Q4 2024 Veris Residential Inc Earnings Call
Speaker Change: 1983 The Sound of Lil' Muff Kop Based onissa History of Illuia 20th century Taryn Fielder, Mahbod Nia, Amanda Lombard Also known as The Sound of Lil' Muff Kop
Speaker Change: 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.
Speaker Change: With that I'd like to hand, the call over to my button, Yeah, various Presidential's Chief Executive Officer, who is joined by Amanda Lombard Chief Financial Officer, and animal Hari Chief Operating Officer My Bad.
Speaker Change: Thank you Sharon and good morning, everyone.
Speaker Change: To begin I'd like to take them I meant to reflect on various residential evolution since the reconstitution of our board.
Speaker Change: Bob Fishman of the strategic review committee or <unk>.
Speaker Change: First off the highs of four years ago we.
Speaker Change: We successfully pivoted away from our office exposure proactively executing large scale asset sales.
Speaker Change: Advantageous pricing in challenging market conditions, preserving significant value for our shareholders, while accelerating various presidential successful transformation into a consistently top performing pure play multifamily REIT with call class a properties concentrated in one of the top performing residential markets in the U S.
Speaker Change: Concurrently management has worked closely with the board Yeah Sofie on the company's advisers to stay abreast of the states, where the transaction market and related capital flows as well as capital markets as we evaluate all available avenues to maximize value for various residential shareholders.
Speaker Change: We recognize that despite sort of a successful transformation intrinsic value of our company is not accurately reflected in our share price today.
Speaker Change: Management and the board are keenly focused on closing this gap to intrinsic value through measures, including but not limited to the crystallization of assets Oh close to that intrinsic value where opportunities exist to do so.
Speaker Change: Consistent with this approach the company in close coordination with our board has developed various residential is 2025 corporate plot.
Speaker Change: Central to which is the proposed state of approximately $300 million to $500 million of select assets, which we believe we can achieve strong pricing at or near to their intrinsic value over the next 12 months to 24 months given their size location and buyer interest despite the broader challenges in the investment market today.
Speaker Change: These assets comprised the majority of our remaining land bank who's, saying what would be the primary catalyst for earnings accretion.
Speaker Change: The balance is a number of smaller multifamily assets that are generally less efficient to operate and will be largely earnings neutral.
Speaker Change: We plan to use the proceeds from these dispositions to buy back up to $100 million of stock.
Speaker Change: Taking advantage of the dislocation that exists between our public trading value and intrinsic value on behalf of our shareholders.
Speaker Change: But the remainder of the proceeds being used to pay down debt positioning the competency reduces leverage dipped below nine times.
Importantly, as we monetize these assets, we will maintain our ability to be nimble and to continue exploring any and all path to further crystallize value for shareholders should opportunities arise to do so.
Speaker Change: Coming back to the year in review 'twenty 'twenty four marks another year of strong operational and financial results for various residential as we continued to execute on our three pronged approach for value creation focused on ongoing operational outperformance through a number of platform and portfolio optimization strategies capital allocation initiatives.
Speaker Change: <unk> accretion and create value and the further strengthening of our balance sheet.
Speaker Change: For the full year, we delivered NOI growth of six 9% blended net rental growth of 4%, which contributed to a 13% increase.
Speaker Change: In cortisol or go out to 2023, and 38% compared to 2022.
Speaker Change: This solid performance supported our ability to raise our dividend meaningfully year over year by approximately 60%.
Speaker Change: We also refinanced the $526 million of mortgages in 2024, you said I think the corporate facility secured earlier in the year and proceeds from select asset sales.
Speaker Change: Do you think indebtedness by over $180 million further strengthening our balance sheet and leaving the company with no consolidated debt maturities until 2026.
Speaker Change: These results are a testament to our ongoing pursuit of strategic operational and financial excellence and the hard work and commitment of the virus residential team to whom I am extremely grateful.
Speaker Change: Looking ahead, we remain focused on continuing to upgrade and enhance and find efficiencies in our operating platform solidifying bearish residential is positioned as a leader at the forefront of innovation in the multifamily sector.
