EDGAR 10-K Filing

Company CIK: 924901
Filing Year: 2022
Filename: 924901_10-K_2022_0001562762-22-000051.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
GENERAL
Veris Residential, Inc., a Maryland corporation, together with its subsidiaries (collectively the “General Partner”), is a fully-integrated, self-administered and self-managed real estate investment trust (“REIT”). In December 2021, the Company changed its names from Mack-Cali Realty Corporation to Veris Residential, Inc. and Mack-Cali Realty, L.P. to Veris Residential, L.P. reflecting the Company’s continued transition to a multifamily REIT, and on December 10, 2021, the General Partner began trading on the New York Stock Exchange (“NYSE”) under its new ticker symbol, “VRE.” The General Partner controls Veris Residential, L.P., a Delaware limited partnership, together with its subsidiaries (collectively, the “Operating Partnership”), as its sole general partner and owned a 91.0 and 90.4 percent common unit interest in the Operating Partnership as of December 31, 2021 and 2020, respectively. The General Partner’s business is the ownership of interests in and operation of the Operating Partnership and all of the General Partner’s expenses are incurred for the benefit of the Operating Partnership. The General Partner is reimbursed by the Operating Partnership for all expenses it incurs relating to the ownership and operation of the Operating Partnership.
The Operating Partnership conducts the business of providing management, leasing, acquisition, development, construction and tenant-related services for its General Partner. The Operating Partnership, through its operating divisions and subsidiaries, including the Veris property-owning partnerships and limited liability companies, is the entity through which all of the General Partner’s operations are conducted. Unless stated otherwise or the context requires, the “Company” refers to the General Partner and its subsidiaries, including the Operating Partnership and its subsidiaries.
The Company owns and operates a real estate portfolio comprised predominantly of multifamily rental properties located primarily in the Northeast, as well as a portfolio of Class A office properties. The Company performs substantially all real estate management, leasing, acquisition and development on an in-house basis. Veris Residential, Inc. was incorporated on May 24, 1994. The Company’s executive offices are located at Harborside 3, 210 Hudson Street, Suite 400, Jersey City, New Jersey 07311, and its telephone number is (732) 590-1010. The Company has an internet website at www.verisresidential.com.
As of December 31, 2021, the Company owned or had interests in 22 multifamily rental properties as well as non-core assets comprised of seven office buildings, four parking/retail properties and three hotels, plus developable land (collectively, the “Properties”). The Properties are comprised of: (a) 27 wholly-owned or Company-controlled properties comprised of 15 multifamily properties and 12 non-core assets, and, (b) nine properties owned by unconsolidated joint ventures in which the Company has investment interests, including seven multifamily properties and two non-core assets. The Properties are located in three states in the Northeast, plus the District of Columbia. For more information on the Properties, refer to Item 2.
STRATEGIC DIRECTION
On December 19, 2019, the Company announced that its Board had determined to sell the Company’s entire suburban New Jersey office portfolio totaling approximately 6.6 million square feet, which had excluded the Company’s office properties in Jersey City and Hoboken, New Jersey (collectively, the “Suburban Office Portfolio”). As the decision to sell the Suburban Office Portfolio represented a strategic shift in the Company’s operations, these properties’ results (other than a single property not qualified to be classified as held for sale) are being classified as discontinued operations for all periods presented herein. In late 2019 and through December 31, 2021, the Company completed the sale of all but one of its 37 properties in its Suburban Office Portfolio, totaling 6.3 million square feet, for net sales proceeds of $1.0 billion.
Transition to Multifamily Company
In December 2021, the Company announced that it has rebranded to Veris Residential, Inc. reflecting its ongoing transition into a multifamily Company as well as its new corporate values and focus on conducting business in a socially, ethically, and environmentally responsible manner, while seeking to maximize value for all stakeholders.
The Company expects to continue to pursue opportunities to streamline its portfolio and enhance the stability of its revenue stream, as well as pursue overall expense savings from internal reorganizations which may result from the transition of the Company’s real estate portfolio.
Environmental- and Socially-Conscious Considerations
The Company’s Board of Directors and management team have worked on weaving environmental, social, and governance considerations (“ESG”) into the fabric of the Company including through the establishment of its Environmental, Social and Governance Committee (“ESG Committee”) in July 2020. By strategically assessing and managing evolving ESG risks and opportunities while integrating ESG considerations into its overall business model, the Company is seeking to not only generate long-term value for its shareholders, but also positively impact its residents, tenants, employees and the communities it serves.
SUSTAINABILITY
Our Sustainability Strategy
At Veris Residential, the Company’s goal is to conduct its business, development, and operations of new and existing buildings in a manner that contributes to positive environmental, social and economic outcomes for its shareholders, employees, residents, tenants and communities.
The Company is focused on developing and maintaining high-quality properties, while reducing operational costs and mitigating the potential external impacts of energy, water, waste, greenhouse gas emissions and climate change. The Company’s dedicated in-house team initiates and applies sustainable practices throughout all aspects of its business, from investment and development to property operations and resident experience.
Veris Residential is a signatory to the Ten Principles of the United Nations Global Compact and was the first U.S. real estate company to join the Climate Group's EV 100 initiative. The Company is also a corporate member of the U.S. Green Building Council® and has a history of developing properties certified under the USGBC’s Leadership in Energy and Environmental Design™ (LEED®) rating system. In 2021, 25 percent (by number of units) of its wholly owned multifamily portfolio was LEED® certified and Harborside 1, its 399,600 square feet office property in Jersey City is expected to achieve LEED® Gold certification.
The Company’s existing multifamily portfolio has a sector-leading average property age of 6 years, and environmental considerations - particularly focused on energy consumption, water consumption and greenhouse gas emissions - have been integrated into many existing properties and development projects since the design stage. The Company has also invested in energy-saving technology, such as those for irrigation, lighting, and HVAC to positively impact resident experience and its assets’ value over the long-term. To improve its overall carbon footprint, the Company carefully assesses its buildings’ location based on walkability as well as accessibility to public transport, neighborhoods and parks. The Company’s office properties are located on the Jersey City Waterfront, adjacent to the PATH station, light rail, ferry and other transport hubs. In addition, half of the Company’s wholly owned multifamily portfolio is classified as “Walkers Paradise,” the highest standard by WalkScore®.
Equally important is the Company’s focus on supporting the health and wellbeing of its employees, residents and tenants, which the Company has enhanced through the inclusion of on-site amenity offerings, including fitness centers and on-demand fitness programs, as well as health and safety considerations across the portfolio and within its corporate offices. The Company’s efforts led it to obtain WELL® Health and Safety certification for 14 multifamily properties in 2021.
Climate Resilience
As a long-term owner and active manager of real estate assets in operation and under development, the Company recognizes that climate change is no longer a potential threat but today’s reality and is taking measured steps to mitigate its carbon footprint by assessing risks and adapting its business to ensure it is well positioned over the long-term. Event-driven (acute) and longer-term (chronic) physical risks that may result from climate change could have a material adverse effect on the Company’s properties, operations, and business. Management’s role in assessing and managing these climate-related risks and initiatives is spread across multiple teams throughout the Company’s organization, including its executive leadership and its Sustainability, Development, and Property Management departments. The Company views its proactive assessment risks related to climate change as an opportunity to protect asset value, and as such, is implementing measures, planning and decision-making processes to protect its investments by improving resilience.
