Veris Residential, Inc.

Good morning and welcome to the Veris Residential Inc. fourth quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Taryn Fielder, General Counsel. Please go ahead.

Good morning, everyone, and welcome to the Veris Residential fourth quarter 2022 earnings conference call. I would like to remind everyone that certain information discussed on this call may constitute forward-looking statements within the meaning of the federal securities laws. Although we believe the estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. We refer you to the company's press release annual and quarterly reports filed in the SEC for risk factors that impact the company. With that, I would like to hand the call over to Mabad Nia, Veris Residential's Chief Executive Officer. Mabad?

Thank you, Taryn. Good morning, and welcome to our fourth quarter 2022 earnings call. I'm joined today by our CFO, Amanda Lombard. Before I turn to our financial results, I'd like to take a moment to acknowledge the tremendous progress our team made during 2022 on our path to becoming a pure-play multifamily company. Despite the significant market volatility and resulting slowdown in transaction activity, we successfully executed on $1.4 billion of non-strategic asset sales, $925 million of which has closed since the beginning of 2022, significantly reducing our office exposure and fully exiting the hotel segment. We also completed and stabilized our newest ground-up multifamily development, House 25, and completed the acquisition of the James, together adding almost 1,000 units to our portfolio, reflecting approximately 15% growth for the second consecutive year. As a result, we increased the share of our multifamily business from 56% of NOI at the beginning of 2022 to approximately 98% by year-end, pro forma for sales under binding contract and the stabilized NOI from House 25, net of concessions that we expect to burn off during the next 12 months. This progress has also allowed us to further strengthen our balance sheet, reducing net indebtedness by nearly $570 million. Amanda will discuss this further. Our 6,931-unit operating multifamily portfolio and our 5,825-unit same-store operating portfolio were 95.3% and 95.5% occupied, respectively, as of December 31st. This is consistent with our strategy of optimizing rents and growing NOI during the year. We continue to capture upside in our portfolio and have seen sustained growth of headline rents with loss to lease reducing to below 2% at the end of the quarter. The same store portfolio achieved a blended net rental growth rate of 17% for the year and 11.7% for the fourth quarter. Our key markets of New Jersey and Boston achieved above-average market rental growth compared to the national average during 2022. Market rents across the Class A multifamily segment in Jersey City grew by 8% during 2022. By contrast, rents in our portfolio significantly outperformed the market, growing by over 15%, reflecting the high quality of our properties and strength of our operational platform. This was despite record new deliveries in the Jersey City market last year of almost 2,000 new units, three times the historic average. However, near-term supply is limited with a mere 500 units expected to be delivered over the next 18 months, while demand remains robust. Four-year same-store NOI increased by 20.1% compared to 2021, driven by higher revenues and slightly lower controllable expenses, despite significant and ongoing inflationary pressures. Turning to 2023, we've seen an increase in occupancy at the beginning of the year, following a typically slower December driven by seasonal trends. Our same-store portfolio, which going forward will include the Upton, Capstone, and Riverhouse Mine, was 96% occupied as of February 14th, with a blended net rental growth rate of 11% recorded since the beginning of this year. As previously noted, House 25, our 750-unit apartment tower in Jersey City, which commenced leasing in April, was 95% leased as of February 3rd, well ahead of schedule and underwritten rents, demonstrating the strong demand for this property, consistent with that seen across our premium Class A multifamily portfolio. Achieving this milestone is a testament to Verish Residential's experienced leasing and marketing teams, as well as our investment in environmentally friendly design features and responsible living concepts that meet the lifestyle preferences of residents. During 2022, we closed on over $800 million of sales, including two waterfront office properties, 111 River Street and 101 Hudson Street, a number of non-strategic land parcels, and the Hyatt Hotel. Earlier this month, we also completed the sale of the Port Imperial Hotel for $97 million, releasing approximately $13 million in equity and removing a $14 million corporate guarantee. An additional $437 million of office properties are under binding contract, the proceeds from which upon closing are expected to provide the company with increased liquidity and valuable optionality in the year ahead. Furthermore, with our exit from the hotel segment complete, we'll be only two office properties away from becoming a pure play multifamily REIT once these transactions close. These remaining non-strategic properties are unlevered, and as such, are expected to release significant equity upon their sale. Since launching Embrace by Veris Residential, our formal approach to environmental, social, and governance initiatives just over a year ago, we have significantly enhanced our company's efforts to support properties, people, and the planet, and are continuing to fulfill our stated commitments of creating communities with purpose, valuing diversity, equity, and inclusion, and implementing sustainable best practices. all through an approach that seeks to prioritize the creation of value for shareholders. Most recently, Veris Residential was named a member of the 2023 Bloomberg Gender Equality Index, a modified market capitalization-weighted index developed to gauge the performance of public companies dedicated to reporting gender-related data. We also joined Pledge 1%, a global movement to inspire, educate, and empower companies to leverage their resources for positive social impact. and formed a strategic partnership with the MIT Center for Real Estate, one of the world's foremost institutes for the study of real estate and technology, to jointly explore innovative solutions that will help our industry effectively and efficiently evolve for the future. During the past two years, we have successfully reduced complexity across the company, strengthened and simplified the balance sheet, and streamlined and enhanced the operational platform, resulting in a fifth consecutive quarter of sector-leading performance across our multifamily portfolio. We begin 2023 in a strong position and well equipped to weather potential economic challenges that lie ahead as we need the anticipated completion of our transformation and seek to unlock the substantial value created for shareholders. With that, I'm going to hand it over to Amanda, who will update you on our financial performance during the quarter.

