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

Quarterly report pursuant to Section 13 or 15(d)

REDEEMABLE NONCONTROLLING INTERESTS

REDEEMABLE NONCONTROLLING INTERESTS

6 Months Ended

Jun. 30, 2024

Temporary Equity Disclosure [Abstract]

Rockpoint Transactions

On April 5, 2023, Veris Residential Trust (“VRT”), the Company’s subsidiary through which the Company conducts its multifamily residential real estate operations, exercised its right to purchase and redeem direct and indirect interests (the “Put/Call Interests”) in preferred units of limited partnership interests in VRLP (the "Preferred Units") from certain affiliates of Rockpoint Group, L.L.C. (Rockpoint Group, L.L.C. and its affiliates, collectively, “Rockpoint”). On April 6, 2023, Rockpoint exercised its right under the Veris Residential Partners, L.P. (“VRLP”) Partnership Agreement to defer the closing of VRT’s purchase and redemption of the Put/Call Interests for one year. The exercise of the call right caused Rockpoint's interests to be reclassified as mandatorily redeemable noncontrolling interests under the accounting guidance, and included within the Total liabilities on the Company's Consolidated Balance Sheets. The impact of subsequent changes in redemption value at each period end is recorded as interest cost. The carrying amount is not reduced below the initial measurement amount.

On July 25, 2023, VRT and the Operating Partnership entered into the Rockpoint Purchase Agreement with Rockpoint pursuant to which VRT and the Operating Partnership acquired from Rockpoint all of the Preferred Units that constituted the Put/Call Interests for an aggregate purchase price of approximately $520 million. Under the terms of the Rockpoint Purchase Agreement, the Original Investment Agreement and the Add On Investment Agreement have been terminated and are of no further force and effect (other than certain tax and related indemnification rights and obligations), Rockpoint ceased to be, direct or indirect, as applicable, members of VRLP, and all obligations of VRT and VRLP and all rights, title and interest of Rockpoint in and pursuant to the VRLP Partnership Agreement (except for certain tax, confidentiality and indemnification rights and obligations) and all other agreements by and between the General Partner, the Operating Partnership, VRT, VRLP and Rockpoint were terminated, including without limitation all provisions relating to the valuation and repurchase of the Put/Call Interests. As a result of the redemption, the Company recorded the change in redemption value of approximately $34.8 million as Interest cost of mandatorily redeemable noncontrolling interests on the Company's Consolidated Statements of Operations.

Preferred Units

The Operating Partnership has 9,213 Series A-1 Preferred Units (the "Preferred Units") outstanding as of June 30, 2024. The Series A Preferred Units were all redeemed as of March 13, 2024. The key terms of the Preferred Units are summarized as follows:


			Series A-1 Preferred Units
Issuance date			February and April, 2017
Number of units issued			9,213
Stated value per unit			$1,000
Annual dividend rate paid quarterly			(a)
Conversion rate			27.936
Conversion value per unit			$35.80
Maximum common unit conversion			257,375

(a)Series A-1 Preferred Units pay dividends quarterly at an annual rate equal to the greater of (x) 3.50 percent, or (y) the then-effective annual dividend yield on the General Partner’s common stock.

The Preferred Units have a liquidation and dividend preference senior to the common units and include customary anti-dilution protections for stock splits and similar events. The Preferred Units are convertible into common units of limited partnership interests of the Operating Partnership and are redeemable for cash at their stated value at the option of the holder.

Summary of Redeemable Noncontrolling Interests

The following tables set forth the changes in Redeemable noncontrolling interests within the mezzanine section for the three and six months ended June 30, 2024 and 2023, respectively (dollars in thousands):


	Series A-1 Preferred Units In VRLP
Balance at April 1, 2024	$	9,294


Income Attributed to Noncontrolling Interests	81
Distributions	(81)


Balance at June 30, 2024	$	9,294


	Series A and A-1 Preferred Units In VRLP
Balance at January 1, 2024	$	24,999
Redemption/Payout	(15,700)


Income Attributed to Noncontrolling Interests	378
Distributions	(383)


Balance at June 30, 2024	$	9,294


	Series A and A-1 Preferred Units In VRLP		Rockpoint Interests in VRT		Total Redeemable Noncontrolling Interests
Balance at April 1, 2023	$	40,231	$	479,977	$	520,208



Income Attributed to Noncontrolling Interests	350		267		617
Distributions	(350)		(267)		(617)
Reclassification to Mandatorily Redeemable Non-controlling Interests	—		(479,977)		(479,977)
Balance at June 30, 2023	$	40,231	$	—	$	40,231


	Series A and A-1 Preferred Units In VRLP		Rockpoint Interests in VRT		Total Redeemable Noncontrolling Interests
Balance at January 1, 2023	$	40,231	$	475,000	$	515,231



Income Attributed to Noncontrolling Interests	700		6,283		6,983
Distributions	(700)		(6,283)		(6,983)
Redemption Value Adjustment	—		4,977		4,977
Reclassification to Mandatorily Redeemable Non-controlling Interests	—		(479,977)		(479,977)
Balance at June 30, 2023	$	40,231	$	—	$	40,231