Reporting
A significant part of the Company’s commitment to sustainable development and operations is its commitment to transparent reporting of ESG performance indicators, as it recognizes the importance of this information to investors, lenders, and other stakeholders. The Company publishes an annual Corporate Social Responsibility (“CSR”) report that is aligned with the Global Reporting Initiative reporting framework, United Nations Sustainable Development Goals and includes the Company’s strategy, key performance indicators,
annual like-for-like comparisons, and year-over-year achievements. In addition, the Company continues to work to further align its reporting with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures to disclose climate-related financial risks and opportunities.
HUMAN CAPITAL RESOURCES
Overview
Veris Residential is a fully-integrated REIT that, unlike many other real estate companies that outsource management and leasing to third party vendors, performs substantially all real estate management, leasing, property transactions, and development in-house.
As of December 31, 2021, the Company had approximately 234 employees, 24 fewer than it had as of December 31, 2020. The reduction in the number of employees was primarily due to the ongoing disposition of its Suburban Office Portfolio and consolidation of its operational and organization infrastructure across its office and multifamily businesses. Regarding employee tenure, 36 percent of its employees have been with the Company for at least 10 years, of which 24 percent of those employees have a tenure of at least 15 years, and 12 percent have a tenure of at least 20 years.
Approximately 64 percent of the Company’s employees are directly involved in property management, management services, and on-site leasing and maintenance of its portfolio, including property managers, maintenance engineers, technicians, HVAC technicians, and project managers. All these personnel salaries and related costs are allocated to its real estate portfolio and management businesses and recorded in operating services or real estate services expenses. Less than five percent of the Company’s employees work in the corporate development department and are directly involved in the Company’s development pipeline. When applicable, personnel salaries and related costs of such development employees are capitalized as a development expenditure. Generally, all other employee costs, are recorded as general and administrative expense, including corporate office leasing personnel.
Diversity, Equity and Inclusion (DE&I)
At Veris Residential, the Company believes that valuing individual differences, maintaining a unified culture grounded in equality and meritocracy and creating an environment of inclusion across all facets of its business is critical to its continued success. The Company embraces its responsibility towards the diverse and all-inclusive communities it serves and has taken proactive efforts to enhance this support to have positive impact on residents, employees and others. Such efforts have included: increasing gender and ethnic diversity within the Company and its Board of Directors, establishing employee affinity groups and introducing company wide diversity training. The Company has also become a signatory of the CEO Action for Diversity & Inclusion Pledge and the UN Women Empowerment Principles.
59 percent of the Company’s employees identified as male, 40% as female and 1% as non-binary as of December 31, 2021
50 percent of the Company’s employees were persons of color or other minority groups as of December 31, 2021
Currently, 4 of the 8 members (or 50 percent) of the Company’s Board of Directors are female and/or racially diverse
Employee Incentives
The Company strives to provide career opportunities in an energized, inclusive, and collaborative environment tailored to retain, attract and reward highly performing employees. It does so in a culture built on the foundations of collegiality, teamwork, hard work, humility, creativity, humor, respect, acceptance, expertise and dedication to one another, its stockholders and its residents.
The Company provides a comprehensive benefits package intended to meet and exceed the needs of its employees and their families. The Company’s competitive offerings help its employees stay healthy, balance their work and personal lives, and meet their financial and retirement goals. For employees earning less than $50,000 annually, the Company pays 100 percent of the health insurance coverage premiums for its employees and their families, and generally 75 percent of the premiums of health and dental insurance coverage for all employees, as well as 100 percent of the cost of life insurance and short-term and long-term disability insurance. In addition, the Company offers the following enrichment opportunities and benefits to its employees:
The Company maintains a 401(k) plan with a history of annual discretionary Company employee match or profit sharing contributions;
The Company offers tuition reimbursement for education costs for employees who have been with it for at least one year;
Employees receive numerous training resources, including modules on preventing unlawful harassment, hazardous communications and real estate licensing;
The Company also promotes the philanthropic efforts of its employees by providing paid time off toward volunteerism, matching employee charitable contributions dollar for dollar (up to $1,000 per employee per year); and
The Company offers flexible working arrangements.
More information regarding the Company’s human capital policies, programs and initiatives is available under the “Investors” section of its public website and the Company’s CSR Report. Information on or through the Company’s website is not considered part of this Annual Report nor any registration statement that incorporates this Annual Report by reference.
COMPETITION
The leasing of real estate is highly competitive. The Properties compete for residents and tenants with lessors and developers of similar properties located in their respective markets primarily on the basis of location, the quality of properties, leasing terms (including rent and other charges and allowances for tenant improvements), services or amenities provided, the design and condition of the Properties, and reputation as an owner and operator of quality properties in the relevant markets. Additionally, the number of competitive multifamily rental properties in a particular area could have a material effect on the Company’s ability to lease residential units and on rents charged. Other forms of multifamily rental properties or single family housing may also provide alternatives to potential residents of multifamily properties. The Company also experiences competition when attempting to acquire or dispose of real estate, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships, individual investors and others. The Company competes with other entities, some of which may have significant resources or who may be willing to accept lower returns or pay higher prices than the Company in terms of acquisition and development opportunities.
GOVERNMENT REGULATIONS
Many laws and governmental regulations apply to the ownership and/or operation of the Properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.
Under various laws and regulations relating to the protection of the environment and human health, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances. The presence of such substances may adversely affect the owner’s ability to rent or sell the property or to borrow using such property as collateral and may expose it to liability resulting from any release of, or exposure to, such substances. Persons who arrange for the disposal or treatment of hazardous or toxic substances at another location may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws impose liability for the release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances.
In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental penalties and injuries to persons and property.
There can be no assurance that (i) future laws, ordinances or regulations will not impose any material environmental liability, (ii) the current environmental condition of the Properties will not be affected by tenants, by the condition of land or operations in the vicinity of the Properties (such as the presence of underground storage tanks), or by third parties unrelated to the Company, or (iii) the Company’s assessments reveal all environmental liabilities and that there are no material environmental liabilities of which the Company is aware. If compliance with the various laws and regulations, now existing or hereafter adopted, exceeds the Company’s budgets for such items, the Company’s ability to make expected distributions to stockholders could be adversely affected.
There are no other laws or regulations which have a material effect on the Company’s operations, other than typical federal, state and local laws affecting the development and operation of real property, such as zoning laws.
INDUSTRY SEGMENTS
The Company operates in two industry segments: (i) multifamily real estate and services and (ii) commercial and other real estate. As of December 31, 2021, the Company does not have any foreign revenues and its business is not seasonal. Please see our financial statements attached hereto and incorporated by reference herein for financial information relating to our industry segments.
SIGNIFICANT TENANTS
As of December 31, 2021, no commercial tenant accounted for more than 10 percent of the Company’s consolidated revenues.
RECENT DEVELOPMENTS
Properties Commencing Initial Operations
During the year ended December 31, 2021, the Company commenced initial operations of two multifamily properties located in Short Hills and Weehawken, New Jersey and containing 506 apartment units, which was completed for total costs of approximately $265.9 million. See Note 3 to the Financial Statements: Recent Transactions.
Dispositions/Real Estate Held for Sale
During the year ended December 31, 2021, the Company disposed of 16 office properties, three land leases and two developable land properties in New Jersey for net sales proceeds of approximately $716 million, with net gains recorded on the sales of approximately $30.7 million from the dispositions. See Note 3 to the Financial Statements: Recent Transactions.
