ago, but.
Stephen Thomas Sakwa: Okay, thanks. And then for the second question, I just wanted to go back to the balance sheet and the financing strategy. You know, normally, companies are looking to somewhat minimize floating rate debt exposure. And I realize we're kind of at the peak of the Fed's tightening cycle. So taking on floating rate debt probably poses less risk today than it did, you know, 12 to 20 months ago. But I guess I'm just trying to get a better handle on sort of the strategy here and whether this just preserves more optionality for you to the extent that a monetization event does become available. Is having the debt floating and on a line of credit slash term loan just the most advantageous thing for the company versus going in and putting on secured mortgages? Is that kind of the thought process?
Steve: I'm, just trying to get a better handle on sort of the strategy here and whether this just prefer preserves more optionality for you to the extent that a monetization of that does become available as having the debt floating it on our line of credit Slash term loan just the most advantageous thing for the company versus going in and putting on.
Steve: Secured mortgages is that kind of the thought process.
Speaker Change: Well it definitely is a a more flexible.
Speaker Change: Financing strategy that allows us to be able to delever over time should we choose to.
Speaker Change: Focus on that.
Speaker Change: It also allows us to the extent, we do that to have a path to accessing what I mean, more flexible, but cheaper cost of capital.
Mahbod Nia: Well, it definitely is a more flexible financing strategy that allows us to be able to de-lever over time should we choose to focus on that. It also allows us, to the extent we do that, to have a path to accessing not only a more flexible but a cheaper cost of capital when you consider that probably the next [inaudible] What I've described as idle equity that's still tied up in the company. We've got $200 million of land, for example, that could be freed up that would be worth two turns of debt if it was unlocked and used to repay debt. But there is a path to getting there.
Speaker Change: When you consider that probably be the next.
Speaker Change: Stage for a company like cause would be tapping unsecured and for that we're now at around 12 times net debt to EBITDA would need to get probably sub 10, but you know there's a path between growth in the portfolio and.
Speaker Change: What I've described as idle equity that's still tied up in the company I have got $200 million of land for example that could be freed up that's worth two tons of that if it was unlocked and used to repay that there's a path to getting there. So I think it's the fact that it affords us a lot more flexibility going forward and up.
Mahbod Nia: So I think it's the fact that it affords us a lot more flexibility going forward and the potential to access cheaper debt. In terms of managing interest rate exposure, it's floating, but the intention is to hedge it. And so we'll be hedging, and now that hedging strategy isn't in place today, and we haven't announced it today because we're not looking to speculate on where rates go. This is not a drawn facility, but as and when we come to draw down the facility, we'll be taking steps to hedge certainly the term loan and likely a good portion of the loan and credit facility as well to mitigate any exposure, most likely
Speaker Change: Potential to access cheap.
Speaker Change: That in.
Speaker Change: In terms of managing interest rate exposure, it's floating but the intention is to to hedge it and so we'll be hedging and now that hedging strategy isn't it.
Speaker Change: In place today, and we haven't announced it today, because we're not looking to speculate on where rates go. This is not a drilling facility, but Adam when we come to draw it down will.
Speaker Change: We will be taking steps to hedge our suddenly the term loan and a likely a good portion of the revolving credit facility as well.
Speaker Change: To mitigate any exposure most likely with caps.
Stephen Thomas Sakwa: Great, that's it for me, thanks.
Speaker Change: Great that's it for me thanks.
Speaker Change: Thank you Steve.
Operator: Thank you. Our next questions come from the line of Eric Wolfe with Citibank. Please proceed with your questions.
Speaker Change: Thank you. Our next question does come from the line of Eric Wolfe with Citibank. Please proceed with your questions.
Eric Wolfe: Good morning. You mentioned that part of your guidance upside was due to the new secured facilities. Can you just talk about what you were assuming in guidance before versus now in terms of timing of debt paydowns, the average rate you were expecting to achieve versus what you actually ended up achieving? I'm just trying to understand how you got to the upside in that guidance.
Eric Wolfe: Hey, good morning.
