Veris Residential, Inc.

Greetings and welcome to the various residential in fourth quarter 2023 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host. Terran fielder general counsel. Thank you. Miss fielder. You may begin.

Good morning everyone and welcome to various residential fourth quarter 2023 earnings conference call. I would like to remind everyone that certain information discussed on this call may constitute forward looking statements and the meaning of the federal securities law. Although we believe the estimates reflected in these statements are based on reasonable assumptions. We cannot give assurance that the anticipated results will be achieved. We refer you to the company's press release an annual and quarterly reports filed with the SEC for risk factors that impact the company. With that, I would like to hand the call over to my buddy at various residential chief executive officer who is joined by Amanda Lombard chief financial officer. Thank

you, Taryn and good morning everyone. Over the past three years at various residential, we've accomplished a number of key strategic objectives, including two point five billion dollars of non strategic asset sales and the repayment of approximately one billion dollars in net debt. Delivering the risking and strengthening our balance sheet. We also negotiated the early redemption of rock points preferred interest strategically grew our multi family portfolio by nearly 2000 units through the development and stabilization about four new properties and one acquisition. Restated the dividend and built the best in class, vertically integrated platform encompassing new personnel processes and technologies. As a result, we've successfully transformed the company from what was once a complex predominantly office rate to pure play multi family rate. Our focus now turns to the significant opportunities available to us for continued value creation that are broadly categorized into three areas. First. Continued operational performance through a number of platform and portfolio optimization strategies. Second, capital allocation initiatives focused on generating earnings and value creation to further boost the positive baseline performance from a multi family portfolio and third further strengthening of our balance sheet. One is a great earnings volatility is inevitable until we reach a mature state as a company through a combination of these initiatives. We believe we have the potential to deliver continued relative outperformance as we seek to further enhance entity value for our shareholders over time. I'll discuss this in further detail, but first a few words regarding our markets and the economic outlook. Unlike many national markets that are facing a glass of near term supply, the Northeast is expected to see a modest .5% inventory change in 2024 well below the national average of three and a half percent. Supporting the case for continued normalized level of rental growth in our markets. Almost half of our properties are located along the Jersey City waterfront with very limited supply as virtually no new projects were completed last year and approximately 1200 units expected to be completed within the next two years. Demand remains robust and vacancy rates are low suggesting new supplies likely to be absorbed much in the same way it has been during the past decade in which the multi family stock in Jersey City waterfront has doubled to around 24,000 units while rents have continued to rise. Among the key attractions of Jersey City is the fact that class A rents in the area reflect a discount of approximately 40% of top Manhattan sub markets and 10% of those of downtown Brooklyn while offering generally newer product, more space and a wider selection of amenities. As a result, Jersey City remains an appealing sub market for prospective tenants from Manhattan who represented approximately 20% of our move-ins during the fourth quarter. While the fundamentals across our core markets remain strong, we are in an environment of elevated macroeconomic and capital markets uncertainty which coupled with a moderating leasing environment warrants a degree of caution looking ahead. This is reflected in our 2024 guidance which Amanda will discuss later. Turning to operational results, the fourth quarter of 2023 represents the 10th consecutive quarter during which various generated sector leading operating results driven by strong rental growth and effective expense mitigation measures. Our class A multi-family portfolio continue to outperform achieving .6% year over year and a wide growth exceeding the high end of our guidance range despite the widespread slowdown across the multi-family sector. At year end, same store occupancy stood at 94.4%. We continue to achieve favorable leasing and renewal spreads despite the fourth