Speaker Change: Re imagining how multifamily properties are managed and how elevated resident experiences a curated.
Speaker Change: In parallel we continue to invest in our properties, including Liberty towers, and now also port site, where we see tremendous potential to generate compelling risk adjusted returns on invested capital while increasing future earnings.
Before discussing our performance in more detail a few comments on the broader market.
Speaker Change: So that's an measures from the new Federal administration, such as proposed fiscal policies, including potential tax cuts and deregulation aimed to stimulate economic growth and could establish the foundation for further rental growth supported by higher disposable incomes and <unk>.
Additional tariffs are expected to create inflationary pressure on construction materials.
Speaker Change: <unk> and high construction costs.
Speaker Change: <unk> combined with more restrictive immigration policies that could reduce the available construction labor force.
Speaker Change: It may further increase overall development costs, and timelines potentially hindering new multifamily developments and exacerbating the existing housing shortage.
Speaker Change: Ongoing economic uncertainty and inflationary pressures have resulted in the expectation of a higher for longer rate environment, which continues to weigh on the multifamily investment market with 2024 investment volumes, 35% below the historical average, albeit higher than 2023 during which the figure was 44% below the historic classic.
Speaker Change: So that's in a supply constrained markets are beginning to show improved liquidity for transactions under $200 million, while larger transactions are seeing more limited interest with respected bias, primarily value add and opportunistic investors and that resulting baton expectations weighing on pricing.
Speaker Change: Core investors, who typically have lower risk tolerance and return expectations continue to remain largely on the sidelines at this time.
Speaker Change: Although there are some early signs that this may be beginning to change.
Speaker Change: Our key regions exhibit contrasting transaction market than IMAX at this time with Massachusetts, maintaining relatively strong liquidity and cap rates hovering around 5%, While Jersey city continues to see relatively low liquidity, especially for larger transactions.
Speaker Change: Multifamily fundamentals remain intact, driven by the long term structural housing shortage elevated homeownership costs favorable household formation trends and limited near term supply in select markets, including the northeast.
Speaker Change: New York City, and New Jersey led rental growth nationally in 2020, full with 5% and three 8% year over year growth, respectively, well above the national average of 6%.
Speaker Change: In the last decade.
Speaker Change: Does he says he multifamily completions have outpaced the broader New York Metro area, yet vacancy has steadily declined demonstrating the robust demand that is consistent to absorb new supply.
Speaker Change: With wrenches, comprising 74% of the population the population projected to grow by 8% to 15% over the next seven years the market faces a potential housing shortage projected to be between 27030 6000 units.
Speaker Change: Currently there are 10000 units under construction in Jersey city, but the majority of supply concentrated in the journal square area and only three waterfront class eight projects totaling 2800 units expected to deliver between 2026 and 2027 and only a single project of 385 unit.
Speaker Change: Delivered in 2024.
Speaker Change: Our Jersey City impulse in Paradise adds continued to benefit from that proximity to Manhattan, and an increase in box office mandates with New York City office occupancy approaching pre pandemic levels.
Speaker Change: This shift is reflected in our portfolios out of state move ins, which increased over 55% in the fourth quarter, including approximately 30% from New York, where residents are attracted by the quality of our assets and immediacy offering and the compelling, but it's a value proposition that they represent.
Speaker Change: Turning to operations 'twenty 'twenty four marked the third consecutive year the various residential achieved sector, leading same store NOI growth.
Speaker Change: For the full year, our class a portfolio recorded NOI growth of six 9% compared to an average of one 6% for our paper.
Speaker Change: And isn't that rental growth of 4% and a further 160 basis point improvement in operating margin.
Speaker Change: For the first time since Covid, we began to see a return to ordinary seasonal trends in our portfolio, leading to a slight decline in occupancy compared to the previous quarter.
Speaker Change: As of year end, our portfolio was 94, 6% occupied excluding Liberty towers in line with Q4 2023.
Speaker Change: And 93, 9% occupied including that BT towers, where we are undertaking a value add project that has resulted in an expected impact on occupancy.