Eric Wolfe: You mentioned that part of your guidance upside was due to the new secured facilities can you just talk about what you were assuming in guidance before versus now in terms of timing of debt pay downs. The average rate you were.
Eric Wolfe: <unk> achieved versus what you actually ended achieving just trying to understand how you got to the upside in that guidance. Thanks.
Amanda E. Lombard: Good morning, Eric. Good question. We had, or have, a significant amount of debt that's either maturing this year or facing a rate reset or that, want to now in the case of Front Street refinance to Simplify and Consolidate Our Debt. And so the original guidance really reflected the considerable uncertainty in the credit markets, which remain challenged and volatile. And the raise is really a consequence of de-risking that, maturity profile for this year, but also actually for next year, and the uncertainty that came with these refinancings through securing these facilities, and in addition securing another $28 million of non-strategic asset sales, which if you think about that from an earning standpoint, given.., the earnings potential from that capital, that's worth about two cents a year, and the expectation is that we close, of Core FFO.
Speaker Change: Good morning, Eric Good question so.
Eric Wolfe: We had or have a significant amount of debt that's either maturing this year or facing a rate reset all but we want to know in the case of front Street re finance to.
Eric Wolfe: Simplify it consolidates all of that and so the original guidance really reflected the considerable uncertainty.
Eric Wolfe: And the credit markets, which remain challenged and unveil the tall.
Eric Wolfe: And the raise is really a consequence of derisking that maturity profile.
Eric Wolfe: So this year, but also actually for next year and the uncertainty that came with these refinancings through securing these facilities.
Eric Wolfe: And in addition.
Eric Wolfe: Securing another $28 million of nonstrategic asset sales, which if you think about that from an earnings standpoint given.
Eric Wolfe: Just the earnings potential from that capital that's worth about two cents a year.
Eric Wolfe: And the expectation is that we close I've of course, that's right.
Amanda E. Lombard: And the expectation is that we'll close those sales around mid-year. So that equates to about a cent of the upside. So you're selling more assets, another $20 million of assets. Most likely, that will be used to pay down debt, to pay down the RCF. That saves you the cost on that. That's worth another cent.
Eric Wolfe: And the expectation is that we close those sales around mid year, so that equates to about a sense of the upside.
Eric Wolfe: So you'll selling more off that's another $20 million of assets, most likely that would be used to pay.
Eric Wolfe: Pay down debt pay down in the house, yes.
Eric Wolfe: Saves you the cost on that that's why all of a center as well.
Eric Wolfe: That's helpful, and then, you know, assuming you were trying to sell the properties underlying the debt facilities, would that debt and any of the associated swaps that you put on it be assumable, or is there a process for substituting other properties into the facilities? I'm just wondering if this limits your ability to monetize those properties because you talked about, you know, increasing your optionality. So, trying to understand if you'll still be able to, say, you know, sell some of those properties or substitute ones in and out and be able to – or, alternatively, you know, the buyer can assume that debt.
Eric Wolfe: Yeah.
Speaker Change: Okay. That's helpful. And then you know assuming you were trying to sell the properties underlying the debt facilities, I guess would that dead and any of the associated swaps that you put on it.
Eric Wolfe: Assume wars that are processed or substituting other properties into the facilities I'm. Just wondering if there's you know this limit your ability to monetize this property is because you talked about.
Eric Wolfe: Increase your Optionality, so trying to understand if you'll still be able to say the sell some of those properties are substitute ones in and out and then be able to or or Alternatively, do you know the buyer can assume that debt.
Mahbod Nia: Yeah, I wouldn't say it's assumable. This is, uh... To raise $500 million for a company of our size, this is, it's not easy today, and it's very much relationship-based lending, but it is freely payable, and so it doesn't come with the friction costs that would have come with a more rigid financing structure.
Speaker Change: Yeah, I wouldn't say, it's assumable this is.
Eric Wolfe: To raise $500 million for a company of our size. This is very much a.
