Q2 2025 Veris Residential Inc Earnings Call
Operator: A brief question and answer session will follow the formal presentation.
Operator: Should anyone require operator assistance during the conference, please press star zero on your telephone keypad.
Operator: As a reminder, this conference is being recorded.
Taryn Fielder: It is now my pleasure to introduce your host, Taryn Fielder, General Counsel. Thank you.
Operator: You may begin.
Mahbod Nia: Good morning, everyone, and welcome to Veris Residential's second quarter 2025 earnings conference call.
Greetings and welcome to the Veris residential Inc. Second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone 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 your host. Taran Fielder, general counsel. Thank you. You may begin.
Mahbod Nia: 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.
Speaker Change: Good morning everyone and welcome to Varys residentials, second quarter 2025 earnings conference call.
Speaker Change: 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.
Mahbod Nia: 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.
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.
Mahbod Nia: With that, I would like to hand the call over to Mahbod Nia, Veris Residential's chief executive officer, who is joined by Anna Malhari, chief operating officer, and Amanda Lombard, chief financial officer. Thank you, Taryn, and good morning, everyone.
Speaker Change: We refer you to the company's press, release and annual and quarterly reports filed with the FCC for risk factors that impact the company.
Speaker Change: With that, I would like to hand the call over to mabat. Nia Ferris. Residentials, chief executive officer, who is joined by Anna Mel Hari Chief Operating Officer and Amanda Lombard Chief Financial Officer mibid.
Nia Ferris: Thank you, Sarah, and good morning everyone.
Mahbod Nia: I'll begin today's call by providing details on our quarterly results, year-to-date performance, and key dynamics of our market.
Mahbod Nia: We're turning to Anna to update you on our operating performance and Amanda to provide details on our financial performance and outlook. The second quarter marks another period of solid operational and financial results for Veris, including 17 cents of core FFO and 5.6% same-store NOI growth. We also made significant progress with the corporate plan that we announced earlier this year alongside continued enhancements to our operational platform, further optimization of our balance sheet, allowing us to meaningfully reduce our cost of debt. Year-to-date, we've either completed or executed binding contracts for approximately $450 million of non-strategic asset sales, largely fulfilling our stated target of selling $300 to $500 million of non-strategic assets by the end of 2026, well ahead of schedule.
Nia Ferris: I'll begin today's call by providing details on our quarterly results, yesterday's performance and key dynamics of our markets.
Nia Ferris: For turning to Anna's updates, you on operating performance and Amanda to provide details on our financial performance and Outlook.
Speaker Change: The second quarter marked, another period of solid operational Financial results with us.
Speaker Change: Including 17 cents of core ffo and 5.6%. Same store. Noi growth.
Speaker Change: We also made significant progress with the corporate plan that we announced earlier. This year, alongside continued enhancements to our operational platform further optimization of our balance sheet allowing us to meaningfully, reduce our cost of debt.
Mahbod Nia: We intend to utilize proceeds from these sales primarily to reduce leverage to around 10 times by year-end 2025 and are on track to further reduce this to below nine times by year-end 2026. The rapid progress we've made in deleveraging our balance sheet is translating into tangible value creation for our shareholders as we realize an immediate 55 basis point improvement in our borrowing costs through our amended credit facility with potential for a further improvement in our borrowing costs as we continue to delever. Our robust operational performance, combined with the significant progress we have made executing non-strategic asset sales, resulting in the reduction of debt, has enabled us to raise guidance on key metrics.
Speaker Change: Yesterday, we've either completed or executed binding contracts for approximately 450 million of non-strategic, asset sales, largely for fitting. Our stated Target of setting 3 to 500 million of non-strategic assets by the end of 2026. Well, ahead of schedule,
Speaker Change: we intend to utilize proceeds, from these sales, primarily to reduce leverage to around 10, times by year end, 2025 and an on-track. To further reduce this to below 9 times by year end 2026.
Speaker Change: The rapid progress we've made in deleveraging our balance sheet is translating into tangible value creation for our shareholders. As we realize, in immediate 55 basis, point improvement in our borrowing, costs through our amended credit facility with potential, for a further improvement, in our borrowing costs as we continue to deliver.
Speaker Change: Our robust operational performance combined with the significant progress. We have made executing non-strategic, asset sales, resulting in the reduction of debt as enabled us to raise guidance, on key metrics.
Mahbod Nia: We've now closed $268 million of the aforementioned $450 million of non-strategic asset sales, including the recent sales of Signature Place, a 197-unit property located in suburban New Jersey, for $85 million, and 145 Front Street, a 365-unit property located in Worcester, Massachusetts, for $122 million. These assets, generally smaller in size, were sold at an average cap rate of 5.1% in line with what we believe to be their intrinsic value. We've also entered binding contracts for The James in suburban New Jersey and Quarry Place, our only asset in New York, posting an additional $180 million of sales, which are anticipated to close in the coming months.
Speaker Change: We've now closed 268 million of the aforementioned 450 million of non-strategic assets sales, including the recent sales of Signature Place, 197 unit property located in Suburban New Jersey for 85 million and 1. 145 Front Street a 365 unit property located in worecester Massachusetts for 122 million.
Speaker Change: These assets generally smaller in size were solved in an average cap rate of 5.1% in line with what we believe to be their intrinsic value.
Speaker Change: We've also entered binding, contracts for the James and Suburban. New Jersey and Quarry place are only Assets in New York.
Speaker Change: Hosting an an additional 180 million of sales were transported to close in the coming months.
Mahbod Nia: As previously announced, during the second quarter, we consolidated our partner's 15% stake in Sables, formerly the Jersey City Urby, and have already begun to realize meaningful operational synergies through the integration of this asset into the various platforms. Before I hand over to Anna to walk through our operational performance, I'd like to say a few words regarding the current dynamics in our market. The Northeast Multifamily landscape continues to perform encouragingly well, driven by favorable supply-demand dynamics and resilient urban migration trends. New York City, to which Jersey City is highly correlated, remains one of the strongest markets nationwide, underpinned by a historically low vacancy of below 3% metro-wide, despite the delivery of approximately 15,000 new units over the past year.
Speaker Change: As previously announced during the second quarter, we Consolidated our partners, 15% stake in Sables formerly, the Jersey City urby.
Speaker Change: And I've already begun to realize meaningful operational synergies through the integration of this asset into the various platform.
Speaker Change: Before I hand over to Anna to walk through our operational performance, I'd like to say a few words regarding the current Dynamics in our markets.
Speaker Change: Form encouragingly, well driven by favorable Supply demand Dynamics and resilient Urban migration trends.
Mahbod Nia: Demand has also remained strong in Boston, where vacancy has edged lower year over year and rent growth has remained above national levels. New construction in Jersey City remains concentrated in Journal Square, a less established sub-market which does not compete directly with the Jersey City waterfront where our assets are located. The waterfront submarket maintains clear advantages, lower vacancy, approximately 25% higher asking rents and almost three times the rental growth of Journal Square this year. The Jersey City border front has successfully absorbed 3,900 units, with minimal impact to our occupancy rates over the past five years. In the next four years, around 3,000 units across four projects are currently under construction.
Speaker Change: New York City to which Jersey City is highly correlated remains 1 of the strongest markets Nationwide. Underpinned by historically low, vacancy of below, 3% Metro Wide, despite the delivery of approximately 15,000 new units over the past year.
Speaker Change: The Manders also remain strong in Boston where vacancy has edged lower year-over-year and rent. Growth has remained above National levels.
Speaker Change: New construction and Jersey City remains concentrated in general square, a less established submarket, which does not compete directly with the Jersey City, Waterfront where our assets are located.