Thanks, Mahbub. For the full year of 2022, net loss available to common shareholders was 63 cents per fully diluted share, versus $1.39 for fully diluted share in the prior year. Net income available to common shareholders was higher in 2022 as a result of the ongoing transition to a pure plain multifamily REIT and higher gains recorded in 2022 on sales of non-strategic assets. Core FFO was $0.05 and $0.44 for the fourth quarter and full year of 2022 respectively. As communicated previously, the transition to a pure-play multifamily company continues to drive near-term variability in our earnings. As we are focused on driving long-term value and earnings growth rather than short-term profit, the sale of highly levered assets with high capital requirements results in depressed earnings in the short term, despite these assets generating little cash flow for distribution to shareholders. The good news is that as we conclude the transformation and reallocate the significant equity released from non-strategic sales, there is room for significant earnings growth over the next 24 months. Given this backdrop, we have added a reconciliation in our earnings release of the variances from the third quarter to the fourth quarter. Ignoring all the noise, fourth quarter core FFO would have been seven cents, excluding two cents of one-time items related to catch-ups and property-level expenses in Jersey City real estate taxes. We believe that earnings will grow from this base due to the House 25 lease-up, continued improvements in our overhead cost structure, and further strengthening of the balance sheet. As Lubbock mentioned, House 25 achieved stabilized lease occupancy in February. However, the GAAP NOI in House 25 doesn't reflect the fully stabilized NOI, as there are concessions that will burn off over the next year. In addition, the fully stabilized NOI of $30 million presented in our supplemental is expected to be achieved by the end of 2023 and includes retail NOI, which is still under lease-up. Annual year-over-year same-store NOI was up 20.1%. However, despite strong rental growth, same-store NOI sequentially was relatively flat, as we had anticipated, due to the catch-up in higher real estate taxes, primarily in Derby City, and a dip in leasing activity due to a return to more normalized seasonal trends. Sequentially, we saw an increase in same-store rental revenue of 2.1% and believe that we will continue to capture some of our loss to lease and see market rent grow. As Mahbub mentioned, our 2023 same-store pool will include three additional properties comprising 866 units that together contributed around $16 million with NOI during the last year. For the last two quarters, we have seen elevated real estate taxes in Jersey City. While we have little control over future tax rate changes, you're doing all that we can to appeal real estate taxes and have pilot agreements in place at many of our newer properties. As we near the completion of our transition to a pure play multifamily company, we have decided to align our reporting with that of other multifamily companies and break out property level costs among controllable and non-controllable expenses. We believe this breakout is important As it illustrates that year over year, same-store controllable expenses are almost flat, despite the current inflationary environment. Further, the 3% increase in controllable expenses sequentially is a function of the timing in which the expenses were incurred. We believe that we will be able to continue mitigating anticipated inflationary pressures and maintain moderate expense growth in 2023. Turning to our general and administrative costs, after adjustments for one-time severance charges, Core DNA for 2022 was $42 million in real term, representing the lowest level in over two decades. Over a year ago, we set a target to reduce cash expenses by $5 million, which we exceeded. In 4Q21, the sum of our core DNA and real estate services expenses was $14.9 million. In 4Q22, That sum was $12.9 million, implying a $2 million reduction on a quarterly basis, or $8 million on an annualized basis. These savings were even greater, including capitalized expenses. Over the last two years, we have focused on enhancing our operations