quarter typically being a slower leasing season and rents now lapping two consecutive years of high growth. Blended same store net rental growth remains strong at 5% for the quarter and .3% for the full year driven by an .4% increase in renewal rates partially offset by modest growth in new leases. While the rate of rental growth in the portfolio moderated during the fourth quarter consistent with our commentary last quarter, it remained competitive relative to our peers who saw an average blended rent growth of around .9% during the same period. Our Jersey City waterfront properties continue to outperform achieving .6% rental growth in the fourth quarter and 11% for the full year. Despite the strong rental growth across our portfolio, affordability remained healthy with an average rent to income ratio of 13% reflecting the profile of our affluent residents who have benefited from growth in their salaries and have an average annual income of over $180,000 or an average annual household income of over $300,000. Our focus on realizing operational efficiencies is evident in our NOI margin which further improved to 64% in 2023 up from 62% in 2022 and 57% in 2021 on a normalized basis reflecting our continued focus on expense management and proactive approach to insurance renewals and tax appeals. We remain highly focused on our pursuit of excellence and the creation of value for all of our stakeholders. Consistent with this, we've introduced a number of innovative technological solutions across our portfolio including an AI-based leasing assistant that has proven particularly effective at communicating directly with residents saving approximately 1,200 staff hours per month while allowing us to tend to our residents' needs around the clock. In addition to a number of centralized back office functions, we also implemented new processes and a new hybrid-style floating leasing team and a smart maintenance platform that we anticipate will allow for further operational efficiencies and enhanced productivity across our portfolio without impacting the exceptional customer service that our residents have come to expect. A number of these initiatives were implemented during the fourth quarter and are expected to positively contribute to our NOI and operating margins over time. As part of our ongoing commitment to providing an unrivaled living experience, last year we launched the Various Promise, an extensive collection of unique resident benefits including a 30-day move-in guarantee, 24-hour maintenance guarantee, and promotions from brand partners, among other programs. An initiative that's been well received by our residents and is unrivaled among peers. Our commitment to excellence is further reflected in our peer-leading online reputation assessment or Aura score of 83, with two of our properties recently achieving elite 1% status. Earlier I mentioned capital allocation as a focus area in this next phase. While our transformation is behind us, as a company we're not yet in a mature, optimized state presenting a number of unique opportunities. Earlier this year we closed an additional $40 million of non-strategic sales, including the sale of a land parcel in suburban New Jersey for $10 million, and the sale of our 50% stake in the Metropolitan Lost Joint Venture in Morristown, New Jersey. The 59-unit property was sold for $31 million, representing a 4% cap rate and releasing $6 million in net proceeds. Further, at the end of January, the company signed a binding purchase and sale agreement to dispose of our last remaining office property, Harvest Site 5, for $85 million, anticipated to release approximately $80 million in net proceeds. Including this asset, we have approximately $140 million of assets on the binding contract at this time. The equity released from these sales will provide us with valuable liquidity and optionality during this next phase in the company's evolution. We also have a further $215 million of equity in our land bank and are in the process of determining our long-term strategic sites and potential further monetization opportunities. We will continue to work closely with the board to determine the highest and best use for capital as it becomes available to us, evaluating a broad range of capital allocation alternatives as we seek to maximize value for our shareholders. This includes, but is not limited to investing in our own portfolio, such as our planned extensive renovation of Liberty Towers, a 648-unit apartment building in Jersey City from which once completed, we anticipate the -to-high teens' return on invested capital over a four-year period, and an estimated six cents of annual Core FFO contribution, representing 11% of our 2023 Core FFO from this single investment, approximately $30 million, while significantly enhancing the value of the asset.