The Company identified two office properties and several developable land parcels as held for sale as of December 31, 2021. The total estimated sales proceeds, net of expected selling costs, from these sales are expected to be approximately $920 million. In January 2022, the Company completed the disposition of one of the office properties held for sale at December 31, 2021 for gross sales proceeds of $210 million. See Note 3 to the Financial Statements: Recent Transactions.
Unconsolidated Joint Venture Activity
On April 29, 2021, the Company sold its interest in the 12 Vreeland Road joint venture for a gross sales price of approximately $2 million, with no gain or loss on the transaction. See Note 3 to the Financial Statements: Recent Transactions.
On September 1, 2021, the Company sold its interest in the Offices at Crystal Lake joint venture to its venture partner for $1.9 million and recorded a loss on the sale of approximately $1.9 million in the year ended December 31, 2021. See Note 3 to the Financial Statements: Recent Transactions.
Development Activity
The Company is developing a 750-unit multifamily project at 25 Christopher Columbus, also known as Haus 25, in Jersey City, New Jersey, which began construction in the first quarter of 2019. The construction project, which is estimated to cost $469.5 million, of which $425 million has been incurred through December 31, 2021, is expected to be ready for occupancy in the second quarter of 2022. The Company has funded $169.5 million of the construction costs, and the remaining construction costs are expected to be funded from a $300 million construction loan (of which $255.5 million was drawn as of December 31, 2021). See Note 13 to the Financial Statements: Commitments and Contingencies.
Capital Markets Activity
In May 2021, the Company entered into a revolving credit and term loan agreement that provides for a $250 million senior secured revolving credit facility (the “2021 Credit Facility”) and a $150 million senior secured term loan facility (the “2021 Term Loan”) and terminated its previous 2017 credit facility scheduled to mature in July 2021. The 2021 Team Loan was repaid in July of 2021. The Company also repaid various mortgages through a combination of sales, retirements and defeasances, and refinanced a construction loan with permanent financing. See Note 10 to the Financial Statements: Mortgages, loans payable and other obligations.
In December 2021, the Company established an At-The-Market share offering program (“ATM Program”) through which the Company may issue and sell, from time to time, up to $200 million of shares of its common stock. See Note 16 to the Financial Statements: Veris Residential, Inc. Stockholders’ Equity and Veris Residential, L.P.’s Partners’ Capital.
AVAILABLE INFORMATION
The Company’s internet website is www.verisresidential.com. The Company makes available free of charge on or through its website the annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed
or furnished by the General Partner or the Operating Partnership pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission. In addition, the Company’s internet website includes other items related to corporate governance matters, including, among other things, the General Partner’s corporate governance principles, charters of various committees of the Board of Directors of the General Partner and the General Partner’s code of business conduct and ethics applicable to all employees, officers and directors. The General Partner intends to disclose on the Company’s internet website any amendments to or waivers from its code of business conduct and ethics as well as any amendments to its corporate governance principles or the charters of various committees of the Board of Directors. Copies of these documents may be obtained, free of charge, from our internet website. Any shareholder also may obtain copies of these documents, free of charge, by sending a request in writing to: Veris Residential, Inc. Investor Relations Department, Harborside 3, 210 Hudson St., Ste. 400, Jersey City, NJ 07311.
Disclosure Regarding Forward-Looking Statements
We consider portions of this report, including the documents incorporated by reference, to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of such act. Such forward-looking statements relate to, without limitation, our future economic performance, plans and objectives for future operations and projections of revenue and other financial items. Forward-looking statements can be identified by the use of words such as “may,” “will,” “plan,” “potential,” “projected,” “should,” “expect,” “anticipate,” “estimate,” “target,” “continue,” or comparable terminology. Forward-looking statements are inherently subject to certain risks, trends and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.
In addition, the extent to which the ongoing COVID-19 pandemic impacts us and our tenants and residents will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in this Annual Report on Form 10-K for the year ended December 31, 2021, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.
Among the factors about which we have made assumptions are:
risks and uncertainties affecting the general economic climate and conditions, which in turn may have a negative effect on the fundamentals of our business and the financial condition of our tenants and residents;
the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis;
the extent of any tenant bankruptcies or of any early lease terminations;
our ability to lease or re-lease space at current or anticipated rents;
changes in the supply of and demand for our properties;
changes in interest rate levels and volatility in the securities markets;
our ability to complete construction and development activities on time and within budget, including without limitation obtaining regulatory permits and the availability and cost of materials, labor and equipment;
our ability to attract, hire and retain qualified personnel;
forward-looking financial and operational information, including information relating to future development projects, potential acquisitions or dispositions, leasing activities, capitalization rates, and projected revenue and income;
changes in operating costs;
our ability to obtain adequate insurance, including coverage for natural disasters and terrorist acts;
our credit worthiness and the availability of financing on attractive terms or at all, which may adversely impact our ability to pursue acquisition and development opportunities and refinance existing debt and our future interest expense;
changes in governmental regulation, tax rates and similar matters; and
other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants or residents will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated.
For further information on factors which could impact us and the statements contained herein, see Item 1A: Risk Factors. We assume no obligation to update and supplement forward-looking statements that become untrue because of subsequent events, new information or otherwise.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Our results from operations and ability to make distributions on our equity and debt service on our indebtedness may be affected by the risk factors set forth below. All investors should consider the following risk factors before deciding to purchase securities of the Company. The Company refers to itself as “we” or “our” in the following risk factors.
OPERATING RISKS
The ongoing coronavirus ("COVID-19") pandemic and measures intended to prevent its spread present material uncertainty and risk and could have a material adverse effect on our business, results of operations, cash flows and financial condition.
The global outbreak of COVID-19 across many countries around the globe, including the United States, has significantly slowed global economic activity, caused significant volatility in financial markets, and resulted in unprecedented job losses causing many to fear an imminent global recession. Certain states and cities, including all of the jurisdictions in which our properties are located, have taken measures to prevent or slow the spread of COVID-19, including by instituting quarantines, vaccination mandates, restrictions on travel, "stay-at-home" rules, restrictions on types of business that may continue to operate and/or restrictions on the types of construction projects that may continue. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which we and our customers operate. We have modified, and might further modify, our business practices as a result of the COVID-19 pandemic, the economic and social ramification of the disease, and the societal and governmental responses in the communities in which we operate. In addition, we have adapted our operations to protect our employees, including by implementing a work from home policy. As a result, many of our employees are currently working remotely. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business.
The COVID-19 pandemic presents material uncertainty and risk with respect to our financial condition, results of operations, cash flows and performance. The COVID-19 pandemic could negatively impact our business in a number of ways, including:
a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government or customer action;
deterioration in the financial condition or liquidity of our tenants, customers or other counterparties, which could result in their inability to pay rents or failure to meet their contractual obligations to us;
the potential negative impact on our ability to complete planned acquisitions or dispositions of assets on expected terms or timelines, or at all;
reduced demand for space at our office properties and units at our multifamily residential properties, which could have a negative impact on our prospects for leasing current or additional space and/or renewing leases with existing tenants;
difficulty accessing debt and equity capital on attractive terms, or at all, which could result in reduced availability and increased cost of capital necessary to fund business operations, finance our development pipeline or address maturing liabilities on a timely basis;
costs associated with construction delays and cost overruns at our development and redevelopment projects;
unanticipated costs and operating expenses associated with remote work arrangements, sanitation measures performed at each of our properties, and other measures to protect the welfare of our employees and tenants; and
the potential negative impact on the health of our employees, particularly if a significant number of them are impacted, which could result in a deterioration in our ability to ensure business continuity during this disruption.
