Quarterly report pursuant to Section 13 or 15(d)

VERIS RESIDENTIAL, INC. STOCKHOLDERS??? EQUITY AND VERIS RESIDENTIAL, L.P.???S PARTNERS??? CAPITAL

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VERIS RESIDENTIAL, INC. STOCKHOLDERS’ EQUITY AND VERIS RESIDENTIAL, L.P.’S PARTNERS’ CAPITAL
 3 Months Ended
Mar. 31, 2023
Stockholders' Equity Note [Abstract]  
VERIS RESIDENTIAL, INC. STOCKHOLDERS’ EQUITY AND VERIS RESIDENTIAL, L.P.’S PARTNERS’ CAPITAL VERIS RESIDENTIAL, INC. STOCKHOLDERS’ EQUITY AND VERIS RESIDENTIAL, L.P.’S PARTNERS’ CAPITALTo maintain its qualification as a REIT, not more than 50 percent in value of the outstanding shares of the General Partner may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of any taxable year of the General Partner, other than its initial taxable year (defined to include certain entities), applying certain constructive ownership rules. To help ensure that the General Partner will not fail this test, the General Partner’s Charter provides, among other things, certain restrictions on the transfer of common stock to prevent further concentration of stock ownership. Moreover, to evidence compliance with these requirements, the General Partner must maintain records that
disclose the actual ownership of its outstanding common stock and demands written statements each year from the holders of record of designated percentages of its common stock requesting the disclosure of the beneficial owners of such common stock.
Partners’ Capital in the accompanying consolidated financial statements relates to (a) General Partners’ capital consisting of common units in the Operating Partnership held by the General Partner, and (b) Limited Partners’ capital consisting of common units and LTIP units held by the limited partners. See Note 16: Noncontrolling Interests in Subsidiaries.
The following table reflects the activity of the General Partner capital for the three months ended March 31, 2023 and 2022, respectively (dollars in thousands):
Three Months Ended
March 31,
2023 2022
Opening Balance $ 1,235,685 $ 1,281,982
Net loss available to common shareholders (19,973) (9,092)
Redeemable noncontrolling interests (4,516) (2,942)
Redemption of common units for common stock 4,859  — 
Shares issued under Dividend Reinvestment and Stock Purchase Plan 1 11
Directors' deferred compensation plan 110 110
Stock Compensation 3,471 1,957
Cancellation of common stock (247) — 
Other comprehensive income (loss) (858) 1,986
Rebalancing of ownership percent between parent and subsidiaries (2,002) 1,669
Balance at March 31 $ 1,216,530 $ 1,275,681
Any transactions resulting in the issuance of additional common and preferred stock of the General Partner result in a corresponding issuance by the Operating Partnership of an equivalent amount of common and preferred units to the General Partner.
ATM PROGRAM
On December 13, 2021, the Company entered into a distribution agreement (the “Distribution Agreement”) with J.P. Morgan Securities LLC, BofA Securities, Inc., BNY Mellon Capital Markets, LLC, Capital One Securities, Inc., Comerica Securities, Inc., Goldman Sachs & Co. LLC, R. Seelaus & Co., LLC and Samuel A. Ramirez & Company, Inc., as sales agents. Pursuant to the Distribution Agreement, the Company may issue and sell, from time to time, shares of common stock, par value $0.01 per share, having a combined aggregate offering price of up to $200 million. The Company will pay a commission that will not exceed, but may be lower than, 2% of the gross proceeds of all shares sold through the ATM Program. As of March 31, 2023, the Company had not sold any shares pursuant to the ATM Program.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The General Partner has a Dividend Reinvestment and Stock Purchase Plan (the “DRIP”) which commenced in March 1999 under which approximately 5.4 million shares of the General Partner’s common stock have been reserved for future issuance. The DRIP provides for automatic reinvestment of all or a portion of a participant’s dividends from the General Partner’s shares of common stock. The DRIP also permits participants to make optional cash investments up to $5,000 a month without restriction and, if the Company waives this limit, for additional amounts subject to certain restrictions and other conditions set forth in the DRIP prospectus filed as part of the Company’s effective registration statement on Form S-3 filed with the SEC for the approximately 5.4 million shares of the General Partner’s common stock reserved for issuance under the DRIP.