Speaker Change: The Waterfront submarket maintains clear advantages, though, a vacancy approximately 25% higher asking rents and almost 3 times. The rental growth of Journal Square this year.
Speaker Change: The Jersey City Waterfront has successfully absorbed 3,900 units with minimum impact to our occupancy rate over the past 5 years.
Mahbod Nia: Only 385 units delivered over the past three years. well below historical levels, we expect the market to readily absorb the new supply in line with the historical absorption rate of approximately 630 units annually. These robust supply-demand dynamics leave our waterfront portfolio well-positioned to sustain strong rental growth going forward.
Speaker Change: In the next 4 years around, 3,000 units across 4, projects are currently under construction. It's only 385 units delivered over the past 3 years.
Speaker Change: Well, below historical levels. We expect the market to readily absorb the new Supply in line with the historical absorption rate of approximately 630 units, annually.
Speaker Change: These robust Supply demand and mxd are Waterfront portfolio. Well, positioned sustained, strong, rental, growth going forward.
Anna Malhari: With that, I'll hand over to Anna to discuss our operational performance for the quarter. Thank you, Mahbod.
Speaker Change: With that, I'll hand it over to Anna to discuss our operational performance for the quarter.
Anna Malhari: Our portfolio continues to deliver strong operating results in the second quarter. excluding Liberty Towers, where we continue to undergo unit renovation. Occupancy was 95.5% as of June 30th, up from 94.7% a year ago. Including Liberty Towers, occupancy was 93.9%, while retention improved to approximately 60%. To date, we have renovated and leased 121 units at Liberty Towers, nearly 20% of the property, at a gross rental uplift of around 20%. Occupancy has picked up over the last few weeks, with the asset currently 88% leased and over 80% occupied. Rental growth is gradually increasing as peak season progresses.
Anna: Thank you, ma'am. But our portfolio continued to deliver strong operating results in the second quarter.
Anna: Excluding Liberty Towers where we continue to undergo unit, renovations.
Anna: Occupancy was 95.5% as of June 30th.
Anna: Up from 94.7%. A year ago.
Anna: Including Liberty. Towers occupancy was 93.9% for retention improves to approximately 60%.
Anna: To date. We have renovated and least 121 units at Liberty Towers. Nearly 20% of the property.
Anna: At a growth rental, uplift of around 20%.
Anna: Occupancy has picked up over the last few weeks with the asset currently 88% leased and over 80% occupied.
Anna Malhari: Our portfolio achieved a blended net rental growth rate of 4.7% for the quarter, up from 2.3% in the first quarter, and well above the national average of 1%. This is driven by renewals of 5.2% and new leases accelerating to 4%. The blended net rental growth rate was 3.5% for the first half of 2025, comprising 2.5% in new leases and 4.3% in renewal. Simultaneously, rent-to-income ratios across our portfolio have remained stable, highlighting the creditworthiness of our high-income resident base. This rental performance coupled with our ongoing focus on expense management is reflected in our same store NOI growing by 5.6% in the quarter and our operating margin improving by approximately 200 basis points year over year to 67.5%.
Anna: Rental growth is gradually increased as speaking season progresses.
Anna: Our portfolio achieved a blended Nest, rental growth rate of 4.7% for the quarter up from 2.3% in the first quarter. And well above the national average of 1%
Anna: This is driven by renewals of 5.2% and new leases accelerating to 4%.
Anna: The Blended, net. Rental growth rate was 3.5% for the first half of 2025, comprising 2.5%, in new leases and 4.3 in renewals
Anna: Simultaneously rent to income ratios across. Our portfolio have remained stable.
Anna: Highlighting the credit worsening of our high income resident base.
Anna Malhari: Our broader New Jersey portfolio continued to deliver strong results supported by our asset strategic locations adjacent to New York City with approximately 25% of new move-ins coming from the area and over 50% from out-of-state. These residents are attracted to our compelling value proposition of generally newer, more spacious units and a more comprehensive suite of amenities.
Anna: This rental performance coupled with our ongoing focus on expense management is reflected in our same store, noi growing by 5.6% in the quarter and our operating margin improving by approximately 200 basis points year-over-year to 67.5%.
Anna: Our broader New Jersey portfolio continued to deliver strong results supported by our assets. Strategic locations adjacent to New York City with approximately 25% of new movements coming from the area and over 50% from out of state.
Anna: These residents are attracted to our compelling value. Proposition of generally newer more spacious units,
Anna Malhari: Our portfolio's continued outperformance is a testament to the quality of our assets, the strength of our markets and platform, and the unwavering commitment and hard work of our We continue to focus on further optimization of our operational platform, investing in and implementing innovative technologies, balanced by human interaction, to create an elevated customer experience.
Anna: And a more comprehensive Suite of amenities.
Anna: Our portfolios. Continued outperformance is a testament to the quality of our assets. The strength of our markets and platform, and the unwavering commitment and hard work of our teams.
Anna Malhari: In June, we hosted an investor event showcasing PRISM, our approach to technology adoption that further empowers our teams and provides comprehensive support to every resident. During the presentation, which you can find on our website, our technology partners spoke to our outperformance, including our AI assistants achieving a least conversion rate more than double that of our partners' other clients, and our website generating more than three times the virtual tours than other multifamily companies using the same tool. During the quarter, we leverage our existing virtual tours to launch our VR showroom in an incredibly cost-effective manner. allowing residents to tour select units at all of our properties in 3D wearing their own VR glasses.
Anna: We continue to focus on further optimization of our operational platform investing in and implementing Innovative Technologies, balance by human interaction, to create an elevated customer experience.
Anna: In June, we hosted an investor event showcasing prism.
Anna: Our approach to technology adoption that further empowers our teams and provides comprehensive support to every resident.
Anna: During the presentation, which you can find on our website, our technology Partners, spoke to our output performance, including our AI, assistants achieving, a lease conversion rate more than double that of our partners at a clients.
Anna: The same tool.
Anna: During the quarter. We leverage, our existing virtual tours to launch our VR showroom in an incredibly cost-effective manner.
Anna Malhari: with the plans to expand this immersive experience across all units this year. In addition to our virtual leasing assistant, our website now features an embedded AI chatbot, which is designed to guide every prospect, resident, investor, and job seeker who visits our website. We've also developed our own proprietary revenue management tool, which is performing extremely well across the assets we've deployed, eliminating over $250,000 of annualized costs associated with utilizing third-party revenue management tools, and potentially more over time.
Anna: Allowing residents to Tour Select units at all of our properties in 3D varying, their own VR glasses.
Anna: With the plans to expand this immersive experience across all units this year.
Anna: In addition to our virtual leasing assistant our website. Now features an embedded AI chat box which is designed to guide every Prospect resident investor and job Seeker who visits our website.
Anna: We've also developed our own proprietary Revenue management tool which is performing extremely well across to the assets where deployed
Anna Malhari: Overall, our strong operational performance reflects the effectiveness of our platform investment. the quality of our assets and the strengths of our market. positioning as well to continue momentum as we move forward.
Anna: eliminating over 250,000 dollars of annualized costs, associated with utilizing, third-party Revenue, management tools and potentially more over time.
Anna: Overall, our strong operational performance, reflects the effectiveness of our platform Investments, the quality of our assets, and the strengths of our markets.
Amanda Lombard: With that, I'm going to hand it over to Amanda who will discuss our financial performance and provide an update on guidance. Thank you, Anna.
Anna: Positioning as well to continue momentum, as we move forward.
Anna: With death, I'm going to hand it over to Amanda who will discuss our financial performance and provide an update on guidance.