Speaker Change: Our annualized blended net rental growth rate remains strong at 4% for the year.
Speaker Change: While this rate slowed as anticipated to 0.5% for the quarter and was driven by renewals of four 7% offset by negative new lease growth. It outperformed the broader market. We saw average growth of zero percent during the period.
Speaker Change: As we move into 2025, we have observed what we believe to be the beginning of a seasonal uplift in our net blended rental growth rate to 1.6% year to date through February 20th and 3% in February with new leases turning positive.
Speaker Change: The average rent per home across our portfolio is now about $4000, reflecting a four 6% year over year increase and a 35% premium to our public base up from 30% at the beginning of 2021.
Speaker Change: Over the last four years, we have seen an eight 4% compounded growth rate of our average rents compared to four 5% for the peer group.
This sustained outperformance in rents across our portfolio demonstrates the quality of our highly sought after properties.
Speaker Change: The affordability ratio across our portfolio stands at 12, 9% underpinned by move ins with an average income of $180000 per person or $388000 per home.
Speaker Change: The 17% increase from the fourth quarter of 2023.
Speaker Change: As we continue to optimize our portfolio, we remain focused on value creation through targeted investments across our properties.
Speaker Change: As noted earlier last year, we commenced an extensive renovation of Liberty towers in Jersey City and in January we began leasing newly refurbished units realizing over 20% gross blended rental growth in line with our projections for these early units.
Speaker Change: We anticipate six cents accretion to core F. Once the renovations are complete.
Speaker Change: But he's pretty stabilized.
Speaker Change: The meaningful uplift in the value of the property.
Speaker Change: In addition to renovations that Liberty towers, we've identified an accretive value add opportunity one of our Boston assets Portside, one where we intend to invest $2 $5 million, including unit renovations alongside an upgrade to Colorado's in select common areas.
Speaker Change: Investment is projected to generate a mid teens return over a three year period.
Speaker Change: Turning to our platform optimization efforts, we remain focused on continuing to achieve operational excellence as reflected in the operating margin, which has further improved to 66, 8% from 65, 2% a year ago and 57% at the beginning of 2021 and is now in line with our peers.
Speaker Change: Our platform enhancement, including operational improvements the adoption of new technologies and changes to our organizational structure and processes continues to have a positive impact on our results. This is evidenced in our Jersey city portfolio achieved over 40% rental growth since the beginning of 2022 compared to 13th.
And of course competing properties in the Jersey City waterfront market.
Speaker Change: Similarly rents across our Boston portfolio outpaced their respective markets over the same period, most notably in 2020 full well know rents increased by 86% compared to an average negative 3% trade out in the broader east Boston market.
Speaker Change: In parallel our teams have done a phenomenal job of containing expense growth, which has remained below the peer group average during the past two years, despite ongoing inflationary pressures.
Speaker Change: Thanks, a lot technology initiatives, we are excited to introduce prism.
Speaker Change: Overarching approach to strategic technology implementation.
Speaker Change: Strategy aims to enhance operational efficiency across the company by identifying precise opportunities for innovation, ensuring technology reduces friction for all stakeholders, including our employees residents and prospects.
Speaker Change: Using this approach, we evaluate and implement solutions that drive measurable returns from AI powered tools to process automation, all while maintaining an elevated customer experience that prioritizes human interaction supported by technological solutions.
Speaker Change: To this end in 2024, we introduced a hugely successful area leasing model to further leverage the proximity of our assets and our recently expanded this initiative to watch as he says he maintenance teams.
Speaker Change: Additionally building off the success of our virtual community and leasing assistant Quinn, we've introduced a new AI team member Taylor.
Speaker Change: [noise] focuses on delinquency matches, providing remind us the residents about upcoming rent payments late payments and unpaid balances.
Speaker Change: These initiatives contributed to a 2% reduction in payroll expense in 2020 full aiding our efforts to contain controllable expenses.
Speaker Change: Overall through the combination of our dedicated high performing teams a strategic technology deployment, we were able to further reduce our controllable expenses as a percentage of revenue to 17, 7% in <unk>.
