Veris Residential, Inc. · NYSE:VRE
Veris Residential — Mack-Cali Realty — Investor Presentation (March 2019)
32 slides from Veris Residential's investor presentation, Mar 4, 2019
Slide 1: Forward-looking statements
This Operating and Financial Data should be read in connection with our Annual Report on Form 10-K for the year ended December 31, 2018. Statements made in this presentation may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forwar
Slide 2: Our Investment Strategy
Our Investment Strategy Value Proposition Access to New York & professional hubs, discount to NYC, room to grow as millennials start families, tax benefits Thesis NJ Waterfront transit hubs will experience unparalleled growth as more seek value, connectivity & space Strategy Dominate core submarkets
Slide 3: Dual Platforms Form One Strategy: The Waterfront
Dual Platforms Form One Strategy: The Waterfront Residential Office $5.1 billion Market Capitalization $3.6 billion Net Asset Value 11.7 million 7,776 95.9% 83.2% 7.3% 22.5% 2,321 6.08% Mack-Cali:$38.90 $45.00 Premium: 16% Market: Mack-Cali:$31.43 $33.00 5% $46.53 Market: Premium: 29% 12% 4 (1) Incl
Slide 4: Comprehensive Transformation
Comprehensive Transformation 4Q18 2Q15 (66% Reduction) (142% Increase) (96% Reduction) $76.0 million (432% Increase) $14.3 million $3.9 billion (31% Increase) (31% Reduction) (15% Increase) $46.5 million (3% decrease) (12% decrease) (1) Excludes 2115 Linwood Ave and 201 Littleton Road, which were di
Slide 5: NOI Evolution – 40/40/20
NOI Evolution – 40/40/20 Through the executed disposition program, strategic acquisitions and residential development, the Company has and will continue to dramatically shift its NOI composition: 40% Residential 40% Waterfront & Class A Office 20% Suburban Projected NOI W/ Near-Term CIP Stabilized,
Slide 6: NAV 4Q 2018 (Unaudited)
NAV 4Q 2018 (Unaudited) $ in millions (except per share amounts) Net Asset Value (A-B-C-D) Hig h Low Ren t a b le SF / FY 20 18 Ca p Ra t e Gr o s s Ass et Gr o s s P e r SF Pr o p er t y Th ir d Pa r t y Dis c o u n t in g Cas h NOI (1 ) Uni t (1 0 ) (1 3 ) Ap t Uni t s Valu e Deb t Inter e s t s (
Slide 7: Waterfront Concentration
Waterfront Concentration PSF/ Unit $356.40 Waterfront Holdings: GAV (1) $1,812M 8 Operating Office (2) 5,084,193 SF Fort Lee 7 Operating Resi (3) 2,996 Units $1,493M $503,300 2 Operating Hotels 514 Keys $155M $302,279 Edgewater $432M 2 In-Construction Resi 1,423 Units $303,878 208 Keys $98M $472,696
Slide 8: Two Platforms = One Strategy: The Waterfront
Two Platforms = One Strategy: The Waterfront Summary Valuation (1) Office Waterfront NAV (3) $1,006M GAV $1,889M MSF/ Units % NAV GAV (2) NAV Short Hills & Metropark $544M $303M $911M $554M Suburban/Other Total $3,638M 100% $7,500M GAV Waterfront Share NAV Waterfront Share Residential Waterfront GAV
Slide 9: Waterfront: Residential Market Share
Waterfront: Residential Market Share The Company is the largest institutional owner of operating class A residential and developable land, controlling approximately 12% of the current market and 30% of the potential market Roseland Waterfront Operating Portfolio: Share Units 2,069 2,996 +927 Ownersh
Slide 10: Waterfront: Office Market Share
Waterfront: Office Market Share Office leasing velocity along the Waterfront has increased, with 1.5MSF of deals currently being toured. Mack-Cali blocks >100KSF is well positioned for large-scale tenants, as the Company controls 50% of Share Mack-Cali (1) LeFrak SJP Properties Goldman Sachs Bentell
Slide 11: Waterfront Value Proposition
Waterfront Va lue Proposition We believe that large mark-to-market gain and rents have room to grow while discount to those in Manhattan: still at a significant Financial District Harborside Residential: $50.00 PSF Office: $45.00 PSF Residential (1): 34% increase in disposable income Office: 35% ren