Our third area of focus, the

continuous strengthening of our balance sheet, will be discussed by Amanda in more detail. Finally, turning to our commitment to ESG, we are pleased with the recent additions to our collection of industry awards, which recognize our tremendous progress and the commitment of our employees and residents to our core ESG principles. After earning global and regional recognitions from the 2023 Global Real Estate Sustainability Benchmark, or GRESP, last quarter, we are honored to have subsequently received NAWET's Leader in the Light Award for outstanding sustainability efforts in the residential sector. Our commitment to diversity, equity, and inclusion was also acknowledged by NAWET with their Bronze recognition. To start the year, we were honored to receive the Great Place to Work certification for the third consecutive year, a testament to our strong company culture and highly engaged employees, whom I would like to thank for their tireless efforts and contributions in the pursuit of excellence across our business. With that, I'm going to hand it over to Amanda, who will discuss our financial performance and guidance for 2024.

Thanks, Mahbud. For the fourth quarter and full year of 2023, net loss available to common shareholders was $0.06 and $1.22 respectively for fully-divided share, versus net income of $0.34 and loss of $0.63 for fully-divided share in the fourth quarter and full year of 2022. Core FFO per share was $0.12 and $0.53 for the fourth quarter and full year, as compared to $0.12 last quarter, and $0.05 and $0.44 for the fourth quarter and full year of 2022. -over-year, Core FFO was up 20% driven by same-store portfolio growth, a full year of operations for the James, stabilization of House 25, and cost reductions in both overhead and property operating costs. We realized this increase in Core FFO, despite the loss of $47 million in NOI from offices and the three hotels that we used to own. A FFO per share grew fivefold -over-year to $0.62 per share, up from $0.12 in 2022, reflecting the impact of shedding capex-intensive office assets, in addition to the factors noted driving Core FFO's 20% growth. Given we are now fully a multifamily company, next quarter we anticipate modifying our calculation of A FFO to only back out recurring capex required to maintain our assets, and we will exclude revenue-generating capital expenditures related to retail leasing in line with our peers. For the fourth quarter, this adjustment would have only been $300,000, so it's not significant and isn't expected to be in the future. Turning to GNA, after adjustments for non-cash stock compensation and severance payments, GNA was $36.5 million for the year, representing a 13% reduction as compared to 2022, and a 21% reduction since 2021. As has been the case in the past, fourth quarter GNA was higher than third quarter due to anticipated seasonal items. We've made significant progress in reducing GNA over the past two years, despite the high inflationary environment. We continue to evaluate opportunities to reduce expenses, such as those associated with the wind-up of rock point, which are expected to be fully realized in 2025 and further technological enhancement. On to our balance sheet. We ended the year with virtually all of our debt fixed and or hedged, and with a weighted average maturity of 3.7 years, and a weighted average coupon of 4.5%. Net debt to EBITDA based upon EBITDA for the full year was 11.9 times, an improvement of almost a turn from 2022 and three turns since 2021. Before we begin discussing our guidance in detail, I'd like to start by emphasizing that while our transformation to a multifamily company may be complete, as Mahboud mentioned, there remains the possibility that earnings may fluctuate materially, depending upon our capital allocation strategy and timing. Our guidance at the low end is assuming that the macroeconomic headwinds discussed by Mahboud results in a decline in job and wage growth in our market. Thus slowing the pace of rent growth, coupled with elevated expenses. On the high end of our range, we've assumed higher rental revenue growth given the low supply in our market, albeit below 2022 and 2023 levels, but still with elevated expense growth due to insurance and real estate taxes, which are difficult to predict and largely outside of the company's control. In all scenarios, we've assumed that the only sales completed in 2024 are the two previously announced transactions. We are projecting core FFOPRA share of 48 cents to 53 cents, which is largely driven by same store NOI growth of two and a half percent to five percent offset primarily by a reduction in deposit interest income and one time items recorded in 2023 to other income. Our 2024 same store pool will include house 25 and the James and exclude the Met Lofts, which results in a net increase of 32 million to our 2023 same store NOI. On the revenue side, we project growth of four to five percent. At the midpoint, the growth is comprised of approximately 350 basis points of rental revenue growth, primarily driven by recapture of loss to lease. On a hundred basis points from house 25 due to the impact of retail leasing and concessions burning off as a result of the lease up. We are forecasting modest rental revenue growth, which we believe is prudent given the past two years strength and potential economic headwinds ahead. However, rental revenue growth will be higher than our annual projection in the first quarter as a result of houses relative performance this year versus last before returning to a more normal seasonal bell curve. On the expense side, we are projecting growth of five to six percent driven largely by our non controllable expenses. At the midpoint, we see a hundred and sixty basis points related to increases in insurance as we believe premiums will continue realizing double digit increases and about a hundred and seventy five basis points related to expense inflation, which is offset by anticipated savings from various operational initiatives. We will also have about two hundred and fifteen basis points of expense growth, primarily in the second quarter when we lapped the recognition of the credits received last year on the tax appeals on the two Jersey City assets. In regards to the balance sheet and interest expense, we are projecting that interest will remain relatively flat. With modest to leveraging from the sales proceeds, tamping down the impact of higher rate. We have three hundred and eight million dollars of mortgages maturing in twenty, twenty four and in July, we have an additional one hundred and fifty nine million dollar mortgage that steps up to above market interest rates that we will seek to revert back to market term. Given the high quality and strong performance of these class a multifamily properties. Lender appetite remains strong and we are working with lenders on potential solutions at this time. Upon refinancing of these loans, the company has no consolidated maturities on its balance sheet until twenty, twenty six. We will awful as we have in the past to hedge and or fix the majority of our debt. Rounding out guidance at the midpoint, we expect overhead cost of real estate services, which is where we record a property management expenses. And to remain relatively flat, reflecting our cost saving initiative, despite anticipating ongoing inflationary pressures. While our portfolio of class a multifamily assets continue to perform well, our guidance reflects a company that is still emerging from a strategic transformation and an uncertain macro economic climate. In addition, given our reliance upon sales of non strategic assets this year and what continues to be a challenging transaction market. Uncertainty around future interest rates and our upcoming maturity and tempered expectations for our market given two consecutive years of extremely strong performance. There remains potential for continued volatility in our earnings, which is reflected in our guidance. There is represents an extremely compelling value proposition. The highest quality and newest class a multifamily properties. Located in established markets in the northeast. Commanding the highest average rent and growth rate among peers. With limited near term supply high barriers to entry and managed by our vertically integrated best in class operating platform. We believe the multifaceted approach described earlier. Will be instrumental to long term value creation for our shareholders. And we are looking forward to updating us the year progresses. I would also like to point you to our new investor presentation. Which is imposed on our website and contains additional details about our go forward strategy. With that

