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
 9 Months Ended
Sep. 30, 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’ CAPITAL
To 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 and nine months ended September 30, 2023 and 2022, respectively (dollars in thousands):
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2023 2022 2023 2022
Opening Balance $ 1,196,953 $ 1,296,280 $ 1,235,685 $ 1,281,982
Net loss available to common shareholders (54,807) (101,218) (102,214) (83,937)
Common stock distributions (4,714) — (4,714) —
Redeemable noncontrolling interests —  1,279  (4,516) (5,187)
Redemption of common units for common stock 2,297  —  11,348  161 
Shares issued under Dividend Reinvestment and Stock Purchase Plan 1 (4) 3 23
Directors' deferred compensation plan 99 110 295 330
Stock Compensation 9,366 2,790 16,218 7,256
Cancellation of common stock (31) (156) (497) (852)
Other comprehensive (loss) income (652) 2,338 (111) 4,270
Rebalancing of ownership percent between parent and subsidiaries (902) 160 (3,887) (2,467)
Balance at September 30 $ 1,147,610 $ 1,201,579 $ 1,147,610 $ 1,201,579
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 September 30, 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. Both of the these inducement awards have a three-year vesting period.
There were no stock options that were exercised under any stock option plans for the nine months ended September 30, 2023 and 2022, respectively. The Company has a policy of issuing new shares to satisfy stock option exercises.
As of September 30, 2023 and December 31, 2022, the stock options outstanding had a weighted average remaining contractual life of approximately 3.8 and 4.6 years, respectively.
The Company recognized stock compensation expense related to stock options of $414 thousand and $323 thousand for the three months ended September 30, 2023 and 2022, respectively and $1.2 million and $885 thousand for the nine months ended September 30, 2023 and 2022, respectively.
Restricted Stock Awards
The Company has issued Restricted Stock Awards in the form of restricted stock units to non-employee members of the Board of Directors, which allow the holders to each receive shares of the Company’s common stock following a one-year vesting period. Vesting of the Restricted Stock Awards issued is based on time and service. On June 14, 2023, the
Company issued Restricted Stock Awards to non-employee members of the Board of Directors, of which 54,184 unvested Restricted Stock Awards were outstanding at September 30, 2023.
The Company recognized stock compensation expense related to Restricted Stock Awards of $230 thousand and $175 thousand for the three months ended September 30, 2023 and 2022, respectively and $592 thousand and $511 thousand for the nine months ended September 30, 2023 and 2022, respectively.
As of September 30, 2023, the Company had $649 thousand 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 0.7 years.
All currently outstanding and unvested Restricted Stock Awards provided to the non-employee members of the Board of Directors were issued under the 2013 Plan.
Long-Term Incentive Plan Awards
The Company has granted long-term incentive plans awards (“LTIP Awards”) to officers, senior management, and certain other employees of the Company. 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.
A portion of the RSUs are subject to time-based vesting conditions and will vest over three-year period. Additionally, 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. As of September 30, 2023, there are 816,876 time-based 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 853,430 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 660,710 awards outstanding and unvested.
The Company recognized stock compensation expense related to LTIP awards of $5.1 million and $3 million for the three months ended September 30, 2023 and 2022, respectively and $11.3 million and $9 million for the nine months ended September 30, 2023 and 2022, respectively.
As of September 30, 2023, the Company had $12.8 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 1.9 years.
All currently outstanding and unvested RSU LTIP Awards provided to the officers and certain other employees were issued under the 2013 Plan and as inducement awards.
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 September 30, 2023 and 2022, 6,193 and 9,607 deferred stock units were earned, respectively. During the nine months ended September 30, 2023 and 2022, 19,143 and 24,024 deferred stock units were
earned, respectively. As of September 30, 2023 and December 31, 2022, there were 71,446 and 73,071 deferred stock units outstanding, respectively. Pursuant to the retirement of a director from the Board of Directors in May 2023, the Company converted 20,767 deferred stock units into shares of common stock.