The extent to which the COVID-19 pandemic may adversely affect our business will depend on future developments, including, among others, the severity and duration of the pandemic, the effectiveness of COVID-19 vaccines in curbing the spread of the virus, the nature and duration of other measures taken to contain the pandemic or mitigate its impact, and the direct and indirect economic impact of the pandemic and containment measures on the industries in which we and our customers operate. Among other things COVID-19 and government and our responses to the virus could (1) adversely affect the ability of our suppliers and vendors to provide products and services to us; (2) make it more difficult for us to serve our tenants, including as a result of delays or suspensions in the issuance of permits or other authorizations needed to conduct our business; (3) cause labor shortages in the available labor force due to quarantine requirements thereby making it more difficult for us to attract, hire and retain qualified personnel; and (4) increase our cost of capital and adversely impact our access to capital. Due to factors beyond our knowledge or control, including the duration and severity of COVID-19, as well as third-party actions taken to contain its spread and mitigate its public health effects, at this time we cannot estimate or predict with certainty the impact of COVID-19 or the measures the government and we take in response thereto on our financial position, results of operations and cash flows.
Adverse economic and geopolitical conditions in general and the Northeastern office markets in particular could have a material adverse effect on our results of operations, financial condition and our ability to pay distributions to you.
Our business may be affected by the continuing volatility in the financial and credit markets, the general global economic conditions, continuing high unemployment, and other market or economic challenges experienced by the U.S. economy or the real estate industry as a whole. Our business also may be adversely affected by local economic conditions, as substantially all of our revenues are derived from our properties located in New Jersey, New York and Massachusetts. Because our portfolio currently consists primarily of multifamily and office rental buildings (as compared to a more diversified real estate portfolio) located in the Northeast, if economic conditions persist or deteriorate, then our results of operations, financial condition and ability to service current debt and to pay distributions to our shareholders may be adversely affected by the following, among other potential conditions:
significant job losses in the financial and professional services industries may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted;
our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities and refinance existing debt, reduce our returns from both our existing operations and our acquisition and development activities and increase our future interest expense;
reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;
the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have made short-term investments, the dislocation of the markets for our short-term investments, increased volatility in market rates for such investments or other factors;
reduced liquidity in debt markets and increased credit risk premiums for certain market participants may impair our ability to access capital; and
one or more lenders under our line of credit could refuse or be unable to fund their financing commitment to us and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.
These conditions, which could have a material adverse effect on our results of operations, financial condition and ability to pay distributions, may continue or worsen in the future.
Our performance is subject to risks associated with the real estate industry.
General: Our business and our ability to make distributions or payments to our investors depend on the ability of our properties to generate funds in excess of operating expenses (including scheduled principal payments on debt and capital expenditures). Events or conditions that are beyond our control may adversely affect our operations and the value of our properties. Such events or conditions could include:
changes in the general economic climate and conditions;
changes in local conditions, such as an oversupply of office space, a reduction in demand for office space, or reductions in office market rental rates;
an oversupply or reduced demand for multifamily apartments caused by a decline in household formation, decline in employment or otherwise;
decreased attractiveness of our properties to tenants and residents;
competition from other office and multifamily properties;
development by competitors of competing multifamily communities;
unwillingness of tenants to pay rent increases;
rent control or rent stabilization laws, or other housing laws and regulations that could prevent us from raising multifamily rents to offset increases in operating costs;
our inability to provide adequate maintenance;
increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents;
changes in laws and regulations (including tax, environmental, zoning and building codes, landlord/tenant and other housing laws and regulations) and agency or court interpretations of such laws and regulations and the related costs of compliance;
changes in interest rate levels and the availability of financing;
the inability of a significant number of tenants or residents to pay rent;
our inability to rent multifamily or office rental space on favorable terms; and
civil unrest, earthquakes, acts of terrorism and other natural disasters or acts of God that may result in uninsured losses.
We may suffer adverse consequences if our revenues decline since our operating costs do not necessarily decline in proportion to our revenue: We earn a significant portion of our income from renting our properties. Our operating costs, however, do not necessarily fluctuate in relation to changes in our rental revenue. This means that our costs will not necessarily decline even if our revenues do. Our operating costs could also increase while our revenues do not. If our operating costs increase but our rental revenues do not, we may be forced to borrow to cover our costs and we may incur losses. Such losses may adversely affect our ability to make distributions or payments to our investors.
Financially distressed tenants may be unable to pay rent: If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord and protecting our investments. If a tenant files for bankruptcy, we cannot evict the tenant solely because of the bankruptcy and a potential court judgment rejecting and terminating such tenant’s lease (which would subject all future unpaid rent to a statutory cap) could adversely affect our ability to make distributions or payments to our investors as we may be unable to replace the defaulting tenant with a new tenant at a comparable rental rate without incurring significant expenses or a reduction in rental income.
Renewing leases or re-letting space could be costly: If a tenant does not renew its lease upon expiration or terminates its lease early, we may not be able to re-lease the space on favorable terms or at all. If a tenant does renew its lease or we re-lease the space, the terms of the renewal or new lease, including the cost of required renovations or concessions to the tenant, may be less favorable than the current lease terms, which could adversely affect our ability to make distributions or payments to our investors.
Adverse developments concerning some of our major tenants and industry concentrations could have a negative impact on our revenue: We have tenants concentrated in various industries that may be experiencing adverse effects of current economic conditions. For instance, 13.5 percent of our revenue is derived from tenants in the Securities, Commodity Contracts and Other Financial Services industry. Our business could be adversely affected if any of these industries suffered a downturn and/or these tenants or any other tenants became insolvent, declared bankruptcy or otherwise refused to pay rent in a timely manner or at all.
Our insurance coverage on our properties may be inadequate or our insurance providers may default on their obligations to pay claims: We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire and flood. We cannot guarantee that the limits of our current policies will be sufficient in the event of a catastrophe to our properties. We cannot guarantee that we will be able to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, while our current insurance policies insure us against loss from terrorist acts and toxic mold, in the future, insurance companies may no longer offer coverage against these types of losses, or, if offered, these types of insurance may be prohibitively expensive. If any or all of the foregoing should occur, we may not have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. Should an uninsured loss or a loss in excess of our insured limits occur, we could lose all or a portion of the capital we have invested in a property or properties, as well as the anticipated future revenue from the property or properties. Nevertheless, we might remain obligated for any mortgage debt or other financial obligations related to the property or properties. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our ability to make distributions or payments to our investors. If one or more of our insurance providers were to fail to pay a claim as a result of insolvency, bankruptcy or otherwise, the nonpayment of such claims could have an adverse effect on our financial condition and results of operations. In addition, if one or more of our insurance providers were to become subject to insolvency, bankruptcy or other proceedings and our insurance policies with the provider were terminated or
canceled as a result of those proceedings, we cannot guarantee that we would be able to find alternative coverage in adequate amounts or at reasonable prices. In such case, we could experience a lapse in any or adequate insurance coverage with respect to one or more properties and be exposed to potential losses relating to any claims that may arise during such period of lapsed or inadequate coverage.