Amanda Lombard: For the second quarter of 2025, net income available to common shareholders was $0.12 per fully diluted share versus $0.03 for the prior year and a net loss of $0.12 in the first quarter. Core FFO per share was $0.17 for the second quarter, up $0.01 from the first quarter due to several factors, including the transactions closed in the period, the timing of the annual stable tax credit, and continued strong performance from our portfolio. Core FFO per share for the second quarter also includes approximately 1 cent of non-recurring other income and property management expense savings. Year-to-date, Core FFO is 33 cents per share versus 32 cents last year.
Thank you, Anna.
Amanda Lombard: For the second quarter of 2025.
Amanda Lombard: Net income available to Common shareholders with 12 cents per fully diluted share versus 3 cents for the prior year and a net loss of 12 cents in the first quarter.
Amanda Lombard: Corporal Basher was 17 cents for the second quarter up. 1 cent from the first quarter due to several factors including the transactions closed in the period. The timing of the annual Sable tax credit and continued strong performance from our portfolio.
Amanda Lombard: Core of Phil for shared for the second quarter, including 1 cent of non-recurring, other income and Property Management, expense savings.
Amanda Lombard: Year to date. Core Pho is 33 cents per share versus 32 cents last year.
Amanda Lombard: As mentioned earlier, same-store NOI growth for the quarter was 5.6%. On a year-to-date basis, same-store NOI growth is 4.4%. Same store rental revenue was up 2.5% for the quarter, driven by an increase in occupancy across the majority of our portfolio and continued rental revenue growth. Excluding Liberty Towers and other income recognized last year, rental revenue growth would have been 3.8%. Year-to-date, rental revenue growth was 2.4%, driven by growth in market rates, occupancy, higher amenity fees, and retail lease-up. All set by the same components as the quarter to date, the reduction in Liberty Towers occupancy due to renovations and the benefit of other income recognized last year.
Amanda Lombard: As mentioned earlier same store. Noi grows for the quarter was 5.6%.
Amanda Lombard: On a year-to-date basis. Same store. Noi growth is 4.4%.
Amanda Lombard: Same store, rental Revenue was up 2.5% for the quarter.
Amanda Lombard: Driven by an increase in occupancy across the majority of our portfolio and continued rental Revenue growth.
Amanda Lombard: Excluding Liberty towers and other income recognized last year, rental Revenue. Growth would have been 3.8%.
Amanda Lombard: Year to date rental Revenue. Growth was 2.4%.
Driven by growth in Market rates, occupancy, higher, amenity fees, and Retail lease UPS.
Amanda Lombard: Offset by the same components as the quarter to date, the reduction in Liberty, Towers occupancy, due to Renovations and the benefit of other income recognized last year.
Amanda Lombard: On the expense side, our technology investments and enhancements and portfolio optimization initiatives continue to drive savings. Both controllable and non-controllable expenses were down from prior year. Controllable expenses decreased by 3.7% year-over-year and are essentially flat year-to-date. This benefit is driven primarily by lower marketing and administrative costs due to increased demand for our waterfront assets and a reduction in repairs and maintenance expenses at Liberty Towers, given little to no make ready costs are incurred while units undergo renovation. Year-to-date, these savings in marketing, administration, and repairs and maintenance were partially offset by higher utility costs due to cold weather in the first quarter.
Amanda Lombard: On the expense side, our technology investments in enhancements and portfolio optimization initiatives continue to drive savings.
Amanda Lombard: Those controllable and non-controllable expenses were down from prior year.
Amanda Lombard: Controllable expenses decreased by 3.7% year-over-year.
Amanda Lombard: And our essentially flat year to date.
Amanda Lombard: This benefit is driven primarily by lower marketing and administrative costs.
Amanda Lombard: Due to increased demand for our Waterfront assets.
Amanda Lombard: And a reduction in repairs and maintenance expenses at Liberty Towers.
Amanda Lombard: Given little to no, Make Ready costs are incurred while units, undergo renovations.
Amanda Lombard: Additionally, payroll costs are virtually flat as technology and centralization initiatives are rolled out across the portfolio. Non-controllable expenses, which will reset in the third quarter, are down 3.2% year-over-year, 2.6% year-to-date due to lower insurance costs and real estate tax expenses.
Amanda Lombard: Year to date these savings and marketing Administration and repairs and maintenance were partially offset by higher utility costs due to cold weather in the first quarter.
Amanda Lombard: Additionally, payroll costs are virtually flat as technology and centralization initiatives are rolled out across the portfolio.
Amanda Lombard: Non-controllable expenses, which will reset in the third quarter.
Amanda Lombard: Are down 3.2% year-over-year. 2.6% year to date due to lower Insurance costs and real estate tax expenses.
Amanda Lombard: On the overhead front, core G&A after adjustments for severance payments was $8.2 million. significant improvement from last quarter as expected due to seasonal increases in non-cash stock compensation in the first quarter. We also recognize savings of approximately $500,000 this quarter in property management expenses related to our employee benefits.
Amanda Lombard: On the overhead front core GNA after adjustments or Severance payments was 8.2 million.
A significant improvement from last quarter, as expected, due to seasonal increases in non-cash, stock compensation in the first quarter.
Amanda Lombard: We also recognize Savings of approximately 500,000 dollars. This quarter in Property Management, expenses related to our employee benefits.
Amanda Lombard: Turning to our balance sheet, a key focus area of our 2025 strategic initiative. Given our progress in modifying low-yielding land and select non-strategic multifamily assets with the aim of improving our leverage and cost of debt capital. In early July, we modified our revolving credit facility and term loan. With this amendment, we reduced our borrowing spread and introduced a leverage grid to allow for continual improvement in our borrowing costs as we further reduce leverage. The initial spread is 150 basis points over SOFR, down from 205 basis points, with the ability to step down to 120 basis points should we reduce corporate leverage below 40%.
Amanda Lombard: Turning to our balance sheet.
Amanda Lombard: A key Focus area of our 2025 strategic initiatives.
Amanda Lombard: Given our progress in monetizing low yielding land and select non-state multi Family Assets.
Our leverage and cost of debt capital.
Amanda Lombard: In early July, we modified our revolving credit facility in term loans.
Amanda Lombard: With this amendment, we reduced our borrowing spread and introduced The Leverage grid to allow for continual improvement in our borrowing costs as we further reduce Leverage.
Amanda Lombard: The initial spread is 150 basis points. Go over so far down from 205 basis points.
Amanda Lombard: This amendment represents another important step in the company's balance sheet evolution. tangibly improving our cost of capital, flexibility, and optionality, and demonstrating continued support from our lenders. Net set to Ibadana trailing 12-month basis was 11.3 times. which does not reflect the impact of assets closed and under contract after June 30th. With these sales, we remain on track to reduce net debt to EBITDA to around 10 times by year-end 2025. After factoring in the impact of the recent transactions closed in July, we had $126 million outstanding on the revolver. Our $200 million term loan has been fully repaid and liquidity has increased to $181 million, which includes the available balance of the revolver.
Amanda Lombard: With the ability to step down to 120 basis points to be reduced corporate. Leverage below 40%.
Amanda Lombard: This amendment represents another important step in the company's balance sheet evolution.
Amanda Lombard: Tangibly, improving our cost of capital flexibility and optionality, and demonstrating continued support from our lenders.
Amanda Lombard: Nets up to EBA on a trailing 12-month basis was 11.3 times.
Amanda Lombard: which does not reflect the impact of assets closed and under contract, after June 30th,
Amanda Lombard: with these sales, we remain on track to reduce net debt to ibida through around 10 times by year end 2025
Amanda Lombard: after factoring in the impact of the recent transactions closed in July,
Amanda Lombard: We had 126 million outstanding on the revolver.