Eric Wolfe: It's not easy today, and it's very much a relationship based lending, but it is freely pre payable and so it doesn't come with the friction costs that would have come with us.
Eric Wolfe: A more rigid financing structure.
Amanda E. Lombard: I just would add one thing here; we're going to use taps to hedge and not swaps, so there'll be no termination.
Eric Wolfe: I just would add one airport, we're gonna caps to hedge and not flops.
Eric Wolfe: Hum no termination costs with us.
Mahbod Nia: Yeah, so if someone wanted to buy, they would just effectively put their own mortgage on it, and that debt would get... Correct, correct, correct. And then the caps, at that point, are just an asset and just have a value.
Speaker Change: Yeah. So if someone wants to buy they would just effectively put their own mortgage on it and that that would get alright, correct correct.
Speaker Change: Okay, and then a capsule pinpoint just announce that type of value.
Eric Wolfe: Thank you.
Speaker Change: Understood. Thank you.
Operator: Thank you. Our next questions come from the line of Josh Dennerlein with Bank of America. Please proceed with your questions.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is come from the line of Josh <unk> with Bank of America. Please proceed with your questions.
Joshua Dennerlein: Good morning, everyone. I wonder if I could come back to a comment you made in your opening remarks. You mentioned there was an earnings benefit from some company initiatives and 1Q results. Could you elaborate further on that? And then is there anything else baked into guidance for the year from initiatives hitting? Or if not, is there anything that could be a potential source of upside?
Josh: Yeah. Good morning, everyone, Oh Boy I Wonder if I come back to a comment you made in your opening remarks, you mentioned there was a earnings benefit for this little company initiatives in <unk> results I guess could you elaborate further on that and then is there anything else baked into guidance for the year from initiatives hitting or if not is there anything that could be a potential source of.
Mahbod Nia: Yeah, the comment was really that we've begun to implement a number of initiatives. I mentioned last quarter that the operational optimization captured broadly three areas revenue maximization, expense mitigation, and capital investment in certain properties, based on a return on invested capital, focused approach. The most recent initiative that we've announced there is Liberty Towers, which is just kicking off. As I mentioned, we've started to see some of the benefits of those initiatives.
Speaker Change: Upside.
Speaker Change: Yeah. The comment was really that we've begun to implement a number of initiatives I mentioned.
Speaker Change: Last quarter or is it the operational optimization captured broadly three areas revenue maximization expense mitigation.
Speaker Change: On capital investment and in certain properties.
Speaker Change: Based on our return on invested capital.
Speaker Change: Kosta approached the most recent initiative that we've announced there isn't it with your towers, which is just kicking off so.
Speaker Change: As I mentioned, we've started to see some of the benefits of those initiatives are I mentioned are all new.
Mahbod Nia: I mentioned our new... AI-based leasing assistant, for example, that is saving us considerable hours—it was 1,200 hours; it's even more than that now—of Human Capital Time, freeing up our leasing agents to be able to focus on higher-value tasks. We're working with a provider to actually extend the utilization of technology and specifically AI to uh... also uh... deal with existing resident requests. That's one area we haven't put in, and I'm not putting any specific numbers around each initiative and how much it can contribute in earnings over a specific time frame because this is really about gradual optimization of the platform over time.
Speaker Change: AI based leasing assistant for example that are saving us.
Speaker Change: Considerable hours it was 1200 hours, it's even more than that now of.
Speaker Change: Human capital time, freeing up our leasing agents to be able to focus on.
Speaker Change: Higher values.
Speaker Change: <unk>, we're working with.
Speaker Change: I provided so actually extend.
Speaker Change: The utilization of technology, and specifically AI too.
Speaker Change: Also.
Speaker Change: Deal with existing resident requests that's one area.
Speaker Change: We haven't put and I am not putting any specific.
Speaker Change: Numbers around each initiative and how much it can contribute and earnings over a specific time frame. Because this is really about gradual optimization of the part for them over time.