operator, please open the line for questions.

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 that your line is in the question queue. And you may press start to if you'd 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 key. One moment, please. While we pull for questions. Thank you. Our 1st question comes from the line of Steve with ever core. Please proceed with your question.

Yeah, thanks. Good morning. I'm but in Amanda, maybe just a couple things on guidance now that you're basically fully transitioned to being an apartment company. Could you just discuss what's embedded in the revenue growth as it relates to kind of occupancy? Maybe you're blended rent spreads and and maybe any bad debt trends that you could highlight things.

Good morning, Steve. It's a good question. On the revenue side, as Amanda said in descriptive remarks, the assumption is that the majority around .5% of that is recapture of loss to lease. And then 1% related to house in terms of occupancy. It's not really the primary metric that I would say we target. I would say that we do try to maintain that around the 95% understanding that it may fluctuate from time to time. Like the above all below that, but our strategy very much is focused on the maximization of and that's what drives us forward. So if you're referring to that, that's like, that can occupancy. That's not particularly troubling at this point. And we're encouraged to see that the blended net rental spreads are still positive and around the mid single digit is where we see them for the next couple of months.

Okay, I guess what I'm really trying to get at is you guys obviously had a great 23 and you handily beat your expectations. And as you sit here today, you've got to earn in on the portfolio that might get you most of the way towards your revenue growth. So does that mean you're really not assuming much in the way of market rent growth this year? Or I guess how conservative might you have been on setting the top line targets just given the macro uncertainty?

So we've assumed modest rental growth for this year that's in that lost the least recapture figure that I gave you. The reality is that the fundamentals here, as I mentioned, still feel strong. Not not not as strong as they were, but still strong on a relative basis compared to some of the other markets that we've seen supply challenges primarily beginning to feed in and cause them softening. So that's reflected in our guidance and we are assuming some modest rental growth this year. And that's in the number in the last release.

Okay, and just I know and touched on it just on the FFO and the bridge, I guess. I think if I hear you correctly, you're saying that the positive and why growth is kind of getting offset by higher interest expense and some one time items in 23. That don't recur in 24. Is that kind of how we're getting from 53 in 23 down to 51 at the midpoint? Or again, is there anything else that might be dragging FFO down in 24?

