Veris Residential, Inc. · NYSE:VRE
Veris Residential — Mack-Cali Realty — Investor Presentation (November 2015)
47 slides from Veris Residential's investor presentation, Nov 16, 2015
Slide 1: Agenda
Agenda Introduction Mack-Cali Realty Corporation Strategic Plan The Process of Change Office Platform Roseland Multi-Family Platform Portfolio Repositioning Financial Review Investment Summary and Conclusion 3
Slide 2: Introduction & Leadership Team
Introduction & Leadership Team 4 On behalf of senior management and all of our 600 employees, we appreciate the opportunity to discuss Mack-Cali’s future. We have been at the process of changing Mack-Cali for the last 5 months. We believe we understand the problems that we face and have formulated t
Slide 3: Mack-Cali Realty Corporation Strategic Plan
Mack-Cali Realty Corporation Strategic Plan
Slide 4: Company Today
Company Today 6 $4.0 billion REIT publicly traded on NYSE (“CLI”) 24 million sq. ft. of office in 27 submarkets Leased percentage for office 85.8% Substantial development opportunities for office 5,644 operating multi-family units, principally owned in joint ventures Apartment platform managed by Ro
Slide 5: Overview of the 2015-2018 Business Plan
Overview of the 2015-2018 Business Plan 7 Created a simple, easy to communicate 39-month plan called 20 / 15 Own 20 million sq. ft. of class A office buildings Own 15,000 (operating or in construction) units of luxury apartments The sole focus is to drive our operating performance Results should ena
Slide 6: The Process of Change: Transform the Company
The Process of Change 20 / 15 8 Transform the Company into a premier Waterfront and transit-based office owner and a regional owner of luxury multi-family properties Exit non-core assets wisely Upgrade and modernize existing properties Selectively acquire assets for desirable high growth markets Reb
Slide 7: The Process of Change: Recognizing the Problem
The Process of Change 20 / 15 9 The first step to solving any problem is recognizing that there is a problem Our legacy challenges: Inefficient operations Declining occupancy Opaque disclosure Poor capital allocation Strained cash flows
Slide 8: Focus List
Focus List 10 Now (Generate Increased Cash Flow) 1. Staffing levels 2. Cost of operations 3. G&A expenses First 12 – 18 Months (Balance Sheet / Capital Expenditures / Long-term Cash Flow) 4. Increase occupancy 5. Extend credit facility and refinance debt for savings 6. Plan dispositions 7. Repositio
Slide 9: First Months Results
First 5 Months Results 11 Approximate 2016 Savings Personnel — headcount reduction (all departments) $7.5 million G&A — marketing, legal, and other services $3.0 million Operations — re-bid all services $7.5 million Refinancing for 2016 interest expense savings $7.0 million Total $25.0 million FFO s
Slide 10: First Months Results: CLI vs FTSE NAREIT Index
First 5 Months Results 12 Source: Bloomberg 11-12-2015 31.49% (2.16%) (15.00%) (10.00%) (5.00%) 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 6/2/2015 11/12/2015 CLI vs FTSE NAREIT Index Stock Price Percentage Change Since 6 - 2 - 2015 CLI US Equity FNOFF Index CLI 6 - 2 - 15 $17.02 CLI 11 -
Slide 11: First Months Results: CLI vs Suburban Office Peers
First 5 Months Results 13 Source: Bloomberg 11-12-2015 31.49% 1.55% (7.17%) (6.17%) 7.38% (25.00%) (20.00%) (15.00%) (10.00%) (5.00%) 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 6/2/2015 11/12/2015 CLI vs Suburban Office Peers Stock Price % Since 6 - 2 - 2015 CLI HIW BDN PKY OFC EQC CLI 11
Slide 12: First Months Results: CLI vs Suburban Office Peers
First 5 Months Results SALI CLI vs Suburban Office Peers Stock Price % Since 6-2-2015 35.00% 7 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% + 0.00% (5.00%) (a7%) (10.00%) (15.00%) (20.00%) + (25.00%) 6/2/2015 34/2/2015 ‘Source: Bloomberg 11-12-2015 13