Illiquidity of real estate limits our ability to act quickly: Real estate investments are relatively illiquid. Such illiquidity may limit our ability to react quickly in response to changes in economic and other conditions. If we want to sell an investment, we might not be able to dispose of that investment in the time period we desire, and the sales price of that investment might not recoup or exceed the amount of our investment. The prohibition in the Internal Revenue Code of 1986, as amended (the “IRS Code”), and related regulations on a real estate investment trust holding property for sale also may restrict our ability to sell property. In addition, we acquired a significant number of our properties from individuals to whom the Operating Partnership issued Units as part of the purchase price. In connection with the acquisition of these properties, in order to preserve such individual’s income tax deferral, we contractually agreed not to sell or otherwise transfer the properties for a specified period of time, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate individuals for the income tax consequences of the recognition of such built-in-gains. These restrictions expired in February 2016. Upon the expiration of such restrictions we are generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the appropriate individuals. After the effects of tax-free exchanges on certain of the originally contributed properties, either wholly or partially, over time, five of our properties, as well as certain land and development projects, including properties classified as held for sale as of December 31, 2021, with an aggregate carrying value of approximately $1.0 billion, are subject to these conditions. The above limitations on our ability to sell our investments could adversely affect our ability to make distributions or payments to our investors.
We may not be able to dispose of non-core office assets within our anticipated timeframe or at favorable prices: The Company has determined to sell over time properties at total estimated sales proceeds of up to $732 million. While we intend to dispose of these properties opportunistically over time, there can be no assurance that these dispositions will be completed during the period of our strategic initiative. In addition, market conditions will impact our ability to dispose of these properties, and there can be no assurance that we will be successful in disposing of these properties for their estimated sales prices. A failure to dispose of these properties for their estimated market values as planned, or unfavorable tax consequences of the disposition of these properties could have a material adverse effect on our ability to finance our acquisition and development plans and could adversely affect our ability to make distributions or payments to our investors.
New acquisitions, including acquisitions of multifamily rental properties, may fail to perform as expected and will subject us to additional new risks and could adversely affect our ability to make distributions or payments to our investors: We intend to and may acquire new properties, primarily in the multifamily rental sector, assuming that we are able to obtain capital on favorable terms. Such newly acquired properties may not perform as expected and may subject us to unknown liability with respect to liabilities relating to such properties for clean-up of undisclosed environmental contamination or claims by tenants, residents, vendors or other persons against the former owners of the properties. Inaccurate assumptions regarding future rental or occupancy rates could result in overly optimistic estimates of future revenues. In addition, future operating expenses or the costs necessary to bring an acquired property up to standards established for its intended market position may be underestimated. The search for and process of acquiring such properties will also require a substantial amount of management’s time and attention. As our portfolio shifts from primarily commercial office properties to increasingly more multifamily rental properties we will face additional and new risks such as:
shorter-term leases of one-year on average for multifamily rental communities, which allow residents to leave after the term of the lease without penalty;
increased competition from other housing sources such as other multifamily rental communities, condominiums and single-family houses that are available for rent as well as for sale;
dependency on the convenience and attractiveness of the communities or neighborhoods in which our multifamily rental properties are located and the quality of local schools and other amenities;
dependency on the financial condition of Fannie Mae or Freddie Mac which provide a major source of financing to the multifamily rental sector; and
compliance with housing and other new regulations.
The above factors could adversely affect our ability to make distributions or payments to our investors.
Americans with Disabilities Act compliance could be costly: Under the Americans with Disabilities Act of 1990 (“ADA”), all public accommodations and commercial facilities must meet certain federal requirements related to access and use by disabled persons. Compliance with the ADA requirements could involve removal of structural barriers from certain disabled persons’ entrances. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses.
Although we believe that our properties are substantially in compliance with present requirements, noncompliance with the ADA or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against us. Such costs may adversely affect our ability to make distributions or payments to our investors.
Environmental problems are possible and may be costly: Various federal, state and local laws and regulations subject property owners or operators to liability for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner or operator was responsible for or even knew of the presence of such substances. The presence of or failure to properly remediate hazardous or toxic substances (such as toxic mold, lead paint and asbestos) may adversely affect our ability to rent, sell or borrow against contaminated property and may impose liability upon us for personal injury to persons exposed to such substances. Various laws and regulations also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances at another location for the costs of removal or remediation of such substances at the disposal or treatment facility. These laws often impose liability whether or not the person arranging for such disposal ever owned or operated the disposal facility. Certain other environmental laws and regulations impose liability on owners or operators of property for injuries relating to the release of asbestos-containing or other materials into the air, water or otherwise into the environment. As owners and operators of property and as potential arrangers for hazardous substance disposal, we may be liable under such laws and regulations for removal or remediation costs, governmental penalties, property damage, personal injuries and related expenses. Payment of such costs and expenses could adversely affect our ability to make distributions or payments to our investors.
Our corporate sustainability strategies may not be effective. Our sustainability strategy is focused on building and maintaining healthy, high-performance properties, while mitigating operational costs and the potential external impacts of energy, water, waste, greenhouse gas emissions and climate change. Failure to develop and maintain sustainable buildings relative to our peers could adversely impact our ability to lease space at competitive rates and negatively impact our results of operations and portfolio attractiveness.
We face risks associated with property acquisitions: We have acquired in the past, and our long-term strategy is to continue to pursue the acquisition of rental properties, primarily in the Northeast, particularly multifamily rental properties. We may be competing for investment opportunities with entities that have greater financial resources. Several developers and real estate companies may compete with us in seeking properties for acquisition, land for development and prospective tenants. Such competition may adversely affect our ability to make distributions or payments to our investors by:
reducing the number of suitable investment opportunities offered to us;
increasing the bargaining power of property owners;
interfering with our ability to attract and retain tenants;
increasing vacancies which lowers market rental rates and limits our ability to negotiate rental rates; and/or
adversely affecting our ability to minimize expenses of operation.
Our acquisition activities and their success are subject to the following risks:
adequate financing to complete acquisitions may not be available on favorable terms or at all as a result of the continuing volatility in the financial and credit markets;
even if we enter into an acquisition agreement for a property, we may be unable to complete that acquisition and risk the loss of certain non-refundable deposits and incurring certain other acquisition-related costs;
the actual costs of repositioning or redeveloping acquired properties may be greater than our estimates;
any acquisition agreement will likely contain conditions to closing, including completion of due diligence investigations to our satisfaction or other conditions that are not within our control, which may not be satisfied; and
we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and acquired properties may fail to perform as expected; which may adversely affect our results of operations and financial condition.
Development of real estate, including the development of multifamily rental real estate could be costly: As part of our operating strategy, we may acquire land for development or construct on owned land, under certain conditions. Included among the risks of the real estate development business are the following, which may adversely affect our ability to make distributions or payments to our investors:
financing for development projects may not be available on favorable terms;
long-term financing may not be available upon completion of construction;
failure to complete construction and lease-up on schedule or within budget may increase debt service expense and construction and other costs; and
failure to rent the development at all or at rent levels originally contemplated.
Property ownership through joint ventures could subject us to the contrary business objectives of our co-venturers: We, from time to time, invest in joint ventures or partnerships in which we do not hold a controlling interest in the assets underlying the entities in which we invest, including joint ventures in which (i) we own a direct interest in an entity which controls such assets, or (ii) we own a direct interest in an entity which owns indirect interests, through one or more intermediaries, of such assets. These investments involve risks that do not exist with properties in which we own a controlling interest with respect to the underlying assets, including the possibility that (i) our co-venturers or partners may, at any time, become insolvent or otherwise refuse to make capital contributions when due, (ii) we may be responsible to our co-venturers or partners for indemnifiable losses, (iii) we may become liable with respect to guarantees of payment or performance by the joint ventures, (iv) we may become subject to buy-sell arrangements which could cause us to sell our interests or acquire our co-venturer’s or partner’s interests in a joint venture, or (v) our co-venturers or partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives. Because we lack a controlling interest, our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. While we seek protective rights against such contrary actions, there can be no assurance that we will be successful in procuring any such protective rights, or if procured, that the rights will be sufficient to fully protect us against contrary actions. Our organizational documents do not limit the amount of available funds that we may invest in joint ventures or partnerships. If the objectives of our co-venturers or partners are inconsistent with ours, it may adversely affect our ability to make distributions or payments to our investors.