Slide 12: Successful 2018 Deliveries
Successful 2018 Deliveries The Company delivered 1,212 units to the marketplace in 2018, which are collectively 87.6% leased as of February 25, 2019 • Highlighting this success is the absorption of RiverHouse 11. The property opened on July 6, 2018, stabilized within 3 months in October, and is curr
Slide 13: Waterfront Residential Development Outperformance
Waterfront Residential Development Outperformance The Company had record velocity on recent Waterfront deliveries (1,368 units): Total Waterfront Deliveries 1,368 - - - - 10.2% M2 311 Jersey City June 2016 6 Months 50 / Month 8.9% . . . . . . . Urby 762 Jersey City March 2017 6 Months 120 / Month 11
Slide 14: Waterfront-Focused Development Pipeline
Waterfront-Focused Development Pipeline The Company’s next round of construction deliveries and near-term starts are heavily weighted towards Waterfront (80% of aggregate total project cost) 1,423 Units 2,403 Units 3,826 Units 15 25 Columbus Building 9 Riverwalk C Chase III 233 Canoe Brook Units 750
Slide 15: Office Vacancy is in Our Best Assets
Office Va cancy is in Our Best Assets • • • • Mack-Cali will continue to invest in its best assets – current plan $149.7M As AFFO increases, we have and will allocate $30M per annum The Company has 1 MSF to lease to 92% stabilization In-place rents on the Waterfront are currently 22% below asking Ap
Slide 16: Harborside Transformation
Harborside Transformation Harborside is the center of live/work/play on the New Jersey Waterfront. Future investment will solidify its position and benefit lease-up efforts Today – 2019 Before – 2015 Amenities to come: • • • • 13,000 sq. ft. Food Hall Lounge & game room Various retailers Restaurants
Slide 17: Suburban Portfolio Repositioning - Core Only
Suburban Portfolio Repositioning - Core Only 18 suburban assets – 2.8 MSF – remain from September portfolio are 21% higher than 2015 rents in those markets 2015 portfolio. Rents in current 333 Thornall 7 Sylvan Way One River Center Core Suburban Markets: As of September 2015 As of January 2019 % Lea
Slide 18: Office - Disposition Strategy & Statistics
Office - Disposition Strategy & Statistics We have made significant progress in our portfolio transformation via dispositions of non-core and JV assets and expect to finish our program in 2019. The average rent profile of our 47.9% remaining office portfolio is higher than the disposition portfolio
Slide 19: Debt Profile
Debt Profile Management believes that utilizing Net Debt/EBITDA alone does not accurately express the real estate Loan to Value, as it ignores the composition of the underlying cash flow. 20 Company X Company Y Ta rget Office Leverage 7.8x 7.2x – 6.3x 12.0x – 10.6x 9.0x – 8.0x 6.25% 56% - 50% 5.25x
Slide 20: Longer Term Leases = Less Lease Maturities
Longer Te rm Leases = Less Lease Maturities By increasing the quality and reducing the size of its office portfolio, Mack-Cali has been able to decrease the forward three-year average annual rollover from 13.9% to 7.4% (1). Lease Roll % 2019 2021 16.0% 13.8% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0
Slide 21: Drivers of Earnings Growth
Drivers of Earnings Growth Management believes that Waterfront lease-up opportunity and development deliveries can generate FFO growth of 36.9% Waterfront Development Development Occupancy Deliveries (2) Deliveries (3) 40% Gains (1) (92% occupancy) 35% 30% 25% 20% 15% 10% 7,059 Units (4) 5% 0% Near/
Slide 22: Implied Stock Price