Yeah, not not quite correct, but almost. I think the way I would think about it is you had around and this was we communicated that this at the time that we had around $5 million of deposit income last year, largely related to the $350 million of cash that we were sitting on once we closed Harborside. So that's five cents that we won't get this year. And then you had another call it three, three cents or so of other one time positive non recurring contributions to earning the largest of which was payment received in a settlement that again, we don't see it's not a recurring item. So that's eight, nine cents of one time items last year that were in core for further you won't get. And so if you adjust the 53 cents for the annualized, so now the full year num core for for 53 cents by that you get to kind of 4445 cents. Excluding those one time items, we also had. Very significant loss of NOI from the sale of office, but that was offset by the interest payments on the preferred that we saved by repaying rock points. So that was kind of a wash. And so you kind of at that 4445 cents. Excluding the one time items and then you look at that relative to the guidance and actually the guidance does tie with the NOI growth that we're projecting even at the midpoint. You're kind of just over 50 cents, 51 cents relative to that 4445 cents from last year. Once you strip out the one time items.

Great thanks. That's it for me. Thank you Steve.

Our next question comes in line of Anthony Palone with JP Morgan. Please proceed with your question.

Thanks. Good morning. Maybe just staying on some of these guidance items. Amanda and that flattish interest expense you noted for 24 over 23. What does that assume in terms of that step up in rate you mentioned for the one mortgage and also the refinancing of the

couple maturities later in the year.

Sure. Good morning. So, um, first off, I think if you look at our debt portfolio today, and we did nothing assumed there was no refinancing. We would have lower interest expense this year of about 2Million dollars due to the refinancing we did last year on house import side. So, right there you have a 2 cent savings and then when you look at the 3 refinancing we have this year. We assume that we would refinance them at the most advantageous market terms and then you have to put into perspective when they would actually get paid off. The largest of the 3 loans maturing this year, Liberty Towers doesn't mature until October and so the existing rate is going to be in place for basically three quarters of the year. So you put those factors together and that's roughly how you get it.

Yeah, so just to add to that, if I may, we are, as I mentioned in the scripted remarks, looking at a range of alternatives to refinance those loans. Given the quality of the assets, given the asset class that we're in, the fortunate thing is that despite tight credit conditions, there's a lot of lender interest to lend on those. And so we're evaluating a number of options, but generically have assumed that those are refinanced in a similar way to the refinancing that we affected last year with port side one and house 25. With some level of that pay down and then an interest reset that combined with the timing of those refinancing results in interest expense being broadly flat this year.

Okay, and then just also on the balance sheet, you put in place an ATM program. Can you comment on just how you're thinking about that when you might use it or or just how it fits in?

Cool, so this is a program that actually we've had since 2021. It's just a refresh of that program. It's common and I would say prudent for companies such as ours to have one and you'll see the other companies do have one hasn't been utilized thus far. But you know, it's another source of capital available to the company should it be required. Today we have significant liquidity, $95 million of liquidity between cash and availability under the line and $140 million of dollars of assets under binding contract. As well as a business that is throwing off surface cash flow, including post dividends. So I think we're in a healthy position in terms of liquidity. But this is just prudent to have it in place.

Okay, and then just last one for me, Amanda. I think you mentioned recurring cap ex like $300,000 or something in the fourth quarter. But if we think ahead, if we think about most apartment companies, you know, maybe 10% of NOI or something thereabouts might be, you know, a level of cap ex over time. Like, is there any way to think about that level for you all going forward? I know you said you wanted to delineate between revenue producing and recurring, but just the $300,000 just strikes me as a bit low. And so just wondering if

you could frame that a bit more.

Yeah, sure. I think I'll start off and then Mabah can jump in here if you need to. So I think, yeah, the $300,000 is really low because we don't have a lot of revenue to do that. We're generating cap ex in our portfolio that primarily relates to the retail leasing at our multifamily assets. And so I think, you know, I don't have a target for you. We haven't given guidance on where we see those figures, but it does represent a small portion of our overall spend. The one thing I would add is, you know, we're still leasing up house, and so there will be a little bit of spend next year, but it's not material, as I stated earlier. But that is something that we will be working on next year.

Yeah, I think there's very little vacancy in the portfolio. The change that Amanda mentioned is really more reflective of our transformation from an office company to a multifamily company. And, you know, there's clearly a vast differential there in the lease up costs and the revenue one has to, the cap ex one has to invest to be able to generate revenue. So that's really what that referred to. And today it's mostly just the retail on our side. And that's not a huge portion of our portfolio.

Okay, thank you. Thank you.