Amanda Lombard: Our 200 million term loan has been fully repaid.
Amanda Lombard: And liquidity has increased to 181 million.
Amanda Lombard: As a result, all of our debt was fixed or hedged. With a weighted average maturity of 2.6 years and a weighted average effective interest rate of 4.86%, a reduction of over 20 basis points prior to the amendment.
Amanda Lombard: Which includes the available balance of the revolver.
Amanda Lombard: As a result, all of our debt was fixed or hedged.
Amanda Lombard: With a weighted average maturity of 2.6 years.
And a weighted average effective interest rate of 4.86%.
Amanda Lombard: Our reduction of over 20 basis points prior to the amendments.
Amanda Lombard: Importantly, with the recently closed and announced sales and the new facility, the company will have sufficient liquidity to refinance all of its wholly owned 2026 maturities with proceeds from completed sales and or availability on its revolving credit facility.
Amanda Lombard: Importantly, with the recently closed and announced sales and the new facility, the company will have sufficient liquidity to refinance. All of its wholly owned 2026 maturities with proceeds, from completed sales, Andor availability on its revolving credit facility.
Amanda Lombard: Turning to guidance, we are raising our core FFO guidance range to $0.63 to $0.64 from $0.61 to $0.63 per share. This change reflects the robust performance of our portfolio to date, including strong blended leasing spreads of 3.5% year-to-date, recent sales and resulting debt repayment, the acquisition of the controlling interest in Sable, and the amended facility. Our revised range represents core FFO growth of 5 to 6.7% compared to 2024. not only leading our multifamily peers, but also outperforming most rates across sectors and asset classes. We are also raising our same-sort NOI guidance to between 2 and 2.8%.
Amanda Lombard: Turning to guidance, we are raising our core ofo. Guidance range to 63 cents to 64, cents from 61 cents to 63 cents per share.
This change reflects the robust performance of our portfolio today.
Amanda Lombard: Including strong Blended, leasing spreads of 3.5% year to date.
Amanda Lombard: Recent sales.
Amanda Lombard: And resulting debt, repayments the acquisition of the controlling interest and stable and the amended facility.
Amanda Lombard: a revised range represents core fog, growth of 5 to 6.7% compared to 2024
Amanda Lombard: Not only leading our multifamily peers but also outperforming most rates across sectors and asset classes.
Amanda Lombard: reflecting our solid performance year-to-date, visibility into continued market rent growth through the end of the peak leasing season, and realized savings from our technology and operational initiative.
Amanda Lombard: We are also raising our same star, noi, guidance to between 2 and 2.8 percent.
Reflecting our solid performance year to date visibility into continued Market. Rent growth through the end of the peak leasing season.
Amanda Lombard: As a reminder, in the third quarter, we will lap significantly positive insurance and tax resolutions from last year, which will impact our same store growth rate. We still anticipate G&A will be flat relative to last year, with the third quarter mostly in line with the second quarter and an uptick in the fourth quarter for activities that occur at that time. Our interest expense guidance assumes the sales under binding contract are completed by the end of the third quarter and utilized to repay debt.
Amanda Lombard: And realized savings from our technology and operational initiatives.
Amanda Lombard: As a reminder in the third quarter, we will elapse significantly positive insurance and tax resolutions from last year, which will impact our theme store growth rates.
We still anticipate GNA will be flat relative to last year.
Amanda Lombard: But the third quarter mostly in line with the second quarter and an uptick in the fourth quarter for activities that occur at that time.
Amanda Lombard: This concludes a strong second quarter for Veris Residential, highlighting our sustained momentum and achieving our strategic milestones, including accelerated earnings growth. and an earlier than projected reduction in corporate.
Amanda Lombard: Our interest expense guidance assumes, the sales under binding contracts are completed by the end of the third quarter and utilized to repay debts.
Amanda Lombard: This concludes a strong second quarter for various residential.
Amanda Lombard: Highlighting our sustained momentum in achieving our strategic Milestones, including accelerated earnings growth.
Operator: With that operator, please open the line for questions. Thank you.
Amanda Lombard: And an earlier than projected reduction in corporate.
Speaker Change: With that operator, please open the line for questions.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one 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.
Speaker Change: 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 key, you may press star 2. If you would like to remove your question from the queue.
Operator: One moment, please, while we pull for questions.
Speaker Change: For participants using speaker equipment and may be necessary to pick up your handset, before pressing the star Keys 1 moment, please while we pull for questions.
Steve Sakwa: The first question is from Steve Sakwa from Evercore ISI. Please go ahead. Yes, thanks. Good morning.
Speaker Change: The first question is from Steve Saka from evercore isi. Please go ahead.
Mahbod Nia: Mahbod, maybe if you could first talk about kind of the board change and the departure of the CIO, maybe just kind of help us think through, you know, maybe the CIO and kind of what that means for dispositions moving forward and then, you know, just any comments on sort of the board change. Sure. Good morning, Steve. And thank you for the question. With regard to our CIO, That's a decision that we made to make that change. We'd like to thank Jeff for his contribution that he's made over the last two, three years. We have a team, an investment team, headed by Brian Primost, who's been with the company for 19, almost 20 years, and has actually been very much leading many of the executions on the office, land, and even multifamily side, certainly during my tenure.
Yes thanks. Good morning, uh Mob. But maybe uh if you could first talk about kind of the board change and the uh the departure of the CIO, maybe just kind of help us think through uh you know maybe the CIO and kind of what that means for dispositions moving forward and then you know, just any comments on sort of the board change.
Speaker Change: Sure. Good morning Steve. Uh and thank you for the question uh with regard to our CIO. Uh,
Speaker Change: The decision to be made to make that change. Uh, we'd like to thank Jeff for uh his contribution that he's made over the last 2, 3 years. Uh, we have a, a team, an investment team, uh, headed by Brian Primos who's been with the company for 19, almost almost 20 years and, and has actually, uh, been very much, uh, leading many of the executions on the office, uh, land and even multi family side. Um,
Mahbod Nia: We're in good hands with Brian and the investment team, and well-positioned to continue executing on our plan. As you've seen, even during this past quarter, it really made some significant strides in moving that forward.
Mahbod Nia: As for Ron, I'd also like to thank Ron for his valuable contribution over the past two years. He's been a tremendous board member and supporter of the company, been a shelter for a long time. I think his decision was based on his recognition of his fiduciary obligations to various shareholders and balancing those with his position at Madison and their need for greater flexibility to trade various shares in accordance with their fiduciary obligations to their investors. But Ron continues to be highly supportive of us and the company's strategy and we look forward to maintaining a regular dialogue with him and Madison as one of our larger shareholders going forward.
Certainly, during my tenure, and so, we're in good hands with Brian and the investment team. Um, and well, positioned to continue executing, uh, on our plan and, and as you've seen even, you know, during this past quarter, you know, it really made some significant strides in, uh, moving that forward.
Speaker Change: As for Ron, uh, I'd also like to thank Ron for his valuable contribution over the past 2 years. He's been a, a tremendous, uh, board member, um, and, and support of the company. Um, been a shelter for a long time. I think his decision was based on, uh, his recognition of his fiduciary obligations to various shareholders and balancing those, with his position, uh, at Madison, uh, and then need for greater flexibility to, uh, trade various shares in accordance with their fiduciary obligations, to, to, to their investors. But, you know, Ron uh, continues to be highly supportive of, uh, us and the company's strategy, and we look forward to maintaining a regular d.
Dialogue.
With uh, him and Madison is 1 of our larger shareholders going forward.
Steve Sakwa: Okay, thanks.