Mahbod Nia: And so you've seen that in our ability to be able to really mitigate expenses at a time when inflation has been running at particularly elevated levels. That is largely reflective of the efforts of the team to offset those upward inflationary pressures with both processes, technology, and changes in organizational structure; how we go about doing things that offset those expenses and allow us to be able to control expenses in a more robust way. So it is a holistic approach to maximizing revenue, mitigating the expense side, and then investing in our property.
Speaker Change: So you've seen that in our ability to be able to really mitigate expenses at a time when our inflation has been running a particularly elevated levels that is largely.
Speaker Change: Reflective of the assets of the team to offset those up what it is.
Speaker Change: Stationary pressures are ways, both processes with technology with changes in organizational structure. How we go about doing things that are that offset those expenses and allow us to be able to.
Speaker Change: Control expenses in a more.
Speaker Change: A more robust way. So it is a holistic approach to Rex Tabak summarizing revenue, Michigan to the expense side.
Speaker Change: And then investing in our properties.
Joshua Dennerlein: Got it, appreciate that. And then, sorry if I missed it, but did you mention what leasing spreads are or how leasing spreads are trending in April or where you're sending out renewals today?
Speaker Change: Got it appreciate that and then sorry, if I missed it but did you mention what leasing spreads or how leasing spreads are trending in April or where you're sending out renewals.
Mahbod Nia: Yes, on a blended basis, we're in the mid-single digit ballpark, and we're sending out renewals a touch higher than that. It's early, but as we're entering the spring leasing season, you are seeing new leases climb a little bit, a touch above that. But on a blended basis, I'd say around the mid-single digit, maybe a touch higher.
Rex Tabak: Yes on a blended basis that were in the mid single digit ballpark and we're sending out renewals a touch higher than that.
Rex Tabak: Early but as we're entering.
Rex Tabak: The spring leasing season, you are seeing new leases climb a little bit a touch above that.
Speaker Change: But on a blended basis I'd say around the mid mid single digit maybe a touch higher.
Joshua Dennerlein: Got it. Thanks for the time.
Speaker Change: Got it.
Speaker Change: Thank you.
Operator: Thank you. Our next questions come from the line of Tom Catherwood with BTIG. Please proceed with your question. Thank you.
Speaker Change: Thank you our next questions come from the line of Tom Catherwood with B T. I G. Please proceed with your questions.
Tom Catherwood: Thank you and good morning, everybody.
Tom Catherwood: Thank you and good morning everybody. Maybe for Amanda, you mentioned paying down, I think roughly $170 million of principal as you refinanced the four mortgages this year and put them on the line and the revolver. For sources of those funds, it looks like you'll have roughly that much cash once you close on the $28 million in contracted land sales. But outside of that, how much more capital do you need or how much more do you have to sell to execute the rest of your 24-month business plan, including spending on asset upgrades?
Tom Catherwood: Maybe for a man.
Tom Catherwood: Before Amanda you mentioned paying down I think roughly a $170 million of principal as you refinance for mortgages this year and put him on the line and the revolver.
Tom Catherwood:
Tom Catherwood: For sources of those funds it looks like you'll have roughly that much cash once you close on the $20 million of contracted land sales, but outside of that.
Tom Catherwood: How much more capital do you need or have some more they have to sell to execute the rest of your 24 business plan, including spending on asset upgrades.
Amanda E. Lombard: So I'll answer part of it and then I'll throw it over to Mahbod. So first off, your math is right there. If you take, we have about $140 million on the balance sheet today from the recently completed sales, and then you add the $28 million from the recently announced asset under contract, and that's how you get to the debt repayment. Mahbod, I'll let you take the second part of the question.
Speaker Change: So I'll answer part of it and I'll throw it over to Mike.
Mike: So first off your math is right. There if you take we have about $140 million on balance sheet today from the recently completed sales.
Mike: And then you add the $28 million from the recently announced asset under contract and that's how you get to the debt repayment.
Mike: But I'll, let you take that the second part of the question.