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 and nine months ended September 30, 2023 and 2022 in accordance with ASC 260, Earnings Per Share (dollars in thousands, except per share amounts):
Veris Residential, Inc.:
Three Months Ended
September 30,		 Nine Months Ended
September 30,
Computation of Basic EPS 2023 2022 2023 2022
Loss from continuing operations after income tax expense $ (61,644) $ (22,589) $ (107,619) $ (15,917)
Add (deduct): Noncontrolling interests in consolidated joint ventures 592  726  1,815  2,484 
Add (deduct): Noncontrolling interests in Operating Partnership 5,322  2,613  10,016  2,929 
Add (deduct): Redeemable noncontrolling interests (350) (6,365) (7,333) (19,168)
Add (deduct): Redemption value adjustment of redeemable noncontrolling interests attributable to common shareholders —  1,279  (4,516) (5,187)
Loss from continuing operations available to common shareholders $ (56,080) $ (24,336) $ (107,637) $ (34,859)
Income (loss) from discontinued operations available to common shareholders 1,273  (75,603) 907  (54,265)
Net loss available to common shareholders for basic earnings per share (54,807) (99,939) (106,730) (89,124)
Weighted average common shares 92,177  91,087  91,762  91,022 
Basic EPS:
Loss from continuing operations available to common shareholders $ (0.61) $ (0.27) $ (1.17) $ (0.38)
Income (loss) from discontinued operations available to common shareholders 0.01  (0.83) 0.01  (0.60)
Net loss available to common shareholders $ (0.60) $ (1.10) $ (1.16) $ (0.98)
Three Months Ended
September 30,		 Nine Months Ended
September 30,
Computation of Diluted EPS 2023 2022 2023 2022
Net loss from continuing operations available to common shareholders $ (56,080) $ (24,336) $ (107,637) $ (34,859)
Add (deduct): Noncontrolling interests in Operating Partnership (5,322) (2,613) (10,016) (2,929)
Add (deduct): Redemption value adjustment of redeemable noncontrolling interests attributable to the Operating Partnership unitholders —  131  (461) (520)
Loss from continuing operations for diluted earnings per share (61,402) (26,818) (118,114) (38,308)
Income (loss) from discontinued operations for diluted earnings per share 1,394  (83,313) 1,004  (59,862)
Net loss available for diluted earnings per share $ (60,008) $ (110,131) $ (117,110) $ (98,170)
Weighted average common shares 100,925  100,378  100,770  100,215 
Diluted EPS:
Loss from continuing operations available to common shareholders $ (0.61) $ (0.27) $ (1.17) $ (0.38)
Income (loss) from discontinued operations available to common shareholders 0.01  (0.83) 0.01  (0.60)
Net loss available to common shareholders $ (0.60) $ (1.10) $ (1.16) $ (0.98)
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
September 30,		 Nine Months Ended
September 30,
2023 2022 2023 2022
Basic EPS shares 92,177  91,087  91,762  91,022 
Add: Operating Partnership – common and vested LTIP units 8,748  9,291  9,008  9,193 
Diluted EPS Shares 100,925  100,378  100,770  100,215 
Contingently issuable shares under Restricted Stock Awards were excluded from the denominator during the periods ended September 30, 2023 as such securities were anti-dilutive during the periods. Shares issuable under all outstanding stock options were excluded from the denominator during the periods ended September 30, 2023 as such securities were anti-dilutive during the periods. Also not included in the computations of diluted EPS were the unvested LTIP Units as such securities were anti-dilutive during all periods presented.
Veris Residential, L.P.:
Three Months Ended
September 30,		 Nine Months Ended
September 30,
Computation of Basic EPU 2023 2022 2023 2022
Loss from continuing operations after income tax expense $ (61,644) $ (22,589) $ (107,619) $ (15,917)
Add (deduct): Noncontrolling interests in consolidated joint ventures 592  726  1,815  2,484 
Add (deduct): Redeemable noncontrolling interests (350) (6,365) (7,333) (19,168)
Add (deduct): Redemption value adjustment of redeemable noncontrolling interests —  1,410  (4,977) (5,707)
Loss from continuing operations available to unitholders (61,402) (26,818) (118,114) (38,308)
Income (loss) from discontinued operations available to unitholders 1,394  (83,313) 1,004  (59,862)
Net loss available to common unitholders for basic earnings per unit $ (60,008) $ (110,131) $ (117,110) $ (98,170)
Weighted average common units 100,925  100,378  100,770  100,215 
Basic EPU:
Loss from continuing operations available to unitholders $ (0.61) $ (0.27) $ (1.17) $ (0.38)
Income (loss) from discontinued operations available to unitholders 0.01  (0.83) 0.01  (0.60)
Net loss available to common unitholders for basic earnings per unit $ (0.60) $ (1.10) $ (1.16) $ (0.98)
Three Months Ended
September 30,		 Nine Months Ended
September 30,
Computation of Diluted EPU 2023 2022 2023 2022
Loss from continuing operations available to common unitholders $ (61,402) $ (26,818) $ (118,114) $ (38,308)
Income (loss) income from discontinued operations for diluted earnings per unit 1,394  (83,313) 1,004  (59,862)
Net loss available to common unitholders for diluted earnings per unit $ (60,008) $ (110,131) $ (117,110) $ (98,170)
Weighted average common unit 100,925  100,378  100,770  100,215 
Diluted EPU:
Loss from continuing operations available to common unitholders $ (0.61) $ (0.27) $ (1.17) $ (0.38)
Income (loss) from discontinued operations available to common unitholders 0.01  (0.83) 0.01  (0.60)
Net loss available to common unitholders $ (0.60) $ (1.10) $ (1.16) $ (0.98)
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
September 30,		 Nine Months Ended
September 30,
2023 2022 2023 2022
Basic EPU units 100,925  100,378  100,770  100,215 
Diluted EPU Units 100,925  100,378  100,770  100,215 
Contingently issuable shares under Restricted Stock Awards were excluded from the denominator during the periods ended September 30, 2023 as such securities were anti-dilutive during the periods. Shares issuable under all outstanding stock options were excluded from the denominator during the periods ended September 30, 2023 as such securities were anti-dilutive during the periods. Also not included in the computations of diluted EPU were the unvested LTIP Units as such securities were anti-dilutive during all periods presented.