Slide 13: New Jersey — targeting the right markets
New Jersey — targeting the right markets 15 Richest state in America, with one of the highest educated workforces NJ is ranked 7th in the country for concentration of Fortune 500 companies with a total of 21 Many other Fortune 500 companies with HQ in NYC also have a significant presence in NJ Stron
Slide 14: Current Portfolio
Current portfolio 9.5 million sq. ft. of Core, 4.3 million sq. ft. of Waterfront, and 5.2 million sq. ft. of Flex Source: Company filings as of September 30, 2015 Core: Long-term hold properties. Select suburban markets. Transit-based growth markets Waterfront: Office assets located on NJ Hudson Riv
Slide 15: Northern and Central NJ Office Markets: Mass Transit vs. Non Mass Transit
Northern and Central NJ Office Markets Mass Transit vs. Non Mass Transit Statistics 17 MARKET GROUP CLASS A INVENTORY DIRECT VACANCY RATE OVERALL VACANCY RATE DIRECT GROSS ASKING RENT RATE TRANSIT SERVED (MSF) Hudson Overall 21.5 12.8% 13.7% $37.92 Short Hills Overall 1.1 7.3% 7.3% $36.50 Metropark
Slide 16: Portfolio Mix by Market
Portfolio Mix by Market 18 *As of 9/30/15 * * Current % of Percent (MSF) Total Leased Flex Assets 5.3 22.0% 92.2% Other Assets 3.5 14.5% 85.4% Waterfront 4.3 18.0% 86.7% Paramus Area 2.5 10.6% 81.5% Parsippany 2.8 11.7% 78.8% DC & Maryland Region 1.3 5.4% 74.2% Cranford Area 0.8 3.3% 83.7% Princeton
Slide 17: Commercial Land Assets for NAV
Commercial Land Assets for NAV 19 Land Description Region Estimated Value in Millions Harborside Plaza 4 Jersey City, NJ $70.0 - $80.0 Princeton Land Sites West Windsor, NJ $35.0 - $41.0 Parsippany Land Sites Parsippany, NJ $10.0 - $13.2 Flex Land Sites NJ & NY $7.0 - $11.0 Eastpoint 2 Lanham, MD $3
Slide 18: Current Portfolio - Diversification
Current Portfolio - Diversification 20 Top 10 Tenants Number of Properties % of ABR Credit ratings Moody’s S&P Fitch DB Services New Jersey, Inc.* 2 2.6 A3 BBB+ A National Union Fire Insurance Company of Pittsburgh, PA 2 2.3 A1 A+ A Bank Of Tokyo-Mitsubishi FUJI, Ltd. 1 2.2 A1 A+ A United States of
Slide 19: 2017 Lease Expirations
2017 Lease Expirations 21 3.764 million leased square feet, or 19% of the current portfolio, expiries in 2017 1.424 million square feet is in the 4th quarter. 1.126 million square feet, or 30% of the expirations, have been addressed 680,906 square feet, or 18%, are in properties to be disposed of 44
Slide 20: Roseland Multi-Family Platform
Roseland Multi-Family Platform
Slide 21: Roseland Residential Trust
Roseland Residential Trust 23 Created new subsidiary — Roseland Residential Trust Integrated and scalable platform Will execute development, construction, financing, and property management Put together one of the best teams in the business Build out and monetize geographically desirable land portfo
Slide 22: Roseland Portfolio Well Positioned
Roseland Portfolio Well Positioned 24 Portfolio has the highest revenue per home Portfolio will be newer and more transit-based than competitors 0 $500 $1,000 $1,500 $2,000 $2,500 Revenue per Home Equity Residential Post Properties Camden Essex UDR Avalon Bay Roseland Source: Public company filings
Slide 23: Residential Portfolio Overview
Residential Portfolio Overview 25 Multi-family portfolio producing consistent growth in cash flow and NAV Apartments 2Q15 2016 2017 2018 Source: Roseland Supplemental as of September 30, 2015 Portfolio Growth (Units) 3Q 2015 Year end 2018 Operating 5,644 11,999 In-Construction 2,075 2,547 Subtotal —
Slide 24: Roseland Ownership Evolution
Roseland Ownership Evolution PORTFOLIO OWNERSHIP (UNITS) PORTFOLIO OWNERSHIP (CASH FLOW CONTRIBUTION ) 100% Seek to increase ownership and economic participation on future and existing communities Subordinated Joint Ventures Joint Ventures Consolidated Interests Source: Roseland Supplemental as of S