Speaker Change: 18, 3% in 2024 and 20% in 2022.
Speaker Change: As we start the new year bearish residential does say from a position of strength, maintaining the flexibility to respond to evolving market conditions and opportunities that may rise with shareholders best interest in mind.
Speaker Change: With that I'm going to hand, it over to Amanda who will discuss our financial performance and provide an update on guidance.
Amanda: Thank you Matt.
Amanda: For the full year 2024.
Amanda: Net loss available to common shareholders was 25 cents per fully diluted share versus a net loss of $1 22 for the prior year.
Amanda: Core <unk> per share was 11 cents for the fourth quarter at the high end of our guidance compared to 12 cents fourthquarter I playing twenty-three.
Amanda: And 17 cents in the third quarter of 2024.
Amanda: For the full year, we reported <unk> 60 per share an increase of 13% over 2023.
Amanda: Same store NOI growth was seven 3% for the quarter and six 9% for the year.
Amanda: For the quarter same store revenues were up four 1% as compared to last year.
Amanda: Primarily driven by market rent growth.
Amanda: Revenues were up five 4% during the year driven by revenue growth of three 8% approximately 60 basis points. Other revenue earned in the first half of the year.
Amanda: And the remainder primarily attributable to outsized year over year growth from house 25, as the asset lapped at stabilization.
Amanda: On the expense side, we realized expense savings of one 8% for the quarter with expenses only increased two 5% year over year in line with expectations.
Amanda: We have kept expense growth to a minimum due to the favorable resolution of insurance and real estate taxes. In addition to realize cost savings and technological enhancements and portfolio efficiencies implemented.
Moving on to overhead.
Amanda: Core G&A after adjustment for noncash stock compensation and severance payments.
Amanda: I ended the year up broadly flat at $37 million.
Amanda: Reflecting the benefit of cost cutting initiatives offset by inflationary pressures.
Amanda: Consistent with seasonal expense trends quarterly core G&A was elevated relative to the third quarter due to typical seasonal fluctuations on compensation and professional fees.
Amanda: Turning to the balance sheet.
Amanda: 24 was a very successful year for the Barrick team as we repaid approximately $526 million of mortgage debt.
Amanda: And entered into a new corporate facility and term loan reducing total debt by approximately $180 million.
Amanda: This refinancing strategy.
Amanda: <unk> to extract the maximum benefit from our old world low interest rate mortgages by repaying them at maturity well Accretively redeploying proceeds from low or no income producing land and office asset for leverage reduction.
Amanda: Actively saving the company approximately six cents.
Amanda: Interest expense dilution heavy refinance their mortgages at par.
Amanda: Net debt to EBITDA on a trailing 12 month basis continued to improve year over year, albeit marginally.
Amanda: 11.7 times, given the loss of NOI, It's all office assets and the trailing 12 months.
Amanda: As of February 21st.
Amanda: All of our debt was fixed or hedged with a weighted average maturity of three one years and a weighted average effective interest rate of 495 for that.
Amanda: We had liquidity of $158 million.
Robin: As Robin mentioned.
Robin: The leveraging with the aim of that is contributing to earnings growth, while improving our cost of debt capital remains a priority for the parents team.
Robin: Now onto guidance.
Robin: We have issued corvo guidance of 61 to 63 cents per share representing growth of 2% to 5% over 2024.
Robin: Underpinning our 2025 core for call protection.
Robin: Same store NOI growth of one 7% to 2.7%.
Robin: On the revenue side, we are projecting revenue growth of 2.1% to two 7%, reflecting continued moderation of France to normalized levels. After several years of strong sector, leading rental revenue growth.
Robin: Breaking this down further we are expecting rental revenue growth of three 3%. However.
Robin: However, this is offset by 60 basis points from one time other income we recognized in 2024, but the retail lease termination and other items.
Robin: As has been the case, we expect our Jersey city and Port Imperial market to continue their relative strength in our portfolio.
Robin: On the expense side, we are projecting modest expense growth.
Robin: 6% to 3%.