when optimizing our cost structure in a thoughtful and orderly manner to ensure limited business disruption. We began this effort with a focus on people, removing duplications across the organization adding talent to deepen our bench, and right-sizing the team, positioning us well as we enter the final stages of our transformation into a multifamily company. To date, we have eliminated over 40 positions, realizing substantial payroll savings. Our G&A as a percentage of growth assets is currently in line with mid-cap repairs, and with the right people, policies, and processes now in place, we expect to realize further cost savings that will help ensure our G&A continues to be commensurate with the size of our business. We anticipate these savings to stem from internalization of certain services previously outsourced and consolidation of our corporate headquarters into a single location, among other efforts. On to our balance sheet. To date, the primary use of proceeds from the sale of non-strategic assets has been to pay down debt, reducing leverage, and strengthening the balance sheet. As a result, over the course of the year, net debt to EBITDA improved from 15.3 times to 13.3 times, while our debt to undepreciated assets ratio also improved from 47% to 42%. We have repaid nearly $1 billion of debt since the beginning of 2021, inclusive of an $84 million loan secured by the Port Imperial Hotels maturing in 2023 that was repaid at the sale in February. As a result, the only outstanding maturity this year is a $59 million mortgage on one of our stabilized Boston properties. Furthermore, our multifamily debt is 100% senior secured, primarily non-recourse, and none of it is cross-collateralized. We believe that the company is well positioned in the current interest rate environment, with 96% of our total debt fixed and or hedged, inclusive of the hedge on 145 Front Street, which has entered into subsequent to year-end, and the sale of the Port Imperial Hotel. As a result, our current total debt portfolio has a weighted average maturity of 4.1 years and a weighted average interest rate of 4.4%. Finally, in relation to our recently announced transaction activity, the Port Imperial and Hyatt hotels contributed less than one cent of core FFO in the fourth quarter, and a very small loss is expected for the period owned during the first quarter. As we continue to advance our transformation into a pure-play multifamily company, our earnings will remain unpredictable and variable as we put the last pieces of the puzzle into place. And so we still believe that it is appropriate to delay providing company level earnings guidance. However, as we have greater clarity over our core multifamily operations, we feel it is the appropriate time to provide guidance on this part of the business. For 2023, we anticipate that same store NOI will grow between four and 6%. We are projecting that same store revenues and expenses will grow by a similar quantum as well. Before opening the line for questions, I'd like to briefly recap the results of our work over the last two years. We have simplified and focused our business, completing over $2 billion of non-strategic property sales, developed and stabilized over 1,600 units, growing our multifamily portfolio by 32%, and increased the share of NOI for multifamily from 38% at the end of 2020 to 98% at the end of 2022, perform up for the sale of Harborside 1, 2, and 3, and stabilize NOI from House 25. We also strengthened our balance sheet, repaying nearly $1 billion of debt, including $575 million of recourse corporate bonds that were due to mature in 2023 and 2024. Ferris Residential boasts a best-in-class multifamily portfolio with an average age of six years, extensive immunity offerings, and the highest average revenue and lowest capex per unit compared to our publicly traded multifamily peers. As we approach the anticipated completion of our transformation, the management team and board of directors continue to work closely together and remain highly focused on the creation of value for all shareholders. That concludes our remarks and operator, now I think we're ready for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Steve Sakwa with Evercore ISI. Please go ahead.

