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

Quarterly report pursuant to Section 13 or 15(d)

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

TAX ABATEMENT AGREEMENTS

Pursuant to agreements with certain municipalities, the Company is required to make payments in lieu of property taxes (“PILOT”) on certain of its properties and has tax abatement agreements on other properties, as follows:


				PILOT Payments Three				PILOT Payments Nine
Property Name	Location	Asset Type	PILOT Expiration Dates	Months Ended September 30,				Months Ended September 30,
				2023		2022		2023		2022
				(Dollars in Thousands)				(Dollars in Thousands)
111 River Street (a)	Hoboken, NJ	Office	4/2022	$	—	$	—	$	—	$	85
Harborside Plaza 4A (b)	Jersey City, NJ	Office	2/2022	—		—		—		218
Harborside Plaza 5 (c)	Jersey City, NJ	Office	6/2022	—		—		—		2,000
BLVD 401 (Marbella 2) (d)	Jersey City, NJ	Multifamily	4/2026	446		450		1,310		1,185
RiverHouse 11 at Port Imperial (e)	Weehawken, NJ	Multifamily	7/2033	388		432		1,167		1,138
Port Imperial 4/5 Hotel (f)	Weehawken, NJ	Hotel	12/2033	—		729		224		2,189
RiverHouse 9 at Port Imperial (g)	Weehawken, NJ	Multifamily	6/2046	422		321		1,176		961
Haus25 (h)	Jersey City, NJ	Mixed-Use	3/2047	670		343		1,817		467
The James (i)	Park Ridge, NJ	Multifamily	6/2051	143		—		430		—

Total Pilot taxes				$	2,069	$	2,275	$	6,124	$	8,243

(a)The property was disposed of in the first quarter of 2022.

(b)The annual PILOT is equal to two percent of Total Project Costs, as defined. The total Project Costs are $49.5 million.

(c)The annual PILOT is equal to two percent of Total Project Costs, as defined. The total Project Costs are $170.9 million.

(d)The annual PILOT is equal to ten percent of Gross Revenues for years 1-4, 12 percent for years 5-8 and 14 percent for years 9-10, as defined.

(e)The annual PILOT is equal to 12 percent of Gross Revenues for years 1-5, 13 percent for years 6-10 and 14 percent for years 11-15, as defined.

(f)The annual PILOT is equal to two percent of Total Project Costs, as defined. The property was disposed of during the first quarter of 2023.

(g)The annual PILOT is equal to 11 percent of Gross Revenues for years 1-10, 12.5 percent for years 11-18 and 14 percent for years 19-25, as defined.

(h)For a term of 25 years following substantial completion, which occurred in April 2022. The annual PILOT is equal to seven percent of Gross Revenues, as defined.

(i)The property was acquired in July 2022. For a term of 30 years following substantial completion which occurred in June 2021. The annual PILOT is equal to 10 percent of Gross Revenues for years 1-10, 11.5 percent for years 11-21 and 12.5 percent for years 22-30, as defined.

At the conclusion of the above-referenced agreements, it is expected that the properties will be assessed by the municipality and be subject to real estate taxes at the then prevailing rates.

LITIGATION

The Company is a defendant in litigation arising in the normal course of its business activities. Management does not believe that the ultimate resolution of these matters will have a materially adverse effect upon the Company’s financial condition taken as whole.

OFFICE AND GROUND LEASE AGREEMENTS

Future minimum rental payments under the terms of all non-cancelable office and ground leases under which the Company is the lessee, as of September 30, 2023 and December 31, 2022, are as follows (dollars in thousands):


Year	As of September 30, 2023 Amount
October 1 through December 31, 2023	$	318
2024	1,272
2025	1,279
2026	1,279
2027	1,280
2028 through 2101	31,940
Total lease payments	37,368
Less: imputed interest	(29,820)

Total	$	7,548


Year	As of December 31, 2022 Amount
2023	$	192
2024	192
2025	199
2026	199
2027	200
2028 through 2101	31,664
Total lease payments	32,646
Less: imputed interest	(29,418)

Total	$	3,228

Office and ground lease expenses incurred by the Company amounted to $599 thousand and $225 thousand for the three months ended September 30, 2023 and 2022, respectively, and $1.4 million and $787 thousand for the nine months ended September 30, 2023 and 2022.

In accordance with ASU 2016-02 (Topic 842), the Company capitalized operating leases for one office and two ground leases, which had a total balance of $6.4 million at September 30, 2023. Such amount represents the net present value (“NPV”) of future payments detailed above. The weighted average incremental borrowing rate used to arrive at the NPV was 6.6 percent for the weighted average lease terms of 32.6 years. These rates were arrived at by adjusting the fixed and floating rates of the Company’s mortgage debt with debt having terms approximating the remaining lease term of the Company’s office and ground leases and calculating notional rates for fully-collateralized loans.

The initial recognition of a lease liability and right-of-use asset in an amount of $4.7 million for the office lease is a noncash activity during the nine months ended September 30, 2023.

OTHER

As of September 30, 2023, the Company has outstanding stay-on award agreements with 21 employees, which provides them with the potential to receive compensation, in cash or Company stock at the employees’ option, contingent upon remaining with the Company in good standing until the occurrence of certain corporate transactions, which have not been

identified. The total potential cost of such awards is currently estimated to be up to approximately $2.7 million, including the potential future issuance of up to 42,095 shares of the Company’s common stock. Such cash or stock awards would only be earned and payable if such transaction was identified and communicated to the employee within seven years of the agreement dates, most of which were signed in late 2020 and early 2021, and all other conditions were satisfied.