Robin: This is driven by almost flat controllable apprentice, primarily as a result of continued technology and portfolio optimization initiatives, which.
Robin: Which we anticipate will mitigate inflationary pressures.
The majority of the projected expense growth come from non controllable.
Robin: I would be remiss to not add the disclaimer that we have seen material positive or negative fluctuations in our non controllable expenses since he took over at their it and this could certainly be a factor again in 2025.
Robin: Bringing this all together our.
Robin: Our expected same store NOI for 2025, so it's a market and portfolio that is well positioned for strength in the coming year with the highest France and strong market dynamics supported by our innovative and nimble operations that continue to drive efficiencies and improvements.
Robin: Rounding out our guidance, we are projecting G&A and property management expenses to remain largely flat year over year.
Robin: At a time when others are noting overhead increases from sticky inflationary pressures, we are able to benefit from the impact of various simplification and technological initiatives and our cost structure.
Robin: Throughout the year core football will follow the typical seasonal trends, we have observed in 2020 four.
Robin: Notably, we expect the first and last quarter of the year to have higher G&A than the second and third quarter.
Robin: In addition, we are expecting to recognize the early tax credit in the second quarter.
Robin: Although that timing can be pushed out to the third quarter for reasons out of our control.
Robin: In addition, we expect that the multifamily portfolio NOI will remain strong throughout the year.
Robin: Albeit at a more moderated pace following several years of steady margin improvement and sector, leading revenue growth during which our average rents rose to the highest of the multifamily peers at over $4000.
Robin: Additionally in guidance, we assume that only the sales under binding contract or already closed are utilized to repay the revolver.
Bob Fishman: However, as Bob mentioned.
Bob Fishman: We have a pipeline of 300.
Bob Fishman: So $500 million of land in multifamily assets identified for sale over the next 12 to 24 months.
Bob Fishman: In addition to improving our leverage these sales provide an opportunity for core episode growth beyond the high end of our guidance range of 5%.
Bob Fishman: Further demonstrating <unk> potential to continue driving outsized earnings growth by utilizing the multiple levers at our disposal.
Bob Fishman: With that operator, please open the line for questions.
Bob Fishman: Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
Bob Fishman: If you would like to ask a question. Please press star and one on your telephone keypad.
Bob Fishman: A confirmation tone will indicate your line is in the question queue.
Bob Fishman: You May press star two if you'd like to remove your question from the queue.
Bob Fishman: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east.
Bob Fishman: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Speaker Change: The first question comes from the line of Steve <unk> from Evercore ISI. Please go ahead.
Steve: Yeah. Thanks, Good morning, My Bud I appreciate kind of all the comment you provided about about the Src and you know kind of the strategic plan.
Speaker Change: I guess, what I'm really trying to get a better handle on under what environment.
Speaker Change: Does the board think pursuing something large or would be more cable or is it more about the economic outlook is it more about the rate environment do you have a certain sort of targeted interest rate environment that you think would you.
Speaker Change: Make a larger sale more appealable to a larger buyer just trying to understand under what conditions, there's something larger makes sense.
Speaker Change: Good morning, Steve. Thank you for the question a lot of it's the right question I think it's important to remember that we've got a relatively newly reconstituted board and strategic review Committee.
Speaker Change: That was put in place for years, the guy that.
Speaker Change: Also includes our two largest.
Speaker Change: Non passive shareholders and so yeah, we have abroad.
Speaker Change: A broad set of expertise and perspectives, we're well advised.
Speaker Change: True Ah trial advisors and are as I said in my scripted remarks haven't continue to really stay abreast of all the evolving trends in the market felt what together and it's a combination of the things you mentioned and other things such as capital flows and nature of buyers.
Speaker Change: That are ready willing and able to execute on all of that gets factored into what is the.
Speaker Change: The path to maximize value on behalf of shell just because the job of the board is.
Speaker Change: Consistent with our fiduciary obligations.
Speaker Change: The maximization of long term value for shareholders and so at the moment, what we're seeing in transaction market and it's reflective of as I've said a number of the factors. You described is some dislocation.