INCENTIVE STOCK PLAN
In May 2013, the General Partner established the 2013 Incentive Stock Plan (the “2013 Plan”) under which a total of 4,600,000 shares has been reserved for issuance. In June 2021, stockholders of the Company approved amendments to the 2013 Plan to increase the total shares reserved for issuance under the plan from 4,600,000 to 6,565,000 shares.
Stock Options
In addition to stock options issued in June 2021 under the 2013 Plan, in March 2021, the General Partner granted 950,000 stock options with an exercise price equal to the closing price of the Company’s common stock on the grant date of $15.79 per share to the Chief Executive Officer as an employment “inducement award” that is intended to comply with New York Stock Exchange Rule 303A.08. In April 2022, the General Partner granted 250,000 stock options with an exercise price equal to the closing price of the Company’s common stock on the grant date of $16.33 per share to the Chief Investment Officer as an employment “inducement award” that is intended to comply with New York Stock Exchange Rule 303A.08.
There were no stock options that were exercised under any stock option plans for the three months ended March 31, 2023 and 2022, respectively. The Company has a policy of issuing new shares to satisfy stock option exercises.
As of March 31, 2023 and December 31, 2022, the stock options outstanding had a weighted average remaining contractual life of approximately 4.3 and 4.6 years, respectively.
The Company recognized stock options expense of $322 thousand and $253 thousand for the three months ended March 31, 2023 and 2022, respectively.
Appreciation-Only LTIP Units
In March 2019, the Company granted 625,000 Appreciation-Only LTIP Units (“AO LTIP Units”) which were a class of partnership interests in the Operating Partnership that were intended to qualify as “profits interests” for federal income tax purposes. The AO LTIP Units were cancelled and forfeited in March 2023 as they did not vest.
The Company recognized AO LTIP unit expense of $124 thousand and $155 thousand for the three months ended March 31, 2023 and 2022.
Time-based Restricted Stock Awards and Restricted Stock Units
The Company has issued restricted stock units and common stock (“Restricted Stock Awards”) to officers, certain other employees and non-employee members of the Board of Directors of the General Partner, which allow the holders to each receive a certain amount of shares of the General Partner’s common stock generally over a one-year to three-year vesting period. On June 15, 2022, the Company issued Restricted Stock Awards to non-employee members of the Board of Directors of the General Partner which vest within one year, of which 49,784 unvested Restricted Stock Awards were outstanding at March 31, 2023. During the years ended December 31, 2021 and December 31, 2022 and the three months ended March 31, 2023, the Company granted restricted stock units to certain non-executive employees of the Company which will vest after three years, of which 309,192 were still outstanding and unvested as of March 31, 2023. Restricted Stock Awards allow holders to receive shares of the Company’s common stock upon vesting. Vesting of the Restricted Stock Awards issued is based on time and service. All currently outstanding and unvested Restricted Stock Awards provided to the officers, certain other employees, and members of the Board of Directors of the General Partner were issued under the 2013 Plan and as inducement awards.
As of March 31, 2023, the Company had $5.3 million of total unrecognized compensation cost related to unvested Restricted Stock Awards granted under the Company’s stock compensation plans. That cost is expected to be recognized over a weighted average period of 1.8 years.
Long-Term Incentive Plan Awards
The Company has granted long-term incentive plans awards (“LTIP Awards”) to senior management of the Company, including the General Partner’s executive officers. LTIP Awards generally are granted in the form of restricted stock units (each, an “RSU” and collectively, the “RSU LTIP Awards”) and constitute awards under the 2013 Plan. Prior to 2021,
LTIP Awards were in the form of LTIP Units. LTIP Awards are typically issued from the Company’s Outperformance Plan adopted by the General Partner’s Board of Directors. Each RSU entitles the holder to one share of the General Partner's common stock upon vesting. LTIP Awards are subject to forfeiture depending on the extent that awards vest. The number of market-based and performance-based LTIP Units that actually vest for each award recipient will be determined at the end of the related measurement period.
In 2021, the Company has adopted an annual LTIP Award grant program in the form of RSUs. A portion of the RSUs are subject to time-based vesting conditions and will vest in three equal, annual installments over a three year period ending on the three year anniversary of the grant date. Currently, there are 777,685 awards outstanding and unvested.