Steve Sakwa: And then, Amanda, I know you sort of commented about some of the tough comps that you've got, you know, coming up in the back half. I think, you know, taxes and insurance, you know, were both down last year.
Amanda Lombard: But, you know, is there anything that you can share with us on kind of what's embedded in guidance for the back half of the year? And, you know, when do you sort of get more visibility on, I guess, both of those figures for the back half of the year? Yeah, sure. Good morning, Steve. So, for, as you noted, we do have our non-controllables renewing in the second quarter. For insurance, we did assume that we would have a mid-to-high single-digit renewal, and I know that there is more capacity in the market this year, but we also have our real estate taxes resetting in the third quarter, and in particular, Jersey City, which is a large portion of our portfolio.
Speaker Change: Okay, thanks and then uh, Amanda. I know you sort of commented about some of the tough comps that you've got, you know, coming up in the back half. I think, you know, taxes and insurance. Uh, you know, we're both down last year, but you know, is there anything that you can share with us on kind of what's embedded in guidance, for the back half of the year? And, you know, when do you sort of get more, visibility on on, I guess, both of those figures for the back half of the year.
Speaker Change: Yeah, sure. Good morning. Steve
Speaker Change: So for um, as you noted we do have our non-controllable renewing and the second quarter, um, for insurance. We did assume that we would have a mid to high single digits renewal, and I know that, um, it's that, uh, there is more capacity in the market this year.
Amanda Lombard: And so, the real estate taxes in Jersey City have been volatile in the prior years, and to put that into context, a 10% change in insurance premiums would be offset by just a 4% increase in Jersey City taxes. So, overall, in That's how we're thinking about it, and that's how it's been factored into our guidance. Okay, thanks.
Speaker Change: But we also have our real estate taxes, resetting in the third quarter, and, in particular Jersey City, which is a large portion of our portfolio. And so, um, the real estate taxes in Jersey City have been volatile in the prior years and, um, to put that into context, a 10% change in insurance premiums would be offset by just a 4% increase in, uh, Jersey City taxes. So, overall in, um,
Speaker Change: That's how we're thinking about it and um that's how it's been factored into our guidance.
Mahbod Nia: And then this last question, Mahbod, you know, you've been pretty successful executing on the dispositions, I think, faster than most people may be expected. I guess, where is your head just as you kind of hit towards the upper end of the range with the couple that are pending? How are you sort of thinking about future sales over the balance of this year and into 2026? I think it's a good question. I think I'd firstly say that the team's done a phenomenal job to bring us this far at this pace at these valuations, but it's an extremely challenging transaction market and difficult to predict.
Speaker Change: Okay. Thanks and then just last question ma but you know, you've been pretty successful executing on the, the dispositions, I think. Faster than most people may be expected. Um, I guess where is your head? Just as you kind of, kind of Hit the towards the upper end of the range with the couple that are pending, you know, how are you sort of thinking about future sales uh you know over the balance of this year and into 26?
Speaker Change: I think it's a good question. Uh, I think I firstly say that uh,
Speaker Change: The teams on a phenomenal job to bring us this far um, at this pace at these valuations, but it's an extremely challenging transaction Market.
Mahbod Nia: So we've It looks like it's all very smooth on the surface, but behind the scenes. there are challenges to every transaction. And often there's a chain. And so if buyers have issues with their transactions with with their sales of assets, that has the potential to impact us. And so it's very difficult to make calls on the extent and pace of progress that one can make.
Speaker Change: Uh, and uh, difficult to, to predict. So we've
Speaker Change: it looks like it's all, you know, very smooth on the surface, but behind the scenes, um,
Speaker Change: There are there are challenges to every transaction um and and often there's a chain and so if buyers have issues with their transactions with with their sales of assets, uh that has the potential to impact us and so it's very difficult to make. Um,
Mahbod Nia: Having said that This shows a clear desire by the board and management to recognize, to realize. NAV where we can, that tends to be on smaller assets and crystallize those values on behalf of our shareholders. Having achieved what we've achieved so far, there's still $134 million of land that we referenced. that we may want to, to the extent we can rationalize further from here, and potentially less than a handful but you know want to do more other small assets as well that to the extent that we can realize fair value at or close to intrinsic value for those assets we may make some further progress.
Speaker Change: calls on the extent and pace of progress, that 1 can make having said that,
Speaker Change: This shows a clear.
Speaker Change: Uh, Desire by uh, the board and and management to recognize to realize.
Speaker Change: Nav where we can that tend to be on smaller assets. Uh, and and crystallize, uh, those values on on behalf of our shareholders, having achieved, what we've achieved so far, there's still
Speaker Change: 134 million of land that we referenced.
Speaker Change: And potentially.
Mahbod Nia: And to the extent that we can do that, then that allows us to go further in terms of our ability to continue reducing leverage and further strengthening the balance sheet, accreting earnings, especially from land to the extent we can recycle and reallocate that equity. and continue to focus on things that are within our control, at least, to try to close the discount to an AV. Okay, thanks. That's it for me. Thank you.
Speaker Change: Less than a handful but, you know, 1 or 2 more other small assets as well, that to the extent that we can realize fair value at or close to intrinsic value for those assets. We may make some further progress.
Speaker Change: and to the extent that we can do that, then that allows us to go further in terms of
Speaker Change: our ability to continue reducing leverage and further, strengthening the balance sheet accreting earnings, especially
Speaker Change: From land to the extent, we can recycle and reallocate that Equity. Um,
Speaker Change: And and continue to focus on things that are within our control at least.
Speaker Change: To try to close uh the the discount to uh, to an AV.
Speaker Change: Okay. Thanks. That's it for me.
Steve Saka: Thank you, Steve.
Eric Wolfe: The next question is from Eric Wolfe from Citi. Please go ahead. Hey, thanks. Just wanted to follow up on your answer there a moment ago. If you look at the properties that you sold, it looks like they're around 100 million in value on average. Should we take that as an early indication that the market for larger buildings is thawing a bit? Or is there a certain size or type of asset where it becomes more difficult to sell them?
Speaker Change: The next question is from Eric wolf from City, please. Go ahead.
Eric Wolf: Hey, thanks. Just wanted to follow up, um, on your answer there a moment ago. Um, if you look at the the properties that you sold, it looks like they're around about 100 million in value on average. Should we take that as an early indication that the market for larger buildings is is dying a bit? Or is there a certain size or type of asset where it becomes more difficult, um, to sell them?
Mahbod Nia: Good morning, Eric. Yeah, look, there's definitely a discount for size today. That's a given. I wouldn't say that's developed in the last quarter. That's been the case for a while now. But there's definitely a discount for size. And so I would say there's a firm cutoff, but certainly smaller transactions. you do have a greater chance of being able to access a different buyer pool with a different cost of capital or investment horizon or both, that typically would translate into a value that's more consistent with what we think of as intrinsic value. I wouldn't say there's a firm cut-off, but anything over...
Eric Wolf: Uh, good morning, Eric. Yeah. Look, there's definitely a a discount for size today uh, that that's a given. That's I wouldn't say that's developed in the last quarter. That's been the case for a while now, but um, there's definitely a discount for size and so I would say there's a firm cut off but certainly smaller transactions, uh,
You do have a greater chance of being able to um access a different buyer pool or the different cost of capital or investment horizon or both. Um, that typically, uh, it would translate into a value, that's more consistent with. You know what we kind of think of, as as intrinsic value.
Mahbod Nia: Large today is not really that large. Anything over a couple hundred million dollars, the buyer pool starts to really tail off pretty quickly. And you can find yourself often with more value-add, opportunistic-type capital. And with that cost of capital, that translates into a different price.