Our next question comes from the line of Josh dinner line with Bank of America. Please proceed with your question.

Yeah, morning, everyone. Just looking through the investor presentation you posted online. I noticed slide 17 about your ongoing portfolio optimization strategies. Just kind of curious if you've kind of if you could provide any color on the potential margin expansion opportunity from all these initiatives.

Good morning, Josh. Thank you for the question. We haven't put a number on that at this point, but the reality is that there are a number of initiatives, some targeting revenue, some more the expense side. And then, as you mentioned, an element of capital investment as well, with a very much a disciplined return on invested capital approach to dollars that are spent there. And so really what we're saying here is that there are. There is real potential for optimization and growth, both in and margins through affecting a multi plot pronged strategy over time. But the reality is some of those initiatives. A more near term and have a near term impact. Some of the more medium to long term. We gave the example of Liberty Towers, for example, which has the potential. To increase our earnings. On our 2023 earnings by 11% from one asset alone, but that's a four year initiative and and in the first year, we don't anticipate seeing any benefit from that through 2024. So it's difficult to give you an exact. Number over an exact period at this point, but we do believe that over time we can increase both the and the margin through these initiatives.

And speaking of Liberty Towers, I guess have you is there a way to quantify the number of projects like this in your portfolio or or how are you thinking about the opportunity set?

We're looking at that and there potentially could be some others where we're working through. As I said, any investment we make, whether it's within our portfolio or otherwise, there's a very disciplined approach to evaluating returns on that investment. And so this is the largest most impactful one, given the size of the assets in the age of the asset relative to the rest of the portfolio. Which is why it's the primary focus, but that could be that

could be others as well. Right thanks for the time. Thank you. Thanks for the question.

Our next question comes in the line of Eric Wolf with city. Please proceed with your question.

Very good morning. We've seen a couple headlines recently about peers being subject to run control of the properties. Was just curious if you're doing anything differently from an operating or compliance perspective to lower that risk.

Good morning. Thanks for the question. Well, look, we believe that we've taken all the necessary and appropriate steps to preserve the available exemptions from rent control ordinances, which may be applicable to the properties in our portfolio. And we have the added advantage that we have younger vintage properties and have developed most of them. So not a concern for us at this time.

And then, and then I know you've done a lot of work in terms of simplifying structure, the company supplying JVs and the structure there. I guess I was just curious if there's anything left for you to do in terms of cleaning those up the upside that could potentially come from that. And then just as far as being able to sort of freely sell them if you wanted to like, do you have the ability to do that and can buyers assume the debt without some type of penalty there.

You have a question with relation to the joint ventures. Yes. Yeah, it's a good question. We do have a obviously the largest joint venture was the rock point joint venture, but there are a number of others and and we do have a not insignificant sum of equity that is. Embedded within those joint ventures. So as part of. Our capital allocation component of this optimization, we are looking at those and looking at both the managed and the non managed joint ventures. Really understanding what sort of returns we are deriving from the equity that's within those joint ventures those investments and and what our rights are vis a vis a potential exit and so. That potentially could be some further clean up that to release equity and put it to hire and better use, but nothing, nothing to announce today.

Okay, thank you.

Thank you. Our next question comes from the line of Tom Catherine would with. Please proceed with your question.

Excellent Thank you and good morning everyone. It's great to see harborside five going into contract know that was a significant lift. Mahbub you've previously discussed the inefficiencies of running to disparate platforms at the same time with office going away, what are you figuring for G and a and other cost savings this year.