Another portion of the annual LTIP Awards have market-based vesting conditions, and recipients will only earn the full amount of the market-based RSUs if, over the three-year performance period, the General Partner achieves an absolute TSR target and if the General Partner’s relative TSR as compared to a group of peer REITs exceeds certain thresholds. The market-based award targets are determined annually by the compensation committee of the Board of Directors. Currently, there are 857,004 awards outstanding and unvested.
In addition, the Company has granted RSUs subject to the achievement of adjusted funds from operations targets. The RSU LTIP Awards are designed to align the interests of senior management to relative and absolute performance of the Company over a three years performance period. Currently there are 764,976 awards outstanding and unvested.
In April 2022, the General Partner granted approximately 60,000 RSUs subject to time-vesting conditions, vesting over three years, to three executive officers as “inducement awards” intended to comply with New York Stock Exchange Rule 303A.08.
Prior to vesting, recipients of LTIP Units will generally be entitled to receive per unit distributions equal to one-tenth of the regular quarterly distributions payable on a common share but will not be entitled to receive any special distributions. Distributions with respect to the other nine-tenths of regular quarterly distributions payable on a common unit will accrue but shall only become payable upon vesting of the LTIP Unit.
As of March 31, 2023, the Company had $14.7 million of total unrecognized compensation cost related to unvested LTIP awards granted under the Company’s stock compensation plans. That cost is expected to be recognized over a weighted average period of 2.0 years.
Deferred Stock Compensation Plan For Directors
The Amended and Restated Deferred Compensation Plan for Directors, which commenced January 1, 1999, allows non-employee directors of the Company to elect to defer up to 100 percent of their annual retainer fee into deferred stock units. The deferred stock units are convertible into an equal number of shares of common stock upon the directors’ termination of service from the Board of Directors or a change in control of the Company, as defined in the plan. Deferred stock units are credited to each director quarterly using the closing price of the Company’s common stock on the applicable dividend record date for the respective quarter. Each participating director’s account is also credited for an equivalent amount of deferred stock units based on the dividend rate for each quarter.
During the three months ended March 31, 2023 and 2022, 7,571 and 6,183 deferred stock units were earned, respectively. As of March 31, 2023 and December 31, 2022, there were 73,071 and 66,196 deferred stock units outstanding, respectively.
EARNINGS PER SHARE/UNIT
Basic EPS or EPU excludes dilution and is computed by dividing net income available to common shareholders or unitholders by the weighted average number of shares or units outstanding for the period. Diluted EPS or EPU reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In the calculation of basic and diluted EPS and EPU, a redemption value adjustment of redeemable noncontrolling interests attributable to common shareholders or unitholders is included in the calculation to arrive at the numerator of net income (loss) available to common shareholders or unitholders.
The following information presents the Company’s results for the three months ended March 31, 2023 and 2022 in accordance with ASC 260, Earnings Per Share (dollars in thousands, except per share amounts):
Veris Residential, Inc.:
Three Months Ended
March 31,
Computation of Basic EPS 2023 2022
Loss from continuing operations $ (19,394) $ (25,453)
Add (deduct): Noncontrolling interests in consolidated joint ventures 587  974 
Add (deduct): Noncontrolling interests in Operating Partnership 2,329  2,779 
Add (deduct): Redeemable noncontrolling interests (6,366) (6,437)
Add (deduct): Redemption value adjustment of redeemable noncontrolling interests attributable to common shareholders (4,516) (2,942)
Loss from continuing operations available to common shareholders $ (27,360) $ (31,079)
Income from discontinued operations available to common shareholders 2,871  19,045 
Net loss available to common shareholders for basic earnings per share (24,489) (12,034)
Weighted average common shares 91,226  90,951 
Basic EPS:
Loss from continuing operations available to common shareholders $ (0.30) $ (0.34)
Income from discontinued operations available to common shareholders 0.03  0.21 
Net loss available to common shareholders $ (0.27) $ (0.13)
Three Months Ended
March 31,
Computation of Diluted EPS 2023 2022