Mahbod Nia: Well, uh, so... I agree with the math, and in terms of where additional cash flow could come from to invest in the property, the first thing I'd point to is that we are now, as we've come out the other side of the transformation and built earnings back up, generating a not insignificant amount of free cash flow. And so the business itself is cash flow positive again, and so that's not in the equation that you just outlined.
Speaker Change: So so.
Speaker Change: I agree with the math in terms of what additional cash flow to come from to invest in the properties. The first thing I'd point to is that we're now as we've come out the other side of the transformation unbuilt earnings back up we're generating a not insignificant.
Speaker Change: <unk> amount of free cash flow and so the business itself is cash flow positive again, and so that is that's not in the equation that you just outlined.
Mahbod Nia: In addition to that, we have liquidity in the form of the line, which is accessible for investing in our properties, and we still have around $200 million of other assets, which may or may not be monetized but is available to us to the extent that we may seek to unlock that equity as well. So between those sources, I think we're in a good spot. But I think it's important to remember that the business itself is also generating a not insignificant amount of free cash flow.
Speaker Change: In addition to that we have liquidity in the form of the line, which is accessible for.
Speaker Change: Investing in our properties and we still have.
Speaker Change: $200 million of Havas.
Speaker Change: Land, which may or may not be monetized, but is available to us to the extent that we may seek to unlock that equity as well so between those sources.
Speaker Change: We're in a good spot, but I think it's important to remember the business itself is also generating a not insignificant amount of our free cash flow.
Tom Catherwood: Got it. Got it. Appreciate that. And then maybe Mahbod, sticking with you, you've previously discussed your joint ventures as a potential avenue for capital allocation. Is that a nearer-term opportunity, or is something like that more than likely further down the line?
Speaker Change: Got it got it appreciate that and then maybe be more about sticking with you.
Speaker Change: Previously discussed.
Speaker Change: Your your joint ventures, as a potential avenue for capital allocation.
Speaker Change: Is that a nearer term opportunity or something like that more than likely further down the line.
Speaker Change: Yeah.
Mahbod Nia: Well, difficult to comment on the timing because I would say it's certainly an area where we may seek to, for want of a better word, clean up a little bit more. And what I really mean by that is, determine whether, for certain joint ventures, there may be a higher and better use for our company and whether we can access the equity that's locked in those joint ventures.
Speaker Change: Well, it's difficult to comment on the timing because our I would say, it's certainly an area, where we may seek to.
Speaker Change: For want of a better what clean up a little bit more.
Speaker Change: And what I really mean by that is.
Speaker Change: Determine whether certain joint ventures that may be it.
Speaker Change: Higher and better use for our company and whether we can access the equity that slops in those joint ventures.
Mahbod Nia: But there's always a path. The question is, how long does it take to get through that path? Which makes it difficult to, you know, really But I put a time frame around it, but it is another potential area of optimization on the capital allocation side of our three-pronged approach that could be. Unlocked Overtime.
Speaker Change: But there's always there's always a path. The question is how long does it take to get through that path.
Speaker Change: Which makes it difficult to you know really.
Speaker Change: But at a timeframe around that but it is another potential area of of optimization on the capital allocation side of our three pronged approach.
Speaker Change: But that could be.
Speaker Change: Unlocked over time.
Tom Catherwood: And then last one for me, just over on House 25, how much NOI upside is there as you stabilize the storefront commercial space at the building?
Speaker Change: Understood.
Speaker Change: Thanks for that and then last one for me just over on the house 25, how much.
Speaker Change: N O Y upside is there as you stabilize the storefront commercial space at the building.
Mahbod Nia: I wouldn't say it's material. It's going to be in the region of, well, it's not immaterial either. It's in the region of $2 million from it being fully leased.
Speaker Change: I wouldn't say, it's it's material it's gonna be in the region of two minute well, it's not immaterial either it's in the region of $2 million.
Speaker Change: From it being fully fully leased.
Mahbod Nia: Okay, and any thoughts, you know, progress towards some of it, or is it, again, the timing's going to be, you know, are we talking a 25 event? I'd say... I'd...