Yeah, thanks. Good morning, Mahbud. A couple questions here. Look, I understand you've greatly simplified the company. There's not much left on the non-core side, but you've still got a couple of lowly leased office buildings, and there is some land, I guess, both inside the Rock Point JV and outside. Can you maybe just talk about kind of the timing and maybe the appetite from investors today for both the office buildings and maybe the land, assuming that you're not planning to put that land into development service anytime soon?

Good morning, Steve, and thank you for the question. It's a very relevant one. I would start by saying development at this time is not a priority for the company, given what that entails in the near term in terms of capital requirements, leverage implications, et cetera, and the fact that development would take minimum three to four years to begin yielding income, which is a focus for the company. So that is not a priority at this time. As for the remaining non-strategic assets, and as you correctly point out, that is the two remaining office buildings, once Harborside 1, 2, and 3 close, Harborside 5 and 6, and potentially some further rationalization of the land. We are seeing continued interest from buyers in both. We're evaluating our options. both on the office side and the residential side. We may seek to further rationalize the land to some extent. And the office assets have been designated as non-strategic. Doesn't mean we'll fly sell them at any price tomorrow, but does mean that as we have done with the balance of the non-strategic assets today, we were on a thoughtful and a balanced measured way exit those in due course.

Okay, and maybe a second question. I realize you haven't officially designated what you'll do with the proceeds, but I think the market expectation is that you would look to try and simplify the company and pay down or pay off the Rock Point joint venture. I guess my question is, to the extent that you do close the Harborside sales and bring in the cash that you've talked about along with the suburban assets, Are there any restrictions that you have, either via the line of credit or other debt that would sort of preclude that or kind of would hamstring you in sort of paying off the Rock Point venture whenever you kind of cross that mark?

Well, as I'm sure you know, there are certain parameters or framework within which a repayment would occur under the Rock Point joint venture. So there's a buy-sell agreement. that can be triggered by the party, could be deferred by up to 12 months. So within that framework, to the extent the board determines that to be the highest and best use for the equity that's released, we will look to obviously do what we can to efficiently reallocate the capital. If it is determined that that is the path we should go down in a manner that is consistent with the framework or otherwise negotiated. I'm sorry, what was the other part of your question?

Well, I was just trying to understand, are there any limitations on the use of capital?

Yeah, the only other limitation is the credit line, you should assume, given the proceeds for a potential repayment of Royal Point would have to come from the sale of Harborside, and Harborside really represents a collateral or part of the collateral for the current revolving credit facility, you should assume that there would be some sort of amendment or replacement of that revolving credit facility, but nothing that would hamper us there or restrict our ability to be able to move forward in that direction under the framework with RockPoint.

Okay, great. And this last question for me, as you look out to, I guess, kind of March, April, and potentially even May, how are you thinking about the renewal increases that you're sending out to existing residents on the multifamily side? Where are those notices going out, and how might that have compared to the renewals that you got in maybe December, January, and February?

Well, it's still looking quite strong. We have tried to temper expectations. We do think that ultimately they will normalize at a lower level, and we've provided some guidance around around that, which I hope that you and others will find helpful at this stage. But what I can tell you is for the next couple of months going forward, we're still looking at double-digit renewal notices across the portfolio.

Great. Thanks. That's it for me. Thank you, Steve.

The next question comes from Tom Catherwood with BTIG. Please go ahead.

Thank you. Good morning, everyone. Following up on Steve's question on the sales, Mahbad, where are we sitting with Harborside 1, 2, and 3? I know the expectation was for that to close, I think, in the first quarter of this year. How are we kind of looking in the process?