Speaker Change: It takes before anything on the larger side that are really can have implications. It has implications for the viability of transactions and for pricing.
Speaker Change: So it would have to be.
Speaker Change: It's all one thing I think it's just a continual evaluation of options available to the board and Src and then ultimately deciding the best path forward.
Speaker Change: And in the seats of maximization of value for shareholders.
Speaker Change: Okay, and maybe just as a second question could you just provide a little more color on the three to 500 million I guess I'm just curious how you're thinking about the land sales and maybe more importantly, what are the buyers which are presumably all developers how are they thinking about the land value Wendy.
Speaker Change: The targeted yields did they might want to achieve on those new developments and I guess can you just give us any sense for kind of land values per unit that you might be able to achieve on that $500 million.
Sure so within that three to 500 million Ah you have at the moment. So I learned back today is about $180 million.
Speaker Change: While we have it marked and I think that's fast with today.
Speaker Change: Within the three to 500, maybe and you've got a call. It 100 times just that $2 million.
Speaker Change: Of land of which 45 is under binding contract now.
Speaker Change: <unk> per unit of those.
Speaker Change: He assumed values will vary depending on the specific sites and the nuances.
Speaker Change: And not to mention how.
Speaker Change: Advanced they all are in the process of being becoming shovel ready.
Speaker Change: So that's a bit of a range and in terms of the buyer groups. It's it's a bit of a mixed bag actually but if that is one of the areas where we've we believe we've identified.
Speaker Change: Some capital that are that could allow us to be able to exit those that value of close to that intrinsic value as we've said in a highly accretive to earnings to the extent, we monetize them and really the catalyst behind the deleveraging.
Speaker Change: Along side the multifamily yourselves.
Speaker Change: Okay, Great. That's it for me thank you.
Speaker Change: Thank you Steve.
Speaker Change: Thank you. The next question comes from the line of Tom Catherwood from BP I T. Please go ahead.
Speaker Change: Thanks, and good morning, everybody.
Speaker Change: Maybe following up on Steve's question, how much of the land bank is in the market right now and are there properties, where you're updating entitlements to maximize value similar to what you did with harborside eight nine last year.
Speaker Change: Okay.
Speaker Change: Good morning, Tom. Thank you for the question. So like about 100 to 130 million of the three to 500 is land Ah I wouldn't comment specifically on which sites are currently being marketed though in the market.
Speaker Change: But you know you should assume that we would look to work through and get things done as expeditiously as I said, it's reasonable while also seeking to preserve and maximize value and then in terms of.
Enhancing the value of our land wherever we can and that's been a continuous process are really for.
Speaker Change: For the four and a half years four years that I've been here.
Speaker Change: That's something that we always do so regardless of whether we've made a decision on what to do with that land.
Speaker Change: If by progressing steps to enhance the value week by investing and spending the time to enhance the value we can.
Speaker Change: Extract more value in a sale or just hold that asset at a high value that's something that we've pursued proactively.
Speaker Change: Continues today.
Speaker Change: Understood and then I know timing is obviously, a very hard thing to predict but in general as you think to that $3 million to $500 million of potential sales.
Speaker Change: Can you bucket is that in terms of kind of on an aggregate basis. What do you think internally as far as what are near term opportunities more medium term and then what's still have some more work before you think you can truly monetize those assets.
Speaker Change: Yeah. So it's that's a N S them out so that's the product of an extensive review walking with the board on the strategic review Committee and our advisers and it's an estimate today of what we believe could be monetized to give them a range of factors, including.
Speaker Change: The size of those assets the operational efficiency future return profile and very importantly, the nature of the buyers for those types of assets and that ties in with current capital flows.
Speaker Change: That could allow us to realize values are that as I said, Idaho close to the intrinsic value of those assets, implying significantly below the current trading cap rate of the company. So that's the best estimate today the timing of 12 to 24 months I mean, hopefully if you've followed us and I know you have to.
Speaker Change: Hum everything we've done over the last four years, we don't tend to sit on our hands I think we're pretty thoughtful but also pragmatic when it comes to crystallization of value, including with the office portfolio web.