Speaker Change: Okay, and then just any any thoughts you know there is some progress towards some of it or or is it again.
Speaker Change: Timings, but it's gonna be.
Speaker Change: Are we talking a.
Speaker Change: 25 event.
Speaker Change: Yeah.
Mahbod Nia: I'd say overall we're seeing some really positive signs on the retail side. The team is doing a fantastic job of making sure we're in the flow and definitely seeing a little bit of an uptick in inquiries and tours, and so we hope to be able to make some progress there.
Speaker Change: I'd say overall, we're seeing some really positive signs on the retail side. Our team is doing a fantastic job for us.
Speaker Change: Making sure we're in the flow and definitely seeing a little bit of an uptick in inquiries and tours and so we hope to be able to make some progress there.
Operator: Thank you. Our next question has come from the line of Michael Lewis with Truist Securities. Please proceed with your question.
Speaker Change: Got it thanks for the answers.
Speaker Change: That's it for me thank you.
Speaker Change: Thanks, Tom.
Speaker Change: Our next questions come from the line of Michael Lewis with Truest Securities. Please proceed with your questions.
Michael Robert Lewis: Great, thank you. As far as additional non-core dispositions... How much of that is land versus targeted properties that you have to sell?
Michael Robert Lewis: Great. Thank you.
Michael Robert Lewis: As far as additional non core dispositions, how much of that is land versus targeted properties that you pay you have to sell.
Mahbod Nia: We haven't announced any additional sales at this point. So other than $28 million that's under binding contract, what is available is $190 million of land, and then it's really the multi-family properties. Those decisions will be, again, keep using the word, but capital allocation decisions: is the equity that's tied to those assets being put to its highest and best use within the company? Is there a higher and better use for it?
Michael Robert Lewis: Well, we haven't announced any additional sales at this point so other than the $28 million, that's under binding contract, but what is available.
Michael Robert Lewis: Is $190 million of of land.
Michael Robert Lewis: And and then it's really the the multifamily properties so.
Michael Robert Lewis: Those decisions will be can keep using the word but capital allocation decisions is the accuracy. That's tied in those assets being put to its highest and best use within the company is there a higher and better use for it.
Mahbod Nia: Can it be unlocked? And over what time frame? So we're constantly evaluating, as we have in the past, every dollar of equity that's tied up in the business and making those decisions working closely with the board, but no decisions have been made at this point with regard to the remainder of the
Michael Robert Lewis: <unk> be unlocked and and over what timeframe.
Michael Robert Lewis: So.
Michael Robert Lewis: We're constantly evaluating that said in the past every dollar of equity that's.
Michael Robert Lewis: Tied up in the business.
Michael Robert Lewis: And in making those decisions working closely with the board, but no no decisions have been made at this point with regard to the remainder of the.
Michael Robert Lewis: Okay, I guess I'm thinking... You know, not just the yield on this kind of source of capital from sales, but also, you know, should we expect that most of this land is eventually going to be sold? Or do you think you're a material developer going forward when that makes sense?
Michael Robert Lewis: The assets.
Speaker Change: Okay, I guess I'm thinking.
Speaker Change: No not just the yield on this kind of source of capital from sales, but also.
Speaker Change: Should we expect that most of this land is eventually going to be sold or do you think you're a you know a material developer.
Michael Robert Lewis: Going forward when that makes sense.
Mahbod Nia: Well, there's clearly a longstanding DNA at Veris for developing very high-quality [inaudible] products here in terms of class A multifamily assets, and that stands. But, as I said, no decision has been made yet with regard to the land bank.
Speaker Change: Well it says there's clearly a long standing DNA.
Speaker Change: Yes, but developing very high quality.
Speaker Change:
Speaker Change: Products are in tons of class a multifamily assets are and are not stands but as I said no decision has been made yet, but I forgot to put that back.
Michael Robert Lewis: Okay, understood. And then, you know, you talked a lot about this, but as far as the debt repayment, you know, the specific pieces here, right? So, I see Signature Place and Liberty Towers have maturities this year, one much larger than the other. Should I expect that, you know, you'll use some of these proceeds and then put the balance on the line that you're not going to refi either of these?