Eric Wolf: I would say there's a firm cut off, but yeah, look anything over.
Eric Wolf: Large today is not, it's not really that large anything over a couple hundred million dollars. Um, the buyer pool starts to really tail off pretty quickly and uh, and you can find yourself uh, often with more value, add opportunistic type capital and with that cost of capital that translates into a different price.
Eric Wolfe: Makes sense.
Eric Wolfe: I guess I was trying to understand the sort of the number of properties, the value properties that sort of fall into that hard to sell category. Because I guess just looking at yourself, it seems like it's maybe House 25 or the Liberty Towers that sort of fall into that, that category of a couple hundred million. But I didn't know if there's anything else that that would be. But potentially, yeah, potentially Boulevard would be another one.
Makes sense, I guess I was trying to understand the sort of the, the number of properties, and the value of properties that sort of fall into that hard to sell category because I guess just looking at yourself, it seems like it's maybe a house, 25 erby Liberty towers that um sort of fall into that, that category of a couple hundred million. Um but I didn't know if there's anything else that
Mahbod Nia: So now that you are I think I said a minute ago, but we don't have too many more assets that I would say would be regarded as bite-sized. in today's market. But having said that, we've got $134 million of land, and we do have a few more assets. And, and that's certainly between those, there's enough there to continue with this momentum that we've built, deleveraging and accreting earnings.
Eric Wolf: That would be um, fall into that. Yeah. Potentially both of our would be another 1. So, no, there you are.
Eric Wolf: I think I said it a minute ago, but we don't have too many more assets, uh, that I would say, you know, would be regarded as
Eric Wolf: Bite-size in today's market.
Eric Wolf: but having said that we've got 134 million of land and we do have a few more assets and and that's certainly between those uh there's enough there to
Eric Wolf: Continue with this momentum that we've built, um, deleveraging uh, and accreting earnings.
Eric Wolfe: And then this last question for me. You said that I guess there were some struggles in the background. I guess you probably can't talk about the ones that haven't closed yet.
Eric Wolf: Right? And and then just last question for me. Um,
Mahbod Nia: But I was just curious for the ones that did, the two properties, sort of what those struggles were, what needed to be overcome before those could transact.
Mahbod Nia: And then second, if you just had a view on where you sold those properties relative to replacement cost, if buyers are demanding a discount to replacement cost today just given higher debt costs and return hurdles, or if there's an opportunity to actually sort of sell around replacement costs. Yeah, it's a good question. So Relative to replacement costs, I would say those represented something of a discount, not a huge discount, but something of a discount to replacement costs. Relative to what we deem to be a sort of near-term strong valuation for those properties in this market, I think we've got very strong prices, and I think you can see that in the cap rate, which is a low 5 cap rate that we achieved for those assets.
Eric Wolf: you said that there were, I guess there were some struggles in the background. I, I guess you probably can't talk about the ones that I haven't closed yet, but was just curious for, you know, the ones that, um, the ones that did the, the 2 properties, you know, sort of what those sort of struggles were what needed to be overcome before those could transact. Um, and then second, if you just had a, a view on sort of where you sold those properties, um,
Eric Wolf: Relative to replacement cost if buyers are you know demanding a discount to replacement cost today just giving higher debt costs and return hurdles or if there's an opportunity to actually sort of sell around replacement cost.
Eric Wolf: Yeah, it's a good question. Um, so
Eric Wolf: Relative to replacement cost. I would say uh those represented uh something of a discount, not a user scam but something with a discount to a placement cost
Um, relative to what, we deem to be an a sort of near-term, strong valuation. For those properties in this market, I think we've got very strong prices and I think you can see that in the cap rate uh which is a low 5 cap rate uh that we achieved for those assets.
Eric Wolfe: Thank you.
Eric Wolf: Thank you.
Eric Wolf: Thank you.
Anthony Paolone: The next question is from Anthony Paolone from J.P. Morgan. Please go ahead. Yeah, thanks. Good morning.
Speaker Change: The next question is from Anthony pallone from JP Morgan, please go ahead.
Anthony Paolone: First questions on next year's debt maturity is just wondering what your early thoughts are in terms of how you address those with either disposition proceeds or refinancing and also just balancing the desire to reduce leverage versus maybe the buyback. Hi, good morning, Tony. So next year, we do have about half a billion dollars of debt maturing. And I break it up into two buckets. So about half of that is related to mortgages, which aren't fully owned assets. And for those mortgages, between the sales that we've announced already, as well as the capacity and the revolver, we believe we'll have the capacity to repay all of those through those needs.
Anthony Pallone: Yeah, thanks. Good morning. Um, first question is on next year's debt. Maturity is just wondering what your early thoughts are in terms of how you address those with either disposition proceeds or refinancing and also just balancing the the desire to reduce leverage versus maybe the buyback.
Speaker Change: Hi, good morning, Tony. So. Um, next year we do have about half a billion dollars of debt maturing
Speaker Change: And um, I break it up into 2 buckets. So about half of that is related to mortgages which aren't fully owned assets.
Mahbod Nia: The, I'd also just call out within that bucket, we do have one mortgage on Portside One, which is our most expensive mortgage. And so you could actually potentially see us pay that off sooner than its maturity next year. The other half of the mortgages, those are all on assets that are held in joint venture. Some of them consolidated, some of them unconsolidated. And so each one of those is going to require its own asset level financing solution. But I'm sure as you know, as we've talked about previously, there's a lot of demand to provide capital and mortgages for our quality of assets.
Speaker Change: And for those mortgages between the sales that we've announced already, as well as the capacity and the revolver, We Believe will have the capacity to repay all of those through those needs.
Speaker Change: The I'd also just call out within that bucket. We do have 1 more, mortgage on port side 1, which is our most expensive mortgage. And so you could actually potentially see us pay that off sooner than um it's maturity next year.
Speaker Change: The other half of the mortgages, those are all on assets that are held in joint venture, some of them Consolidated, some of them on Consolidated. And so each 1 of those is going to require its own asset level financing solution.
Mahbod Nia: And so we do feel that we'll have a number of options there, and we'll work with our joint venture partners to figure out the solutions there. But overall, we feel comfortable with the refinancing options there. Yeah, I think just to add to that, if you just take the asset class, but then specifically the asset quality that we have, the markets that we're in, and then the progress that we've made operationally, and in terms of addressing our balance sheet, I think that's put us in really good stead to be able to manage through those refinancings as we move forward, as we have done this year, and in prior years.
Speaker Change: But I'm sure as you know, um, as we've talked about previously, there's a lot of demand for um to provide capital and mortgages for our quality of assets. And so we do feel that we'll have a number of options there. And we'll work with our joint venture Partners to figure out the solutions there. But, um, overall we feel comfortable with, um,
Speaker Change: with the refinancing options there.
Speaker Change: yeah, I think just to add to that if you just take the asset class but then specifically the asset quality that we have, the markets that we're in
Mahbod Nia: And so I think we're in a good spot, and I think we've created... many options for ourselves going forward as a result of the great work the team's done to be able to strengthen the balance sheet.
Speaker Change: Uh, and then the progress that we've made, uh, operationally and in terms of, addressing our balance sheet, I think that's put us in really good stead to be able to manage through those refinancing, uh, as we move forward, as we have done, um, this year, uh, and and, and then prior years. And so I think we're we're in a good spot. Uh, and I think we've created
Mahbod Nia: And you can also see that in the terms of the latest amended credit facility, which I think are very different to what they were a few years ago and really reflective of the company today. Got it.
Many options for ourselves going forward, as a result of the great work for teams. Done to be able to strengthen the balance sheet.