Net loss from continuing operations available to common shareholders $ (27,360) $ (31,079)
Add (deduct): Noncontrolling interests in Operating Partnership (2,329) (2,779)
Add (deduct): Redemption value adjustment of redeemable noncontrolling interests attributable to the Operating Partnership unitholders (461) (291)
Loss from continuing operations for diluted earnings per share (30,150) (34,149)
Income from discontinued operations for diluted earnings per share 3,164  20,926 
Net loss available for diluted earnings per share $ (26,986) $ (13,223)
Weighted average common shares 100,526  99,934 
Diluted EPS:
Loss from continuing operations available to common shareholders $ (0.30) $ (0.34)
Income from discontinued operations available to common shareholders 0.03  0.21 
Loss available to common shareholders $ (0.27) $ (0.13)
The following schedule reconciles the weighted average shares used in the basic EPS calculation to the shares used in the diluted EPS calculation (in thousands):
Three Months Ended
March 31,
2023 2022
Basic EPS shares 91,226  90,951 
Add: Operating Partnership – common and vested LTIP units 9,300  8,983 
Diluted EPS Shares 100,526  99,934 
Contingently issuable shares under Restricted Stock Awards were excluded from the denominator during all periods presented as such securities were anti-dilutive during the periods. Shares issuable under all outstanding stock options were excluded from the denominator during all periods presented as such securities were anti-dilutive during the periods. Also not included in the computations of diluted EPS were the unvested LTIP Units and unvested AO LTIP Units as such securities were anti-dilutive during all periods presented. Unvested LTIP Awards outstanding as of March 31, 2023 and 2022 were 1,662,578 and 2,218,081, respectively. Unvested restricted common stock outstanding as of March 31, 2023 and 2022 were 49,784 and 39,529 shares, respectively. Unvested AO LTIP Units outstanding as of March 31, 2022 were 625,000.
No dividends were declared per common share for the three-month periods ended March 31, 2023 and 2022.
Veris Residential, L.P.:
Three Months Ended
March 31,
Computation of Basic EPU 2023 2022
Loss from continuing operations $ (19,394) $ (25,453)
Add (deduct): Noncontrolling interests in consolidated joint ventures 587  974 
Add (deduct): Redeemable noncontrolling interests (6,366) (6,437)
Add (deduct): Redemption value adjustment of redeemable noncontrolling interests (4,977) (3,233)
Loss from continuing operations available to unitholders (30,150) (34,149)
Income from discontinued operations available to unitholders 3,164  20,926 
Net loss available to common unitholders for basic earnings per unit $ (26,986) $ (13,223)
Weighted average common units 100,526  99,934 
Basic EPU:
Loss from continuing operations available to unitholders $ (0.30) $ (0.34)
Income from discontinued operations available to unitholders 0.03  0.21 
Net loss available to common unitholders for basic earnings per unit $ (0.27) $ (0.13)
Three Months Ended
March 31,
Computation of Diluted EPU 2023 2022
Net loss from continuing operations available to common unitholders $ (30,150) $ (34,149)
Income from discontinued operations for diluted earnings per unit 3,164  20,926 
Net loss available to common unitholders for diluted earnings per unit $ (26,986) $ (13,223)
Weighted average common unit 100,526  99,934 
Diluted EPU:
Loss from continuing operations available to common unitholders $ (0.30) $ (0.34)
Income from discontinued operations available to common unitholders 0.03  0.21 
Net loss available to common unitholders $ (0.27) $ (0.13)
The following schedule reconciles the weighted average units used in the basic EPU calculation to the units used in the diluted EPU calculation (in thousands):
Three Months Ended
March 31,
2023 2022
Basic EPU units 100,526  99,934 
Diluted EPU Units 100,526  99,934 
Contingently issuable shares under Restricted Stock Awards were excluded from the denominator during all periods presented as such securities were anti-dilutive during the periods. Shares issuable under all outstanding stock options were excluded from the denominator during all periods presented as such securities were anti-dilutive during the periods. Also not included in the computations of diluted EPU were the unvested LTIP Units and unvested AO LTIP Units as such securities were anti-dilutive during all periods presented. Unvested LTIP Awards outstanding as of March 31, 2023 and
2022 were 1,662,578 and 2,218,081, respectively. Unvested restricted common stock outstanding as of March 31, 2023 and 2022 were 49,784 and 39,529 shares, respectively. Unvested AO LTIP Units outstanding as of March 31, 2022 were 625,000.
No distributions were declared per common unit for the three-month periods ended March 31, 2023 and 2022.