Slide 25: Multi-family Capital Plan
Multi-family Capital Plan 27 Capital Needs ($ in thousands) In-Construction Projects $ 44,000 2015 Starts 75,000 2016 Starts 152,000 2017 Starts 253,000 2018 Starts 115,000 Additional Uses of Capital (1) 54,000 Total - Gross Capital Requirements $ 693,000 Less: Land Receivables/Other (82,000) Net Ca
Slide 26: Repurposing and Value Creation — Short Hills
Repurposing and Value Creation — Short Hills* 28 One of 10 sites for potential repurposing Site is adjacent to The Mall at Short Hills Secured rezoning for multi-family (200 units) and hotel (250 keys) use Value of land with rezoning rights now worth in excess of $20 million Value of future developm
Slide 27: Port Imperial Waterfront Master Plan
Port Imperial Waterfront Master Plan 29 200‐acre master plan community with two miles of waterfront directly across from Midtown Manhattan Future development opportunities: 2,250 units, 364 hotel keys, and 290,000 sq. ft. office
Slide 28: Portfolio Repositioning
Portfolio Repositioning
Slide 29: Upgrading and Re-Amenitizing Office Portfolio
Upgrading and Re-Amenitizing Office Portfolio Capital expenditures of $45 million for Harborside, Parsippany, Paramus and White Plains Meeting needs of today’s growth tenants by adding amenities and improved services Lobby upgrades Renovated restrooms Childcare centers Roseland design team engaged t
Slide 30: Core Portfolio After Proposed Disposition Plan
Core Portfolio After Proposed Disposition Plan 33 Focused on Markets with Multiple Demand Drivers Market Current After Dispositions (MSF) % of Total (MSF) % of Total Flex Assets 5.3 22.0% 5.3 27.8% Other Assets 3.5 14.5% 1.4 7.4% Waterfront 4.3 18.0% 4.3 22.8% Paramus Area 2.5 10.6% 2.3 12.2% Parsip
Slide 31: Waterfront — A Long-Term Growth Opportunity
Waterfront — A Long-Term Growth Opportunity To Create a True Live, Work, Play Neighborhood 34 Retail — Three contiguous blocks up to 200,000 sq. ft. Create a waterfront destination with spectacular Manhattan skyline views Add relevant retail, fitness, food concepts; and potential marina Estimated co
Slide 32: Harborside Today
Harborside Today Retail Space of 100,000 sq. ft. 35
Slide 33: Proposed New Harborside
36 Proposed New Harborside Retail Space of 150,000 sq. ft.
Slide 34: 50% NAV Comes From Waterfront by End of 2018
50% NAV Comes From Waterfront by End of 2018 37 Existing Properties Future Development Office Multi-family Office Multi-family Harborside Marbella Plaza 4 URL® Harborside 2 and 3 Plaza 1 Marbella 2 Port Imperial Office Liberty Landing Plaza 2 Monaco Harborside San Remo Plaza 3 The Estuary Port Imper
Slide 35: 50% NAV Comes From Waterfront by End of 2018
aw ES Mack-CALt 50% NAV Comes From Waterfront by End of 2018 Existing Properties Future Development Office Multi-family Office Multi-family, Harborside Marbella Plaza 4 URL® Harborside 2 and 3 Plaza 1 Marbella 2 Port Imperial Office Liberty Landing Plaza 2 Monaco Harborside San Remo Plaza 3 The Estu
Slide 36: Select Financial Information
Select Financial Information (as of 9/30/15) 39 Total Market Equity $1.9BN Total Market Capitalization $3.9BN Total Debt $2.0BN Sr. Unsecured Debt Ratings (Moody’s/S&P/Fitch) Baa3/BBB-/BBB- Debt-to-Undepreciated Assets 37.6% Interest Coverage 3.1x Fixed Charge Coverage 2.6x Net Debt to Annualized EB
Slide 37: Investment Grade Company with Low Leverage and High Coverage
As of and for the periods ended Mack-Cali has operated as an investment grade company with low leverage and high coverage ratios 40 2.7 3.2 3.2 2.9 2.4 3.1 2.6 3.1 3.0 2.6 2.1 2.6 2010 2011 2012 2013 2014 2015-3Q Interest coverage Fixed charge coverage Debt/Undepreciated Assets 33.6% 36.7% 39.9% 37.