We may face increased risks and costs associated with volatility in commodity and labor prices or as a result of supply chain or procurement disruptions, which may adversely affect the status of our construction projects.
The price of commodities and skilled labor for our construction projects may increase unpredictably due to external factors, including, but not limited to, performance of third-party suppliers and contractors; overall market supply and demand; government regulation; international trade; and changes in general business, economic, or political conditions. As a result, the costs of raw construction materials and skilled labor required for the completion of our development and redevelopment projects may fluctuate significantly from time to time.
We rely on a number of third-party suppliers and contractors to supply raw materials and skilled labor for our construction projects. While we do not rely on any single supplier or vendor for the majority of our materials and skilled labor, we may experience difficulties obtaining necessary materials from suppliers or vendors whose supply chains might become impacted by economic or political changes, or difficulties obtaining adequate skilled labor from third-party contractors in a tightening labor market. It is uncertain whether we would be able to source the essential commodities, supplies, materials, and skilled labor timely or at all without incurring significant costs or delays, particularly during times of economic uncertainty resulting from events outside of our control, including, but not limited to, effects of COVID-19. We may be forced to purchase supplies and materials in larger quantities or in advance of when we would typically purchase them. This may cause us to require use of capital sooner than anticipated. Alternatively, we may also be forced to seek new third-party suppliers or contractors, whom we have not worked with in the past, and it is uncertain whether these new suppliers will be able to adequately meet our materials or labor needs. Our dependence on unfamiliar supply chains or relatively small supply partners may adversely affect the cost and timely completion of our construction projects. In addition, we may be unable to compete with entities that may have more favorable relationships with their suppliers and contractors or greater access to the required construction materials and skilled labor.
During 2021, industry prices for certain construction materials, including steel, copper, lumber, plywood, electrical materials, and HVAC materials, experienced significant increases as a result of low inventories; surging demand fueled by the U.S. economy rebounding from the effects of COVID-19; tariffs imposed on imports of foreign steel, including on products from key competitors in the European Union (“EU”) and China; and significant changes in the U.S. steel production landscape stemming from the consolidation of certain steel-producing companies. Price surges on construction materials may result in corresponding increases in our development costs.
CAPITAL AND FINANCING RISKS
Our performance is subject to risks associated with repositioning a significant portion of the Company’s portfolio from office to multifamily rental properties.
Repositioning the Company’s office portfolio may result in impairment charges or less than expected returns on office properties and could adversely affect our ability to make distributions or payments to our investors: There can be no assurance that the Company, as it seeks to reposition a portion of its portfolio from office to the multifamily rental sector, will be able to sell office properties and purchase multifamily rental properties at prices that in the aggregate are profitable for the Company or are efficient uses of its capital or that would not result in a reduction of the Company’s cash flow, and such transactions could adversely affect our ability to make distributions or payments to our investors. Because real estate investments are relatively illiquid, it also may be difficult for the Company to promptly
sell its office properties that are held or may be designated for sale promptly or on favorable terms, which could have a material adverse effect on the Company’s financial condition. In addition, as the Company identifies non-core office properties that may be held for sale or that it intends to hold for a shorter period of time than previously, it may determine that the carrying value of a property is not recoverable over the anticipated holding period of the property. As a result, the Company may incur impairment charges for certain of these properties to reduce their carrying values to the estimated fair market values. Moreover, as the Company seeks to reposition a portion of its portfolio from office to the multifamily rental sector, the Company may be subject to a Federal income tax on gain from sales of properties due to limitations in the IRS Code and related regulations on a real estate investment trust’s ability to sell properties. The Company intends to structure its property dispositions in a tax-efficient manner and avoid the prohibition in the IRS Code against a real estate investment trust holding properties for sale. There is no guaranty, however, that such dispositions can be achieved without the imposition of federal income tax on any gain recognized.
Unfavorable changes in market and economic conditions could adversely affect multifamily rental occupancy, rental rates, operating expenses, and the overall market value of our assets, including joint ventures. Local conditions that may adversely affect conditions in multifamily residential markets include the following:
plant closings, industry slowdowns and other factors that adversely affect the local economy;
an oversupply of, or a reduced demand for, apartment units;
a decline in household formation or employment or lack of employment growth;
the inability or unwillingness of residents to pay rent increases;
rent control or rent stabilization laws, or other laws regulating housing, that could prevent us from raising rents to offset increases in operating costs; and
economic conditions that could cause an increase in our operating expenses, such as increases in property taxes, utilities, compensation of on-site associates and routine maintenance.
Changes in applicable laws, or noncompliance with applicable laws, could adversely affect our operations or expose us to liability: We must develop, construct and operate our communities in compliance with numerous federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations. These laws and regulations may include zoning laws, building codes, landlord tenant laws and other laws generally applicable to business operations. Noncompliance with applicable laws could expose us to liability. Lower revenue growth or significant unanticipated expenditures may result from our need to comply with changes in (i) laws imposing remediation requirements and the potential liability for environmental conditions existing on properties or the restrictions on discharges or other conditions, (ii) rent control or rent stabilization laws or other residential landlord/tenant laws, or (iii) other governmental rules and regulations or enforcement policies affecting the development, use and operation of our communities, including changes to building codes and fire and life-safety codes.
Failure to succeed in new markets, or with new brands and community formats, or in activities other than the development, ownership and operation of residential rental communities may have adverse consequences: We are actively engaged in development and acquisition activity in new submarkets within our core, Northeast markets where we have owned and operated our historical portfolio of office properties. Our historical experience with properties in our core, Northeast markets in developing, owning and operating properties does not ensure that we will be able to operate successfully in the new multifamily submarkets. We will be exposed to a variety of risks in the multifamily submarkets, including:
an inability to accurately evaluate local apartment market conditions;
an inability to obtain land for development or to identify appropriate acquisition opportunities;
an acquired property may fail to perform as we expected in analyzing our investment;
our estimate of the costs of repositioning or developing an acquired property may prove inaccurate; and
lack of familiarity with local governmental and permitting procedures.
Debt financing could adversely affect our economic performance.
Scheduled debt payments and refinancing could adversely affect our financial condition: We are subject to the risks normally associated with debt financing. These risks, including the following, may adversely affect our ability to make distributions or payments to our investors:
our cash flow may be insufficient to meet required payments of principal and interest;
payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses;
we may not be able to refinance indebtedness on our properties at maturity; and
if refinanced, the terms of refinancing may not be as favorable as the original terms of the related indebtedness.
As of December 31, 2021, we had total outstanding indebtedness of $2.4 billion comprised of outstanding borrowings of $148 million under our revolving credit facility, and approximately $2.2 billion of mortgages, loans payable and other obligations. We may have to refinance the principal due on our current or future indebtedness at maturity, and we may not be able to do so.