Speaker Change: We really proactively have to seek out small pockets of capital to be able to execute the levels that we did but ultimately moves forward. So we don't tend to sit on our hands, but we're also thoughtful and very mindful of preserving and maximizing value for shareholders.
Speaker Change: I appreciate those thoughts and then last one for me My Bud you mentioned the uptick in blended that rental growth. Thus far in 2024 and really accelerating in February can you remind us how terrorists handles it's unit pricing strategy and is that your own system or a third party service.
Speaker Change: Yes.
Speaker Change: Well, it's a it's a combination so and there's an element to that that there's proprietary but we do obviously take into consideration what is happening in competing assets around the market and ultimately set pricing strategy.
Speaker Change: In a way that seeks to not necessarily prioritize.
Speaker Change: Occupancy are some may do or as you may do insights and market conditions, but really to maximize NOI.
Speaker Change: I appreciate that that's it for me thanks, everybody.
Speaker Change: Thanks, Tom.
Speaker Change: Thank you. The next question comes from the line of Eric Wolfe from Citi. Please go ahead.
Speaker Change: Hi, Good morning, it's actually Nick occur on for Eric. This morning, I guess the main question for me is given you guys tried to raise equity somewhat recently in June I think what's causing the sort.
Speaker Change: Sort of shift and rationale to our purchase of 100 million shares and pay off debt with these asset sale proceeds.
Speaker Change: Well I think you were smoking good morning by the way that you spoke about two different points in time in two very different.
Speaker Change: Rationales behind those two things the asset that we had identified.
Speaker Change: In June our was highly strategic and highly accretive.
Speaker Change: Our N V. A consensus NAV you at that time was 20% to 25% lower than it is today. So it's a very different time and an opportunity to acquire an asset that was not only accretive to the business, but also highly strategic we didnt move forward with that for reasons that you're well aware of today, we're at a different point.
Speaker Change: Where we're seeing a significant dislocation between the trading price the trading value of the company and the intrinsic value of the company and we're also seeing a shift in the dynamics in the transaction markets whereby.
Speaker Change: That does seem to be some small pockets of liquidity that we believe may be available for smaller transactions and so consistent with what we've always said we would do.
Speaker Change: And off the seats of maximizing value with seeking to.
Speaker Change: Exploit that arbitrage opportunity that we believe exists.
Speaker Change: And crystallize bodies at or close to N. A V for those assets.
And put that capital to a higher and better use buying back over in stock.
Speaker Change: At these discounts to intrinsic value and Delevering the company in a more accelerated fashion.
Speaker Change: Thanks, and then I guess the second one for me is if you could just kind of walk through high level some of the assumptions for the.
Speaker Change: Same store revenue build like revenue growth in occupancy.
Speaker Change: Sure. Good morning. This is Amanda here.
Speaker Change: So for our same store revenue, we are projecting revenue growth of approximately 3.3%. However, we've got it to a little bit lower number because last year. You know we had some one time items some termination income from a retail tenant.
Other items, that's driving a 60 basis point reduction as we lap the recognition of that revenue.
Speaker Change: And then so that's really driving where our revenue assumptions come from.
Speaker Change: The expense side.
Speaker Change: Earlier on the controllable expenses are we're predicting there for them to be relatively flat I think it's like a 20 basis point increase recall there is a small amount of savings that we're recognizing this year due to the liberty Power's value add where we were not incurring make ready cost anymore.
Speaker Change: But that's only about 70 basis points. So it's still very low overall and then on the non controllable side. We are projecting that that is the bulk of our expense.
Speaker Change: Growth was coming from.
And last year, we have a sad favorable resolutions on both the taxes and insurance side, which are helping to.
Speaker Change: Is that a factor in how we forget that those guys.
Speaker Change: And they care about here can chime in on that okay. It doesn't say as Marvin mentioned, we always look to find the right balance between rental growth and occupancy really targeting somewhere around the 95% of which is what do you have seen over the last few years and that's where we're at.
Speaker Change: Now as you sit in the disclosures are excluding labor to tariffs, where we will continue to have reduced occupancy that's sort of out of that project.
