Veris Residential, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

RECENT TRANSACTIONS

RECENT TRANSACTIONS

9 Months Ended

Sep. 30, 2022

Acquisition

The Company acquired the following rental property during the three months ended September 30, 2022 (dollars in thousands):

Acquisition Date

Property

Location

Property Type

# of
Apartment Units

Acquisition
Cost

7/21/2022

The James (a)

Park Ridge, NJ

Multifamily

240

130,308

Total Acquisitions

130,308

(a) This acquisition was funded using funds available with the Company's qualified intermediary from prior property sales proceeds and through borrowing under the Company's unsecured revolving credit facility.

Properties Commencing Initial Operations

The following property commenced initial operations during the nine months ended September 30, 2022 (dollars in thousands):

In Service Date

Property

Location

Property Type

# of
Apartment Units

Total
Development
Costs Incurred

04/01/22

Haus25 (a)

Jersey City

Multifamily

750

485,128

Totals

750

485,128

(a) As of September 30, 2022, 750 apartment units are currently available for occupancy.

Real Estate Held for Sale/Discontinued Operations/Dispositions

The Company has discontinued operations related to its former suburban New Jersey office portfolio (collectively, the “Suburban Office Portfolio”) which represented a strategic shift in the Company’s operations in 2019. The Company has sold all but one of those assets and expects to dispose of this final suburban office asset in the fourth quarter of 2022. See Note 7: Discontinued Operations.

As of September 30, 2022, the Company identified as held for sale two office properties totaling approximately 1.6 million square feet, two hotels and several developable land parcels, which are located in Jersey City, Holmdel, Parsippany, Morris Township, Wall and Weehawken, New Jersey. As a result of recent sales contracts in place, the Company determined that the carrying value of one of the remaining held for sale office properties, two hotels and two land parcels held for sale were not expected to be recovered from estimated net sales proceeds, and accordingly, during the three and nine months ended September 30, 2022, respectively, recognized an unrealized held for sale loss allowance of $5.1 million and $9.5 million ($4.4 million of which is included in discontinued operations) and also recorded land and other impairments of $2.5 million and $6.4 million during the three and nine months ended September 30, 2022, respectively. In October 2022, the Company completed the disposition of a 1.2 million square foot office property held for sale at September 30, 2022 in Jersey City, New Jersey, for gross sales proceeds of $346 million and the purchaser assumed the in-place $250 million mortgage loan encumbering the property.

During the third quarter of 2022, the Company entered into a contract with a non-refundable deposit to dispose of three office properties totaling approximately 1.9 million square feet for a gross sales price of $420 million. As of September 30, 2022, due to current market conditions for office sales, the Company determined that this transaction did not meet all of the accounting guidance criteria for classification as held for sale under ASC 360-10-45-9 and hence the assets were not reclassified as held for sale. The Company recorded an impairment charge of $84.5 million on these properties for the period ending September 30, 2022. As of June 30, 2022 two land parcels that were previously identified as held for sale were reclassified as held and used, resulting in transaction costs of $0.1 million.

The total estimated sales proceeds of real estate held for sale, net of expected selling costs but before the extinguishment of $250 million of mortgages encumbering an office property and related costs, are expected to be approximately $579.7 million.

The following table summarizes the real estate held for sale, net, and other assets and liabilities (dollars in thousands):


	Suburban Office Portfolio		Other Assets & Liabilities Held for Sale		Total
Land	$	4,336	$	139,526	$	143,862
Building & Other	30,388		457,610		487,998
Less: Accumulated depreciation	(12,165)		(145,201)		(157,366)
Less: Cumulative unrealized losses on property held for sale	(4,440)		$	(5,100)	(9,540)
Real estate held for sale, net	$	18,119	$	446,835	$	464,954


Other assets and liabilities	Suburban Office Portfolio		Other Assets & Liabilities Held for Sale		Total
Unbilled rents receivable, net (a)	$	479	$	15,863	$	16,342
Deferred charges, net (a)	554		11,615		12,169

Mortgages & loans payable, net (a) (b)	—		(339,832)		(339,832)
Accounts payable, accrued exp & other liability	(755)		(4,909)		(5,664)
Unearned rents/deferred rental income (a)	—		(3,781)		(3,781)

(a)Expected to be removed with the completion of the sales.

(b)Includes a $250 million mortgage assumed by the purchaser of a property disposed of in October 2022.

The Company disposed of the following rental property during the nine months ended September 30, 2022 (dollars in thousands):


Disposition Date	Property	Location	# of Bldgs.	Rentable Square Feet	Property Type	Net Sales Proceeds			Net Carrying Value		Realized Gains (Losses) Unrealized Losses, net		Discontinued Operations Realized Gains (Losses)/ Unrealized Losses, net
01/21/22	111 River Street	Hoboken, New Jersey	1	566,215	Office	$	208,268	(a)	$	206,432	$	1,836	$	—

Unrealized gains (losses) on real estate held for sale											(5,100)		(4,440)
Totals			1	566,215		$	208,268		$	206,432	$	(3,264)	$	(4,440)

(a)The mortgage loan encumbering the property was repaid at closing, for which the Company incurred costs of $6.3 million. These costs were expensed as loss from extinguishment of debt during the nine months ended September 30, 2022.

The Company disposed of the following developable land holdings during the nine months ended September 30, 2022 (dollars in thousands):


Disposition Date	Property	Location	Net Sales Proceeds		Net Carrying Value		Realized Gains (Losses)/ Unrealized Losses, net
03/22/22	Palladium residential land	West Windsor, New Jersey	$	23,908	$	24,182	$	(274)
03/22/22	Palladium commercial land	West Windsor, New Jersey	4,688		1,791		2,897
04/15/22	Port Imperial Park parcel	Weehawken, New Jersey	29,331		29,744		(413)
04/21/22	Urby II/III	Jersey City, New Jersey	68,854		13,316		55,538

Totals			$	126,781	$	69,033	$	57,748

Impairments on Properties and Land Held and Used

The Company determined that, due to the shortening of its expected hold period for three office properties and several land parcels, it was necessary to reduce the carrying value of these assets to their estimated fair values. Accordingly, the Company recorded an impairment charge of $84.5 million on the office properties for the three and nine months ended September 30, 2022 and $2.9 million on the land parcels on the consolidated statement of operations for the nine months ended September 30, 2022.