If we are unable to refinance our indebtedness on acceptable terms, or at all, events or conditions that may adversely affect our ability to make distributions or payments to our investors include the following:
we may need to dispose of one or more of our properties upon disadvantageous terms or adjust our capital expenditures in general or with respect to our strategy of acquiring multifamily residential properties and development opportunities in particular;
prevailing interest rates or other factors at the time of refinancing could increase interest rates and, therefore, our interest expense;
we may be subject to an event of default pursuant to covenants for our indebtedness;
if we mortgage property to secure payment of indebtedness and are unable to meet mortgage payments, the mortgagee could foreclose upon such property or appoint a receiver to receive an assignment of our rents and leases; and
foreclosures upon mortgaged property could create taxable income without accompanying cash proceeds and, therefore, hinder our ability to meet the real estate investment trust distribution requirements of the IRS Code.
We are obligated to comply with financial covenants in our indebtedness that could restrict our range of operating activities: The mortgages on our properties contain customary negative covenants, including limitations on our ability, without the prior consent of the lender, to further mortgage the property, to enter into new leases outside of stipulated guidelines or to materially modify existing leases. In addition, our revolving credit facility contains customary requirements, including restrictions and other limitations on our ability to incur debt, debt to assets ratios and interest coverage ratios. These covenants limit our flexibility in conducting our operations and create a risk of default on our indebtedness if we cannot continue to satisfy them. Some of our debt instruments are cross-collateralized and contain cross default provisions with other debt instruments. Due to this cross-collateralization, a failure or default with respect to certain debt instruments or properties could have an adverse impact on us or our properties that are subject to the cross-collateralization under the applicable debt instrument. Failure to comply with these covenants could cause a default under the agreements and, in certain circumstances, our lenders may be entitled to accelerate our debt obligations. Defaults under our debt agreements could materially and adversely affect our financial condition and results of operations.
Rising interest rates may adversely affect our cash flow: As of December 31, 2021, outstanding borrowings of approximately $148 million under our revolving credit facility and approximately $570 million of our mortgage indebtedness bear interest at variable rates. We may incur additional indebtedness in the future that bears interest at variable rates. Variable rate debt creates higher debt service requirements if market interest rates increase. Higher debt service requirements could adversely affect our ability to make distributions or payments to our investors and/or cause us to default under certain debt covenants.
Our degree of leverage could adversely affect our cash flow: We fund acquisition opportunities and development partially through short-term borrowings (including our revolving credit facility), as well as from proceeds from property sales and undistributed cash. We expect to refinance projects purchased with short-term debt either with long-term indebtedness or equity financing depending upon the economic conditions at the time of refinancing. The Board of Directors has a general policy of limiting the ratio of our indebtedness to total undepreciated assets (total debt as a percentage of total undepreciated assets) to 50 percent or less, although there is no limit in our organizational documents on the amount of indebtedness that we may incur. However, we have entered into certain financial agreements which contain financial and operating covenants that limit our ability under certain circumstances to incur additional secured and unsecured indebtedness. The Board of Directors could alter or eliminate its current policy on borrowing at any time at its discretion. If this policy were changed, we could become more highly leveraged, resulting in an increase in debt service that could adversely affect our cash flow and our ability to make distributions or payments to our investors and/or could cause an increased risk of default on our obligations.
We are dependent on external sources of capital for future growth: To qualify as a real estate investment trust under the IRS Code, the General Partner must distribute to its shareholders each year at least 90 percent of its net taxable income, excluding any net capital gain. Because of this distribution requirement, it is not likely that we will be able to fund all future capital needs, including for acquisitions and developments, from income from operations. Therefore, we will have to rely on third-party sources of capital, which may or may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of things, including the market’s perception of our growth potential and our current and potential future earnings. Moreover, additional equity offerings, including sales of the General Partner’s common stock pursuant to its $200 million At-The-Market equity offering commenced in December 2021, may result in substantial dilution of our shareholders’ interests, and additional debt financing may substantially increase
our leverage.
Adverse changes in our credit ratings could adversely affect our business and financial condition: The credit ratings previously assigned to our senior unsecured notes by nationally recognized statistical rating organizations (the “NRSROs”) were based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the NRSROs in their rating analyses of us. These ratings and similar ratings of us and any debt or preferred securities we may issue are subject to ongoing evaluation by the NRSROs, and we cannot assure you that any such ratings will not be changed by the NRSROs if, in their judgment, circumstances warrant. Our credit ratings can affect the amount of capital we can access, as well as the terms of any financings we may obtain. There can be no assurance that we will be able to maintain our current credit ratings, and in the event our current credit ratings are downgraded, we would likely incur higher borrowing costs and may encounter difficulty in obtaining additional financing.
Some of our costs, such as operating and general and administrative expenses, interest expense, and real estate acquisition and construction costs, are subject to inflation.
A portion of our operating expenses is sensitive to inflation. These include expenses for property-related contracted services such as janitorial and engineering services, utilities, repairs and maintenance, and insurance. Property taxes are also impacted by inflationary changes as taxes are regularly reassessed based on changes in the fair value of our properties. We also have ground lease expenses in certain of our properties. Ground lease costs are contractual, but in some cases, lease payments reset every few years based on changes of consumer price indexes.
Our operating expenses, with the exception of ground lease rental expenses, are typically recoverable through our lease arrangements, which allow us to pass through substantially all expenses associated with property taxes, insurance, utilities, repairs and maintenance, and other operating expenses (including increases thereto) to our tenants. During inflationary periods, we may not be able to recover the cost of increases in operating expenses that exceed the fixed amounts for these expenses pursuant to our leases with tenants in our commercial office properties.
Additionally, inflationary pricing may have a negative effect on the real estate acquisitions and construction costs necessary to complete our development and redevelopment projects, including, but not limited to, costs of construction materials, labor, and services from third-party contractors and suppliers. Higher acquisition and construction costs could adversely impact our net investments in real estate and expected yields on our development and redevelopment projects, which may make otherwise lucrative investment opportunities less profitable to us. Our commercial leases have fixed rent increases which may not increase in line with inflation, this causing our net operating income to decrease. As a result, our financial condition, results of operations, and cash flows, as well as our ability to pay dividends, could be adversely affected over time.
MANAGEMENT RISKS
We may not be able to attract, integrate manage and retain personnel to execute our business strategy, and competition for skilled personnel could increase our labor costs.
Our success depends upon our ability to attract, integrate, manage and retain personnel who possess the skills and experience necessary to execute our acquisition, development, management and leasing strategies. We compete with various other companies in attracting and retaining qualified and skilled personnel. Our ability to hire and retain qualified personnel could be impaired by a lack of qualified candidates in the available labor force, the ongoing effects of the COVID-19 pandemic, including vaccination mandates, any diminution of our reputation, decrease in compensation levels relative to our competitors or modifications to our total compensation philosophy or competitor hiring programs. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel. We may not be able to offset such added costs by increasing the rates we charge our tenants. If we cannot attract, hire and retain qualified personnel, our business, financial condition and results of operations would be negatively impacted. Our future success also depends upon our ability to manage the performance of our personnel. Failure to successfully manage the performance of our personnel could affect our profitability by causing operating inefficiencies that could increase operating expenses and reduce operating income.
We are dependent on our key personnel whose continued service is not guaranteed.
We are dependent upon key personnel for strategic business direction and real estate experience, including our chief executive officer, chief financial officer, chief investments officer, chief accounting officer and general counsel. While we believe that we could find replacements for these key personnel, loss of their services could adversely affect our operations. We do not have key man life insurance for our key personnel. In addition, as the Company seeks to reposition a portion of its portfolio from office to the multifamily rental
sector, the Company may become increasingly dependent on non-executive personnel with residential development and leasing expertise to effectively execute the Company’s long-term strategy.