Good morning Tom. Well, I think it's fair to say that we've been if your question is that as we simplified to one asset class from two other further savings to come. Operation Lee from that we have been doing that gradually over time, so this was our last office asset, but. And we sold 51 properties, the majority of which over 3033, which were office over the last three years, and so, as we've gone through this rapid transformation we've also been. Seeking out opportunities to generate efficiencies and organizational structure and cost structure as a result, and so it's not a. it's not like that cost is all there, and now we can suddenly you know rip the band aid often and read the huge saving it's been happening over time gradually having said that. There is potential for some further cost savings going forward, not necessarily related to the state of harborside five more generally we've mentioned. The repayment of rock point and the obligations that we had under that joint venture some of those savings don't really kick in until the latter part of this year, given some continuing obligations that we we have that. So a long way of saying that it could be some further efficiencies. But there is a base cost to running a public company and and we've already reduced you in a pretty significantly over the last three years. To what is now the lowest level in real terms in over two decades and very much consistent with the mid cap pay group, so I don't think we're off the the average when you compare us to the right size. Here and scale is obviously the biggest factor in determining metrics you'll be looking at, but there could be potentially some further further room to reduce that. From this point. What the offset to that is still faced with inflation yes it's a more modest level of inflation, but it's still there, and so timing. plays a part in that as well, and forces that go against us could eat into that to some extent.

got it appreciate appreciate those thoughts and then my buddy you'd mentioned that. Liberty towers project is, if I heard you correct is is kind of a four year probably I assume multi phase project, but can you give us some more color maybe on both. The scope and and cost and I understand that if it's a four year project cost maybe isn't fully nailed down, but maybe what you're expecting to spend towards that this year.

Well it's a pretty comprehensive refurbishment of of that property ranging from the units to the communal and amenity space, and so the idea really is to. We own properties in the area, we know where rents are for newer product, we know whether rents are for that property, and so the return on invested capex assessment. Is a relatively easy one for us to be able to do in an insightful way, and so. It's a range of things will be targeting from like say from units to the broader areas total cost we anticipate to be somewhere in the region of of $30 million, but obviously that's over a four year period. That that that'll be spent and resulting in very creative effects to both earnings and value as a result.

Got it and and then

I think maybe been Josh before that asked about other kind of value add projects in the pipeline and you provided some thoughts on that, but I think you've got it appears you've got an ongoing one or at least some ongoing work at the boulevard collection. Is that a refresh there or is that kind of more just a smaller facelift.

Yeah, that's that's I would say a smaller refresh rather than a comprehensive project equivalent to the diversity towers one.

Got it and then last one for me, Amanda, you mentioned one of the caps burning off mid year, and I think you have at least one, if not a few more that burn off towards the end of the year. What do you build into your sources and uses for the year as far as capital to recast those caps?

So, in my, as I said earlier, the one loan that has a rate reset in the middle of the year, it's actually a rate reset. It's not a like a cap that burns off. And so. Our intention there is to reset that loan to market rates, whether that's with new refinancing or other options. And then, as you noted, there are other caps that expire throughout the year. Generally speaking, we assume that we replace them in our.

And

it's

like, we generally assume that we replace them. That's it for me. Thanks everyone. Thank you.

Thank you and our final question will be a follow up from Steve with every core. Please proceed with your question.

Yeah, thanks, but I just wanted to circle back on the question I had asked about the guidance and you mentioned that you're going to lose interest income. About five million dollars, presumably, you know, that cash was earning interest, but presumably you did something with that cash, either debt pay down. Or you bought an asset or you help fund the development, but I guess I would think that there's some economic return on that cash, but that doesn't seem to be in the thought process. So I guess, what are we missing on that bridge? Because it wouldn't seem that that five cents completely disappears.

Well, it went towards it went towards repaying Rockpoint. So the way I. Sought to simplistically laid out is if you look at the saving from repaying Rockpoint, it's about fourteen million dollars. If you look at the NOI loss from office, it's about fourteen million dollars. So those two things are largely a wash. And then, but you had five million of interest income while you were sitting on that cash waiting to repay Rockpoint. Plus the other three million dollars of one time non recurring and those we don't get the benefit from again this year. So you could. Present that a number of different ways, but simplistically, that's how I think about it. You ultimately had a level of non recurring. Income to the tune of eight nine cents last year, which takes you down from that fifty three to the mid forties and then you build back up from there. So earnings wide. Yes, the upper end of the range. Is flat on last year if you look at it just in absolute terms, but it's higher quality recurring earnings relative to what we had last year.

Got it. Okay, that makes sense. Thanks for clarification.

Of course, thanks Steve.

Thank you. There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Well, thank you everyone for joining us again this quarter. We're pleased to announce another period of both strategic progress and very strong operational performance and look forward to updating you again next

quarter.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.