Speaker Change: Okay understood and then you know you talked a lot about this but as far as the the debt repayment.
Speaker Change: You know the specific pieces here right. So I keep saying that took place that liberty towers have maturity.
Speaker Change: This year one.
Speaker Change: Much larger than the other should should I expect that.
Speaker Change: You know you'll use some of these proceeds and then put the balance on the line that you're not going to refi either of these.
Amanda E. Lombard: This is Amanda here. Yeah, that's correct. So the way we're looking at it is we'll tackle each maturity slash refinancing at the date that it's required to be done, and the order of operations is first we'll repay down with cash on hand. Once we do that, then we'll draw on the term loan, and then after that, we'll draw on the revolver.
Speaker Change: So this is Amanda here, yeah, that's correct, so I see the.
Amanda E. Lombard: The way, we're looking at it as well a tackle each maturity slash refinancing at the date that it is required to be done and the order of operations is first of all a repay down with cash on hand. Once you do that then we'll draw on the term loan and then after that we will draw on number of welfare.
Michael Robert Lewis: Okay. Is there any other debt that you're going to get this year, right? Because you don't have another maturity, it looks like, until 26.
Speaker Change: Okay is there any other debt that youre going to get at the fear right. Because you don't have another maturity it looks like until twenty-six so are.
Amanda E. Lombard: So are those kind of the two main pieces or, you know, asset sales, I suppose, right? You sell a secured property. Those are kind of the two big pieces, I assume.
Speaker Change: Are those kind of the two main pieces are as you know absent asset sales I suppose ready to sell it secured.
Speaker Change: Property is that those are kind of the two big pieces I assume.
Michael Robert Lewis: So those are the two that have maturities this year, that's correct. But there's also, in July, SOHO loss, which is a $158 million mortgage; the rate resets to above market. And so that one we're going to repay with the facility slash cash on hand. And then there's one other loan, 145 Front Street, which we'll repay and add to the pool in May.
Speaker Change: So those are the two that have maturities. This year, that's correct, but there's also in July so whole loss, which is $158 million mortgage the rate resets to above market until that one we're going to repay with the facilities last cash on hand, and then there's one other loan 145 packs.
Speaker Change: Right, which will repay and add to the pool and Mei.
Amanda E. Lombard: The way I would think about it is, between loans maturing, the Soho Loss Loan, which has a rate reset, and one other in Front Street that we would like to just consolidate into this financing because it's effectively cost neutral and cleans things up, that's $528 million of debt that we'll be repaying with a combination of the facilities and proceeds from asset sales. And the net effect of that is you go from $528 million in debt to around $360 million in drawn balance under the term loan and RCF.
Speaker Change: So the way I would think about it is it.
Speaker Change: Tween loans maturing.
Speaker Change: Uh huh.
Speaker Change: Last one learned which has a rate reset and one of the and front Street that we would like to just consolidate into this financing.
Speaker Change: Because I suspect to be cost neutral and clean things up that's $528 million of debt that will be repaying with was a combination of the facilities and proceeds from asset sales and the net effect of that as you go from $528 million of debt to around $360 million of drawn.
Speaker Change: On balance under the term loan and also yes.
Michael Robert Lewis: Perfect, thank you very much.
Speaker Change: Perfect. Thank you very much.
Operator: Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back to management for closing remarks.
Speaker Change: Thank you we have reached we have reached the end of our question and answer session I would now like to turn the floor back to management for closing remarks.
Mahbod Nia: Thank you, everyone. We're pleased to report another extremely positive quarter and look forward to updating you again next quarter. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect at this time. Enjoy the rest of your day.
Speaker Change: Thank you everyone. We're pleased to report another extremely positive quarter and look forward to updating you again next quarter.
Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation and you may disconnect at this time and enjoy the rest of your day.
Operator: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect at this time. Enjoy the rest of your day.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Uh huh.
Speaker Change: [music].