Speaker Change: um, and, and you can also see that in the
the terms of the latest amended credit facility, um, which I think are
Speaker Change: you know, very different to what they were a few years ago and really reflective of
Speaker Change: Uh, of the company today.
Anthony Paolone: And just the, you know, the success you've had and just hitting your disposition goals already.
Mahbod Nia: And then you mentioned the land and maybe some smaller assets, like, is it still the priority, though, to reduce debt further? Or would you consider the buyback here? Yeah, it's a good question. We have the buyback. We have an authorized program. It's a tool that's available to us. If you run the math, I'd say there's limited potential for...
Speaker Change: Got it and just the you know the success you've had and just hitting your disposition goals already and then um, you mentioned the land and maybe some smaller assets. Like, is it still the priority though to reduce debt further or would you consider the buyback here?
Speaker Change: Yeah, it's a good question. We have the buyback. Uh, we have an authorized program. It's a tool that's available to us.
Speaker Change: Uh, if you run the math, uh,
Speaker Change: I'd say that limited potential for
Mahbod Nia: Taryn Fielder, Huainan Song, Anna Malhari, Veris is the priority. So, while the buyback would allow you to take advantage of the discount to an EV that we're trading at and create some accretion, that discount in itself, we believe, is... somewhat driven by the leverage profile, which is significantly better than it has been historically and on a trend now to really get within. an expected range for a public company like us and in addressing that leverage and continuing to de-level the balance sheet, our hope and expectation is that we can close that gap.
Speaker Change: A chretien from that but it's but it's still accretion. So it's valuable to have I think what we've been clear about from the outset is uh, that leverage reduction is
Speaker Change: Is the priority.
Speaker Change: So, while the buyback would allow you to take advantage of the discount to any of you that were trading at and create some accretion that discount in itself.
Speaker Change: Uh, if we believe is, uh,
Speaker Change: Somewhat driven by.
Speaker Change: The Leverage profile which is significantly better than it has been historically.
Speaker Change: um, and on a trend now, to really get Within
Speaker Change: Uh, an expected range for a public company, like us.
Speaker Change: uh, and in
Mahbod Nia: And that's it. that would be in the best interest of our shareholders. And so it's absolutely a priority to delever over anything else at this time. Okay, got it.
Speaker Change: Addressing that leverage and continuing to develop the balance sheet. Uh, you know, our open expectation, is that we can close that Gap.
Speaker Change: uh, and and
Speaker Change: and, and that's
Speaker Change: That would be in the best interest of our shareholders and so it's absolutely a priority to de-lever, um, over anything else at this time.
Anthony Paolone: And then my other question just relates to your rent to income. This is always something that stands out to us. It's now below 11% and it's almost half of where the multifamily peer group sits.
Mahbod Nia: I know there's a market, but can you maybe talk about just where you think that should be over time or maybe the nature of your resident base that just allows it to be so low? It just seems like it would afford you all pretty substantial pricing power relative to, you know, say across the water in New York City. Yeah, you got to bear in mind, 25% or so of our move-ins are from Manhattan. Many of our residents also work in Manhattan and have Manhattan salaries. Around just under 10 percent of our residents have seven figure incomes, and the average household income is over $400,000.
Speaker Change: Nature of your, your resident base that, that just allows it to be so low. It just seems like it would afford you all pretty substantial pricing, power relative to, you know, say cross the the water in New York City.
Speaker Change: yeah, you go to Bear in mind uh,
Speaker Change: 25% or so of our move into from Manhattan. Um,
Speaker Change: Many of our residents also work in Manhattan and have Manhattan salaries.
Mahbod Nia: And so I think that figure is really. reflective of the tenant profile and creditworthiness, if you like, of our residents and the income that underpins our properties. I read into that as It's got, it's very resilient cash flow, and allows us to be able to continue increasing rents in a supply constrained market. I don't think it's a license to go out and, you know, push. Brent Increases, Renewals, all egregious. for want of a better word. And so, at the end of the day, we're in a market that is still competitive. We have our own internal pricing model that takes into consideration a wide number of factors in determining pricing.
Speaker Change: Uh, around just under 10% of our residents have 7, figure incomes and the average household income is over 400,000 dollars. And so I think that figure is really
Speaker Change: reflective of the
Speaker Change: Tenant profile. And
Speaker Change: credit worthiness, if you like of
Speaker Change: Uh, of our uh, residents and and and the income that underpins our, our properties.
Speaker Change: It. I I read into that as
Speaker Change: It's it's got its very resilient cash flow and allows us to be able to continue increasing rents in a supply constrained Market.
Speaker Change: I don't think it's a license to go out and, you know, push,
Speaker Change: Rent increases renewals that are egregious, uh, for 1 to the better word. And so, uh,
Speaker Change: At the end of the, you know, we're in a market that is still competitive. We have
Anthony Paolone: And you can see that that's still translating into very healthy rent growth relative to the country as an average. But I see those The affordability ratio more is just an indication of the resilience of the underlying cash flows. Got it, thank you. Bye.
Speaker Change: um, our own internal pricing model that takes into consideration. Uh, a wide number of factors in determining pricing and you can see that that's still translating into very healthy. Rent growth relative to
Speaker Change: uh, the country as an average.
Speaker Change: Um, but I see those
Speaker Change: the affordability ratio more as just a, a
Speaker Change: Uh, an indication of the resilience of of the underlying cash flows.
Speaker Change: Got it. Thank you.
Speaker Change: Thanks.
Yana Galan: The next question is from Yana Galan from Bank of America. Please go ahead. Thank you, good morning, and congrats on a strong second quarter. I was wondering if you could share any thoughts on the mayoral election in New York City and how potentially less development in New York City can increase rents and values in Jersey City.
Speaker Change: The next question is from Jana Galan from Bank of America. Please go ahead.
Jana Galan: Thank you. Good morning, and congrats on a strong second quarter.
Speaker Change: Um, I was wondering if you could share.
Mahbod Nia: Good morning. Thank you for the question. It's an interesting one. I think it's a little bit too soon to draw any definitive conclusions, but certainly based on some of the policies that have been mentioned, it is very possible, as you say, that Jersey City, and particularly the waterfront, given its proximity to Manhattan, could be a real beneficiary of some of those policies, both in terms of what you just described, but also the mention of potentially higher taxation on corporations and high earners, who are now a meaningful portion of our resident base, and could become an even more meaningful portion of our resident base, to the extent that they face greater taxes across the river.
Speaker Change: Your thoughts on the mayoral election, in New York City and how potentially less development in New York City, uh, can increase rents and values in Jersey City.
Speaker Change: Good morning. Thank you for the
Speaker Change: it's an interesting 1. Uh, I think it's a little bit too soon to
Speaker Change: Draw any, uh, definitive conclusions. But certainly based on some of the policies that have been
Speaker Change: Uh mentioned it. It is very possible as you say that Jody City and particularly the Waterfront given its proximity to Manhattan, could be a real beneficiary of
Speaker Change: Uh of some of those policies. Uh both in terms of what you just described. Um but also uh The Mention Of potentially higher, taxation on corporations, uh, and high earners who are now a meaningful portion of our resident base and could become an even more meaningful portion of our resident base.
Mahbod Nia: There are already benefits to living here and working across the river. One of them is that you don't pay New York City tax and so if you think about the high earners in our portfolio and what that translates into, you know, 4% of seven figures and actually the average is a couple of million dollars is meaningful as a meaningful contribution towards the rent over here, which is then 30% cheaper than prime rents across the river.