Good morning, Tom. So sitting here today, our expectation is still very much that that transaction closes within that timeframe. nothing is done until it's done. It is a tricky transaction market. Could timing slip? Possibly, but actually we're in regular dialogue with that buyer, and based on everything we know, we feel confident today that that will still close within the timeframe that we had originally indicated.

Got it. Got it. Back on the January 18th press release you put out, talking about the negotiations and the offer that had come in from Kushner, the comment was obviously that the board had planned to launch a strategic review process in due course. Where are you in that kind of early stages of the process, and what are the triggers that can commence that strategic review?

So, look, this is what you've seen is – We have a recently reconstituted, independent, transparent board that are highly focused on their fiduciary obligations and on the maximization of value for all shareholders. And in the spirit of that transparency, I think the board was just making it be known to shareholders that we've had a number of inbounds from credible institutions who have expressed an interest in the multifamily side of the portfolio. given that now we are beginning to hopefully reach the conclusion of the transformation with the state of non-strategic assets, which are less interesting to those parties, and that prudent with, also consistent with best corporate government practices, the board, as it currently stands, would contemplate running some sort of a process in due course at the appropriate time, taking into consideration where we are in the strategic transformation, market conditions, and any other relevant factors to evaluate that interest and ultimately determine whether it would be in the best interest of shelters to move forward on any path there. So no specific definitive timeframe given, but I think those are the sorts of factors that the board would consider.

Got it. Appreciate that color mob. And then last one for me, This is kind of a couple quarters in a row where the net asset value that you're carrying for the rock point interest has declined. I assume that that's, you know, with changes in the underwriting as you're looking at, you know, the ultimate IRR of that investment. What has been that kind of underwriting change or hurdle change as you're looking to value that investment?

Yeah, so look, we obviously reassess the value, and that's based on an entity value of the multifamily side of the business in which we have a joint venture with Lockpoint. And on a quarterly basis, we go through asset by asset and take into consideration cap rates and other relevant factors to determine where value sits. and ultimately what that would imply in terms of the value of that stake. So that's all you're seeing. If you're seeing some variability there, it's obviously primarily driven by the movement in rates and the implications for the value of assets.

As far as that cap rate move, how material has that been as part of that underwriting?

So it's asset by asset. So I would say... Overall, as far as the markets are concerned, it's too early to draw any conclusions in terms of where cap rates have moved to, where values have moved to. We're still in a period of price discovery, transaction. Volumes are extremely muted, especially here in Jersey City where we have a concentration of assets. So it is a little bit of an art as opposed to a science. There aren't too many comps. But we try to triangulate to a value that ultimately we think would reflect the quality of these assets, the scarcity of these assets, and really the wall of capital that's still seeking to acquire high-quality multifamily assets.

Got it. I appreciate the answers. Thanks, everyone.

Thank you, Tom.

The next question comes from Joshua Dennerlein with Bank of America. Please go ahead.

Yeah. Hey, guys. Thanks for the time. I just wanted to dig into your guidance assumptions a little bit more. Maybe just the first one. I guess, what are you guys assuming as far as market rent growth or new lease rate growth?

Sorry, what are we assuming in terms of overall rental growth?

Market rent growth for this multifamily portfolio. I know you talked earlier about the renewal rates, so...

So for this coming year, we're assuming in the region of 3% rental growth.

Okay. And how does that compare to what you saw, I guess, last year across the portfolio, market rent growth?

Well, it's obviously tempered down somewhat given the pace of growth that we saw last year and potentially economic headwinds ahead. So last year, to put it into context, Jersey City, where we've got the highest concentration of assets. As a market for Class A saw around 8% rental growth, we achieved around 15% rental growth in the last 12 months.

Okay, awesome. And then maybe on the non-controllable expense side, I guess what are you seeing as far as real estate taxes or what's baked into your expense growth guidance?

Well, look, on the controllable side, so do you say on the non-controllable or controllable?

The non-controllable. I guess I'm just still curious.