Speaker Change: Okay, great. Thank you for that.
Speaker Change: Thank you. Thank you.
Speaker Change: The next question comes from the line of Yana Golan from Bank of America. Please go ahead.
Yana Golan: Hi, Thank you good morning.
Yana Golan: Maybe just following up a little bit deeper on our next question with me.
Yana Golan: Our occupancy and blended rent spreads embedded in the guidance on kind of the seasonal cadence.
Yana Golan: One of your peers are expecting a stronger second half 'twenty five versus first half, but just kind of given your portfolio and focus on.
Yana Golan: Maybe if you could maybe talk to that.
Ana: Good morning, Ana so.
Ana: Sorry, it's approximately of or at least this role between the second and third quarter, which is where we expect.
Ana: This chart is police growth, we typically see slow down in the first quarter as you have seen in 2024 and at the moment, we're kind of recovering from this period going into the stronger leasing season, I would say this summer and what would be the peak on our site.
Speaker Change: Thank you and then maybe just I'm thinking about the revenue enhancing opportunities.
Speaker Change: Is the pace kind of measure just given the disruption to the portfolio is it anyway to pull forward some of that or the capital constrained. If you could just maybe talk to the decisions when looking at these opportunities.
Speaker Change: So you mean in terms of 50000 poles side and any other value add akshay, yes.
Yeah, it's a function of a few things. So obviously the units have to be available and so quit constrained.
Speaker Change: Some extent by the availability of units and waiting for them to town.
Speaker Change: And then we do.
Speaker Change: Two as much as possible and minimize disruption within the building for existing residents as well. So I'd say your aim is to pace things along in a way that is expeditious, but also minimize days to the extent possible.
Speaker Change: Disturbance to existing tenants are and I'm counting on each of our numbers as well I mean, we wouldn't make off the building. They can for example, and what I'm gonna even if we have the opportunity side. So it's a bit of a balancing act I've I've just walking through it steadily but capital is not the constraint we've got plenty of liquidity available.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question comes from the line of David Siegel from Green Street. Please go ahead.
David Siegel: Hi, Thank you I think in your opening remarks, you mentioned that the cap rates in the market are around 5%, but also the assets you're planning to sell our smaller and less efficient. So I was curious how you're thinking about pricing for those assets relative to the market.
David Siegel: Good morning, a great question actually so the 5% was really a reference to general sort of cap rates and turning around the Massachusetts market not across.
David Siegel: Oh.
David Siegel: Full outside space have today, having said that.
David Siegel: The assumption should be that the operating assets.
David Siegel: So Australia and our expectation is to sell them in the low fives cap rates.
David Siegel: Great. Thank you and maybe just to build on that most of the smaller assets you own or outside of the New Jersey waterfront a bucket. So does that mean you'd be looking to potentially exit some of the you know, massachusetts assets or market.
David Siegel: Could be I think the you know the we haven't announced which assets yet, but it's it's a bit of a combination. We also have some smaller assets you will notice a setup.
David Siegel: And markets like Westchester in D C and so.
David Siegel: And then also joint ventures are which we've.
David Siegel: Mentioned in the past that we would like to try to find a.
David Siegel: Path to clean.
David Siegel: Clean up a to the extent that we can and so.
David Siegel: I think the assumption should be that it captures it goes back to what I said earlier. This is the product of an extensive review.
David Siegel: All of our asset base working with the board and that's all see in our advisors and taking into consideration a range of factors, but certainly from a market liquidity.
David Siegel: And pricing standpoint size is a is one of the critical ones today.
David Siegel: Yeah.
Speaker Change: Great. Thank you.
David Siegel: Thank you.
David Siegel: Thank you.
David Siegel: As there are no further questions I now hand, the conference Silver Tomorrow, but Neal for his closing comments.
Speaker Change: Thank you for joining us today, we're very pleased to have reported another year of solid operating results and are excited about the future prospects of the company and look forward to updating you again next quarter.
Speaker Change: Thank you, ladies and gentlemen, the conference of edits residential has now concluded. Thank you for your participation you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].