Slide 38: Debt Maturity Schedule
Debt Maturity Schedule 41 As of September 30, 2015 ($000s) Balance % of Total Weighted average interest rate Weighted average maturity in years Fixed rate unsecured debt and other obligations $1,268,568 62.08% 4.88% 4.41 Fixed rate secured debt 597,185 29.22% 7.13% 2.78 Variable rate secured debt 14
Slide 39: Balance Sheet Strength: Multiple Capital Sources
Balance Sheet Strength: Multiple Capital Sources 42 Ability to finance the office portfolio with either unsecured or secured debt Maintain a large pool of unencumbered office and flex assets Multi-family platform has multiple sources of capital available Minimal floating rate debt exposure Refinanci
Slide 40: Capital Plan Sources
Capital Plan Sources 43 Disposition proceeds $700–$800 million $600 million credit facility Term loans JV partner equity or entity level equity for Roseland Net incremental cash flow – office / multi-family Potential capital markets activity
Slide 41: Earnings Guidance & Assumptions
Earnings Guidance & Assumptions 44 Source: Mack-Cali Supplemental Package filed on October 28th, 2015 Metric Assumption Range ($ in millions) OFFICE PORTFOLIO Occupancy (% Leased) at YE-2016 86.5% to 87.5% Same Store GAAP NOI 2.5% to 3.5% Same Store Cash NOI 1.0% to 2.0% Straight-Line Rent Adjustmen
Slide 42: Earnings Guidance & Assumptions
Metric 2015 Revised Guidance Funds from Operations (FFO) per share $1.83 to $1.87 Funds from Operations (FFO) per share $2.00 to $2.10 Metric Assumption Range ($ in millions) Occupancy (% Leased) at YE-2016 86.5% to 87.5% Same Store GAAP NOI 25% to 3.5% Same Store Cash NOI 1.0% to 2.0% Straight-Line
Slide 43: Investment Strategy
Investment Strategy 46 Management Team Committed to Unlocking Value Two class A platforms with best in-class disclosure Capital program funded by multiple options: Selling non-core assets Expense savings Increased cash flow Leverage Disciplined capital allocation and balance sheet management Driving
Slide 44: NAV Building Blocks Today
NAV Building Blocks Today 47 Source: September 10th Investor Day Presentation Low High Low High Commercial NJ Waterfront (1) $70.1 5.25% 5.75% 1.525 $ 1.650 $ Flex 43.6 6.75% 7.25% 0.580 0.625 Core Suburban/White Plains CBD 75.5 7.50% 8.00% 1.000 1.080 Non-core 54.7 7.50% 8.50% 0.610 0.650 NYC/Wash,
Slide 45: Definitions
Definitions 48 Average Revenue Per Home: Calculated as total apartment revenue for the quarter ended June 30, 2015, divided by the average percent occupied for the quarter ended June 30, 2015, divided by the number of units and divided by 3 Percentage Leased: The percentage of units that are either
Slide 46: Definitions
Definitions 49 Projected Stabilized NOI: Pro forma NOI for Lease-Up, In-Construction or Future Development communities upon achieving Project Stabilization. Joint Ventures: Joint ventures in which the Company invests capital alongside Joint Venture partners with contributions made in proportion to e
Slide 47: Definitions
Definitions Mack-CALI Projected Stabilized NOI: Pro forma NOI for Lease-Up, In-Construction or Future Development communities upon achieving Project Stabilization. Joint Ventures: Joint ventures in which the Company invests capital alongside Joint Venture partners with contributions made in proporti
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