Non-controllable, I mean, we saw a pretty significant increase. You know, one of the highest in the country, really, a 32% increase in Jersey City taxes. And so the assumption would be that that's not, you know, sustainable in perpetuity. And so hopefully that magnitude of that would suggest that any future tax increases to the extent they come won't be, you know, quite sustainable. as high as we've seen. So what we really sought to do is on the controllable side, where we do have, by definition, more control to really mitigate the impact of inflation, where you saw us actually slightly reduce costs year over year, and that's where we're focusing our efforts going forward to continue to further optimize the cost structure there.

Great. Thanks, guys. Thank you for the questions.

The next question comes from Nicholas Joseph with SIPI. Please go ahead.

Hey, good morning. A bit of a follow-up here, but how specifically is the team and the board planning on creating shareholder value beyond the current public offer out there right now?

Sorry, beyond the?

The current public offer from Kushner.

Oh, I see. Well, so... I wouldn't say that there's one path, Nick. I think you have, as I said, a recently reconstituted board that is independent, that has been very transparent, highly focused on their fiduciary obligations and on the maximization of value for all shareholders. And they have and will continue to evaluate any credible inbound offers in parallel with the strategic transformation and the work that we're doing as a management team. But any such offers obviously must be fully funded and must reflect the intrinsic value of Ferris Residential. With regard to the offer that you're referring to, the board has made it clear that 1850 does fall short of our adjusted new world view of where value sits. And there does remain a significant question mark over whether that is even a financed offer. But nonetheless, the board has constructively engaged with Kushner Companies with the aim of signing an NDA, which is quite normal and a logical first step in situations like this, particularly when you're dealing with a competitor, so that we can share non-public information and see if we can bridge the gap in value to where we think value sits. But as it stands, having spent time and made concessions to get to agreement on that NDA, we've not received a signed NDA. The board remains very much willing and open to engaging with Kushner Companies or anyone else who has the ability to be able to move forward on a qualified basis. So the two are not mutually exclusive. The path that we're focused on as a management team is continuing to simplify the business, complete the transformation. Ultimately, we believe that creates entity value. And to the extent the board decides to crystallize that value mid-process, at the end of that process, really at any time, that's a decision for the board and the SRC.

Great, thanks for that color. And then just a quick follow-up. So are you having any other conversations with anyone beyond Kushner?

Well, it would be inappropriate for me to comment on any specifics, but as we did mention in the January 18th press release, we've had a number of credible inbound expressions of strategic interest for the multifamily portfolio, given the progress that we're making on the strategic transformation.

Got it. Thank you very much.

Thanks, Nick.

The next question comes from John Polowski with Green Street Advisors. Please go ahead.

Hey, good morning. Should we expect any multifamily acquisitions this year?

Good morning. Look, ultimately, between the... If you think about the amount of equity that would be released from the remaining non-strategic asset sales, it's significant. And as I mentioned earlier, it would be a decision for the board to make at the appropriate time what the highest and best use is for that capital. Are acquisitions a priority? I don't think so. But ultimately, should they be one of the uses that's considered? I imagine it will be. But no decision has been made on the use of capital at this point.

Okay. And just maybe a follow-up to Steve's question in the beginning. It sounds like we should not expect any development starts this year. Is that a fair interpretation?

Yeah, again, look, I don't want to rule that out. That would be something that we'd discuss with the board, but it is not something that I would imagine being a priority given our focus on other metrics, namely cash flow generation, to be able to replenish lost cash flow from the sale of highly levered office assets and ultimately get to a position of turning the dividend back on. And given leverage considerations, I don't believe development will be a priority, but ultimately, as I say, use of proceeds will be a decision made in conjunction with the board.

Okay, last question from me. Just curious how far along in the marketing process are you on Harborside 5 and 6 and realistically when is the soonest you could sell these properties?

Yeah, we're not really looking to provide any guidance there. I think what I would say is despite challenging transactional markets that we're clearly in, and I would say we have been in for the last two, two and a half years with COVID, and it hasn't stopped us from making progress and making progress in a thoughtful, balanced, measured way. We are considering our options with regard to those two assets, and ultimately we'll update you in due course, but not looking to put any kind of timeframe on when those get sold.