Implied Stock Price The market-impliedvalue of the office portfolio is $0.42 given the Rockpoint-validated Residential NAV and anticipated Flex Portfolio sales price. At modest pro forma values per square foot, the Office Portfolio provides an additional $9.32 per share. Mack-Cali Stock Price 4Q 201
Slide 23: Implied Stock Price
Implied Stock Price The market-implied value of the office portfolio is $0.42 given the Rockpoint-validated Residential NAV and anticipated Flex Portfolio sales price. At modest pro forma values per square foot, the Office Portfolio provides an additional $9.32 per share. Mackall Stock Price 40.2018
Slide 24: Global Definitions
Global Definitions Average Revenue Per Home:Calculated as total apartment revenue for the quarter ended Operating Communities: Communities that have achieved Project Stabilization. September 30, divided by the average percent occupied for the quarter ended September 30, 2018, divided by the number o
Slide 25: Notes: Gross & Net Asset Value (Unaudited)
Notes: Gross & Net Asset Va lue (Unaudited) 1) Reflects FY 2018 Cash NOI for office assets; projected 12-month NOI for stabilized residential assets and the projected stabilized NOI for residential assets in-construction and lease-up. See Information About Net Operating Income on page 32. NAV is gen
Slide 26: Notes: Gross & Net Asset Value (Unaudited)
Notes: Gross & Net Asset Va lue (Unaudited) 9) The value of land is based on a combination of recent or pending transactions for land parcels within our relevant markets and unrelated third parties, and sometimes may utilize land appraisals for certain markets, if available for other purposes, such
Slide 27: Development Activity & Cash Flow Growth
Development Activity & Cash Flow Growth $ in millions (unaudited) 2 017 D e live r ies Urby Harborside Chase II at Overlook Ridge Quarry Place at Tuckahoe To t a l 2017 Le a s e - U p s 85.0% 100.0% 100.0% 90. 2% 96.9% 95.3% 97.2% 96. 5 % 1Q 2017 4Q 2016 4Q 2016 762 292 108 1, 1 6 2 6.72% 6.52% 6.61
Slide 28: Residential Calculator – Harborside
Residential Calculator – Harborside 1 Bedroom Househ old R e s i dent R e sident Annua l Househol d Inc om e Less: Income Tax (1) Federal FICA State Local Subt ota l : Inc om e T a x $150, 000 $150, 00 0 - - $200, 00 0 $200, 00 0 - - $ 250,000 $250, 0 00 - - 20.2% 6.7% 6.3% 3.6% 36. 8% ($30,290) (10
Slide 29: Residential Calculator – Hoboken
Residential Calculator – Hoboken 1 Bedro om Househ old R e s i dent Hobok e n R e s i dent A nnua l House hol d Inc om e Less: Income Tax (1) Federal FICA State Local Subtota l : Incom e T a x $150, 000 $1 50, 0 0 0 - - $200, 000 $ 200, 000 - - $25 0, 000 $250, 000 - - 20.2% 6.7% 6.3% 3.6% 3 6 . 8%
Slide 30: Residential Calculator – Port Imperial
Residential Calculator – Port Imperial 1 Bedro om Househ old Res i de nt R e s i dent A nnua l House hol d Inc om e Less: Income Tax (1) Federal FICA State Local Subtota l : Incom e T a x $150, 000 $ 150, 0 0 0 - - $200 , 000 $20 0, 00 0 - - $250, 000 $250, 000 - - 20.2% 6.7% 6.3% 3.6% 3 6 . 8% ($30
Slide 31: Information About Net Operating Income (NOI)
Information About Net Operating Income (NOI) $ in thousands (unaudited) Reconciliation of Net Income to Net Operating Income (NOI) Net I n c o m e Deduct: Real estate services income Interest and other investment loss (income) Equity in (earnings) loss of unconsolidated joint ventures Gain on change
Slide 32: Information About Net Operating Income (NOI)
Information About Net Operating Income (NOI) Reconciliation of Net Income to Net Operating Income (NOI) TAIT azo lotice/Corp Aoseland _Total_Anoualze Net Income 582,638 (530,116) $52,528 $210,092 feletteseveeincone eo) Bm Bs as. 708) fs terme oan ins 7) ass7 50 3e0 ested gas onesand read son depnton
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