Speaker Change: Um, to the extent that uh they faced greater taxes across the river. Uh, they're already benefits to living here and working across the river and
Mahbod Nia: And so to the extent those policies come in, it could very well be that we're a beneficiary, but I think it's a little bit too soon to draw any conclusions as I said.
Speaker Change: 1 of them is that you don't pay New York City tax. And so if you think about the high owners and our portfolio, um and what that translates into, you know, 4% of 7 figures and and off. And, and actually, the average is a couple of million dollars, uh, is Meaningful uh, as a meaningful contribution towards the, the rent over here, which is then 30% cheaper than Prime rents across the river. And so, to the extent, those policies come in, it could very well be that we're a beneficiary. Um, but I think it's a little bit too soon to, uh, draw any conclusions as I said.
Yana Galan: Thank you.
Anna Malhari: And I'm sorry if I missed it, but can you share the blended rent spreads for July so far? For July, we're mid-single digit. So you mean post-quarter, Anna, just to clarify? Yes. Oh, apologies.
Speaker Change: Thank you and I'm sorry if I missed it. But uh, can you share the Blended run, spreads for July so far?
Speaker Change: For July where, uh, mid single digit.
Speaker Change: No. So so you mean post quarter just to clarify? Yes.
Anna Malhari: Yeah, so look, as you've seen, we've seen acceleration in the second quarter as we've entered the busy leasing season and the portfolio continues to do really well, but it's really only been three weeks, so we don't want to draw any conclusions about where new leases are, but in terms of renewal, we still continue to send out renewals around the mid-single digits, as Mahbod just mentioned. Apologies, I thought your question was where we're sending out renewals. Thank you.
Speaker Change: Oh, I apologize. Yeah, so look, as you've seen, we've seen acceleration in the second quarter as we've entered a bitter leasing season and the portfolio continues to do really well but it's really only been 3 weeks. So we don't want to draw any conclusions about where new leases are. But in terms of renewal we still continue to send out 3 units around the mid single digits as M just mentioned
Speaker Change: Apologies. That's a good question. Was where? We're sending out when yours?
Speaker Change: Thank you.
John Pawlowski: The next question is from John Pawlowski from Green Street. Please go ahead. Hey, thanks for the time. I want to follow up on the disposition commentary on the land.
Speaker Change: The next question is from John paloski from Green Street. Please go ahead.
Mahbod Nia: Do you still expect to sell the bulk of the remaining $130 million or so on the land in the near term? Or would you, at this point, given the challenging construction market and land market, would you expect to hold on to it for the foreseeable future?
Speaker Change: Of the remaining 130 million or so on the land of the near-term. Or would you at this point given the challenging construction market and land market? Would you expect to hold on to it for for the foreseeable future?
Mahbod Nia: Good morning. It's a good question. I go back to my comments about it being a difficult transaction market. It's certainly a difficult transaction market for land as well, as you correctly pointed out. So I think our approach historically has been to be pragmatic about these things, but also measured in our approach, and what I mean by that is we recognize the importance of Recycling capital, and you've seen us do this with Office, recycling capital and the potential to create entity value through that process. And so we're looking at a wide range of options. We're not going to be fire-setting anything, but we would like to make some more progress.
Speaker Change: Good morning. Uh, it's a good question. I I go back to my
Speaker Change: Comments about it being a, a difficult transaction Market. It's certainly a difficult transaction market for land, as well as you correctly pointed out. So, I think
Speaker Change: Our approach historically has been to be.
Speaker Change: Pragmatic about these things. Uh, but also measured uh in our approach. And what I mean by that is we recognize
Speaker Change: the importance of, um,
Speaker Change: Recycling capital and you've seen us do this with office recycling capital and the potential to create entity value.
Speaker Change: Uh, through that process. And so, um, we're looking at a wide range of options. Uh, we're not going to be fire setting anything.
Mahbod Nia: I wouldn't say all of that land is. Fallable near-term But if you look at the composition, you know, there's a significant chunk. of concentration and that is very desirable and in any normal market would be very liquid. Okay, that helps.
Speaker Change: Uh, but we would like to make some more progress. I wouldn't say, all of that land is
Speaker Change: uh,
Speaker Change: it's
Speaker Change: sellable near-term.
Speaker Change: but if you look at the composition, you know, there's a significant chunk
Speaker Change: uh, of concentration and that is
Speaker Change: Very desirable and in any normal Market would be very liquid.
John Pawlowski: Last question for me is just on the trajectory of occupancy for Liberty Towers. It's been volatile and it's stepped down and declined a little bit more than we expected this quarter, but it sounds like it's off up and to the right at least the next few months. Could you just help frame, you know, is, you know, should we expect it to bounce around, hover around the high 70, low 80% for the next several quarters?
Mahbod Nia: As you take units offline, was this the bottom? And it's, again, a little more of a clear upward path from occupancy from here.
Speaker Change: Okay, that helps. Um, last question for me is just in the trajectory of occupancy for Liberty Towers. It's been volatile and it it stepped down and decline a little bit more than we expected this quarter. But it, sounds like it's off up into the right at least the next few months. Could you just help frame? You know, is, you know, should we expect it to bounce around, hover around the high 70, low, 80%, for the next several quarters, as you take units offline. Is this, was this the bottom and it's again a little more of a clear upward path, uh, from an occupancy from here.
Mahbod Nia: Thank you for the question. I think they can bounce around a bit as we're introducing new units to the asset, but we have seen strong momentum in the summer season, both on the new leases, but have also secured a corporate lease for 18 units that helped drive up the lease percentage, as you've seen in my remarks, for July. So there may be some volatility, but we would hope to be in the low 80s going forward.
Speaker Change: Thank you for the question.
Speaker Change: it is, we're introducing new units to the asset, but we have seen
Speaker Change: strong momentum in the summer season both on the new leases but have also secured a corporate lease for 18 units, that helped to drive up the lease percentage as you've seen in my remarks
Speaker Change: for July. So there may be some volatility but we would hope to be in the low 80s going forward.
Mahbod Nia: Okay, can you remind me when exactly you expect the project to be fully complete? It's going to be over three years. We've done 120 units year-to-date that are renovated and are leased. That's around 20% of the building. We're actually pre-leasing some units that we know are scheduled to be delivered in the upcoming weeks to the extent the prospects want to move in in a few weeks or so. But just given the size of the building, it will take around three years to complete a full project. three years from today, so mid-2028 stabilized. Yeah, us and thereabouts.
Speaker Change: Okay, can you remind me when exactly, you expect the project to be fully complete?
Speaker Change: It's going to be over.
Speaker Change: Renovated and a release that's around 20% of the building, we're actually pre-leasing some units that we know are scheduled to be delivered in the upcoming weeks, to the extent of prospects, want to move in uh in a few weeks or so. But just given the size of the building, it will take around 3 years to complete the full project.
Speaker Change: 3 years from today, so mid 20208 today, plus
Mahbod Nia: be end of 27 but may as well slip into 28. It's too early to say we're still on the 20% through the building. Thank you.
Speaker Change: yeah, I think they're about
Speaker Change: could be end of 27 but we may as well slip into 28. It's too early to say, we're still on the 20th through the building
Speaker Change: Thank you.
Speaker Change: Thank you.
Operator: There are no further questions at this time.
Mahbod Nia: I would like to turn the floor back over to Mahbod Nia for a closing. Well, thank you everyone for joining us today. We're pleased to report another strong quarter, both strategically and operationally, and look forward to updating you again next quarter.
Speaker Change: There are no further questions at this time. I would like to turn the floor back over to MA for closing comments.
Speaker Change: Well, thank you everyone for joining us today. We're pleased to report another strong quarter of both strategically and operationally and look forward to updating you again. Uh, next quarter.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.