Okay, thanks for the time. Thank you.

The next question comes from Derek Johnston with Deutsche Bank. Please go ahead.

Hi, everybody. Good morning. Mubad, you know, as you field incoming interest that you mentioned for the multifamily portfolio, you know, aren't potential buyers keenly interested in the land bank, you know, as part of any transaction, which kind of limits your ability there, if you can discuss that? as land acquisition remains costly and development yields under pressure, just thinking that's probably part of the puzzle or the pie, so to speak, if you can expand.

Yeah. Thank you, Derek. That's a great observation because the inbound expressions of interest, as expected, are largely in the platform. There is huge value in controlling developable multifamily land and so for some of those prospective buyers yes it is absolutely interesting to continue to have some land in in the business question is it's all of it of interest and and should we rationalize it to some further extent prior to you know as part of the transformation and that's a balancing act and something that we're working closely with our advisors and the board to determine.

Okay, thank you. Just a quick follow-up. Can you remind us of what the land bank entitles and the entitlements in it and the parcels?

Value-wise, just over $300 million and around 5,000 units is what we believe can be developed on it.

Thanks for the time.

Thank you for the question.

And we have a follow-up from Steve Sakwa with Evercore ISI. Please go ahead.

Great, thanks. Ma, but just one follow-up. On page 7, where you break out some of these non-strategic assets, you do put this estimated land value inside Rock Point JV. That's roughly $240 million for roughly 5,000 units. I just wanted to be clear. Is that 100% owned by Veris, or if you were to, say, sell that either as the entity or individually, does some of that, I guess, some of those proceeds get shared with RockPoint?

No, that's our share of value, Steve. Okay. What we're just trying to show there is what's inside the joint venture, what was RoseZone versus what was on the corporate side, but that's our share.

Okay, great. I guess just going back to John's question on Harborside 5 and 6, and I know leasing was virtually nonexistent at 1,500 square feet. I guess I'm just trying to understand a little bit better. The assets don't have assumable debt, which if it did, might make them more sellable for a buyer if they were at low rates. And I'm just trying to figure out is with the lack of leasing, how problematic is that to sell you know, 40% and 20% office buildings today with no debt assumable in today's environment?

I think it's a great question, actually. So you're absolutely right. Leasing was muted, but not across our portfolio. It was actually muted in the fourth quarter across Jersey City and across Manhattan. We had a significant decline in leasing. And what leasing did occur was really driven by lease explorations, not by growth or strategic initiatives. It was really renewal. So there are some early signs in 2023 that seem positive, that potentially leasing could see some sort of an uptick and increase the number of inquiries. But actually with regard to offsides five and six, beyond that office use, buyers that we're speaking to are looking at alternative use is what I would tell you.

Okay, and one last for me. I guess on page 13 where you kind of reconcile from FFO to core FFO, there's a couple of add-backs. I just wanted to understand a little bit more. There's a dead deal in transaction costs of kind of $2.1 million, and then there were severance slash rebranding. I didn't know how much was severance, how much was rebranding, but are those severance slash rebranding costs kind of over with at this point, or do you expect any of that to be carried forward into 2023?

Hi, Steve. This is Amanda. So in the severance and rebranding costs, for the fourth quarter, that's all severance-related costs. You know, I... It's as far as what we would expect in the future. We're not giving guidance on that, but the rebranding costs are done, and we don't expect any more of that. And they've been done for some time now. Your question on dead deal and transaction-related costs, that's just some various professional fees from a transaction that didn't go through. And I don't know. I don't know what will happen and if we would have more or not in the future.

Great. Thanks. That's it for me. Thank you, Steve.

This concludes our question and answer session. I would like to turn the conference back over to Mahbub Nia for any closing remarks.

Thank you for joining us today. We're pleased to report another quarter of progress in our strategic transformation and a fifth consecutive quarter of stellar operational performance. I'd like to thank the team for their tireless efforts that have allowed us to achieve these results We look forward to updating you again in due course.

Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.