Our real estate construction management activities are subject to risks particular to third-party construction projects.
As we may perform fixed price construction services for third parties, we are subject to a variety of risks unique to these activities. If construction costs of a project exceed original estimates, such costs may have to be absorbed by us. In addition, a construction project may be delayed due to circumstances beyond our control, or the time required to complete a construction project may be greater than originally anticipated. If any such excess costs or project delays were to be material, such events may adversely affect our cash flow and liquidity and thereby impact our ability to make distributions or payments to our investors.
INVESTMENT RISKS
Certain provisions of Maryland law and the General Partner’s charter and bylaws could hinder, delay or prevent changes in control.
Certain provisions of Maryland law and General Partner's charter and bylaws have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change in control. These provisions include the following:
Removal of Directors: Under the General Partner's charter, subject to the rights of one or more classes or series of preferred stock to elect one or more directors, a director may be removed only for cause and only by the affirmative vote of at least two-thirds of all votes entitled to be cast by our stockholders generally in the election of directors. Neither the Maryland General Corporation Law nor the General Partner's charter define the term “cause.” As a result, removal for “cause” is subject to Maryland common law and to judicial interpretation and review in the context of the facts and circumstances of any particular situation.
Number of Directors, Board Vacancies, Terms of Office: The General Partner has, in its bylaws, elected to be subject to certain provisions of Maryland law which vest in the Board of Directors the exclusive right to determine the number of directors and the exclusive right, by the affirmative vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum, to fill vacancies on the board. These provisions of Maryland law, which are applicable even if other provisions of Maryland law or the charter or bylaws provide to the contrary, also provide that any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, rather than the next annual meeting of stockholders as would otherwise be the case, and until his or her successor is elected and qualifies. The General Partner has, in its corporate governance principles, adopted a mandatory retirement age of 80 years old for directors.
Stockholder Requested Special Meetings: The General Partner’s bylaws provide that its stockholders have the right to call a special meeting only upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast by the stockholders at such meeting.
Advance Notice Provisions for Stockholder Nominations and Proposals: The General Partner's bylaws require advance written notice for stockholders to nominate persons for election as directors at, or to bring other business before, any meeting of stockholders. This bylaw provision limits the ability of stockholders to make nominations of persons for election as directors or to introduce other proposals unless we are notified in a timely manner prior to the meeting.
Preferred Stock: Under the General Partner's charter, its Board of Directors has authority to issue preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of its stockholders. As a result, its Board of Directors may establish a series of preferred stock that could delay or prevent a transaction or a change in control.
Duties of Directors with Respect to Unsolicited Takeovers: Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations. The duties of directors of Maryland corporations do not require them to (a) accept, recommend or respond to any proposal by a person seeking to acquire control of the corporation, (b) authorize the corporation to redeem any rights under, or modify or render inapplicable, any stockholders rights plan, (c) make a determination under the Maryland Business Combination Act or the Maryland Control Share Acquisition Act, or (d) act or fail to act solely because of the effect the act or failure to act may have on an acquisition or potential acquisition of control of the corporation or the amount or type of consideration that may be offered or paid to the stockholders in an acquisition. Maryland law also contains a statutory presumption that an act of a director of a Maryland corporation satisfies the applicable standards of conduct for directors under Maryland law.
Ownership Limit: In order to preserve the General Partner's status as a real estate investment trust under the IRS Code, its charter generally prohibits any single stockholder, or any group of affiliated stockholders, from beneficially owning more than 9.8 percent of its outstanding capital stock unless its Board of Directors waives or modifies this ownership limit.
Maryland Business Combination Act: The Maryland Business Combination Act provides that unless exempted, a Maryland corporation may not engage in certain business combinations, including mergers, consolidations, share exchanges or, in circumstances specified in the statute, asset transfers, issuances or reclassifications of shares of stock and other specified transactions, with an “interested stockholder” or an affiliate of an interested stockholder, for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. An interested stockholder is generally a person owning or controlling, directly or indirectly, 10 percent or more of the voting power of the outstanding stock of the Maryland corporation. The General Partner's board of directors has exempted from this statute business combinations between the Company and certain affiliated individuals and entities. However, unless its board adopts other exemptions, the provisions of the Maryland Business Combination Act will be applicable to business combinations with other persons.
Maryland Control Share Acquisition Act: Maryland law provides that holders of “control shares” of a corporation acquired in a “control share acquisition” shall have no voting rights with respect to the control shares except to the extent approved by a vote of two-thirds of the votes eligible to cast on the matter under the Maryland Control Share Acquisition Act. “Control shares” means shares of stock that, if aggregated with all other shares of stock previously acquired by the acquirer, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of the voting power: one-tenth or more but less than one-third, one-third or more but less than a majority or a majority or more of all voting power. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions.
If voting rights of control shares acquired in a control share acquisition are not approved at a stockholder’s meeting, then subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a stockholder’s meeting and the acquirer becomes entitled to vote a majority of the shares of stock entitled to vote, all other stockholders may exercise appraisal rights. In 2018, the General Partner's bylaws were amended to exempt any acquisition of the General Partner’s shares from the Maryland Control Share Acquisition Act. If the General Partner’s bylaws are amended to repeal or limit the exemption from the Maryland Control Share Acquisition Act, it may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating a change in control.
Changes in market conditions could adversely affect the market price of the General Partner’s common stock.
As with other publicly traded equity securities, the value of the General Partner's common stock depends on various market conditions, which may change from time to time. The market price of the General Partner's common stock could change in ways that may or may not be related to our business, the General Partner's industry or our operating performance and financial condition. Among the market conditions that may affect the value of the General Partner's common stock are the following:
the general reputation of REITs and the attractiveness of the General Partner's equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;
our financial performance; and
general stock and bond market conditions.
The market value of the General Partner's common stock is based primarily upon the market’s perception of our growth potential and our current and potential future earnings and cash dividends. Consequently, the General Partner's common stock may trade at prices that are higher or lower than its net asset value per share of common stock.
REIT STATUS RISKS
The enactment of significant new tax legislation, generally effective for tax years beginning after December 31, 2017, could have a material and adverse effect on us and the market price of our shares.
On December 22, 2017, Pub. L. No. 15-97 (informally known as the Tax Cuts and Jobs Act (the “Act”)) was enacted into law. The Act made major changes to the Code, including a number of provisions of the Code that affect the taxation of REITs and their stockholders. The long-term effect of the significant changes made by the Act remains uncertain, and additional administrative guidance will be required in order to fully evaluate the effect of many provisions. The effect of any technical corrections with respect to the Act could have an adverse effect on us or our stockholders or holders of our debt securities.”
Consequences of the General Partner's failure to qualify as a real estate investment trust could adversely affect our financial condition.
Failure to maintain ownership limits could cause the General Partner to lose its qualification as a real estate investment trust: In order for the General Partner to maintain its qualification as a real estate investment trust under the IRS Code, not more than 50 percent in value of its outstanding stock may be actually and/or constructively owned by five or fewer individuals (as defined in the IRS Code to include certain entities). The General Partner has limited the ownership of its outstanding shares of common stock by any single stockholder to 9.8 percent of the outstanding shares of its common stock. Its Board of Directors could waive this restriction if it was satisfied, based upon the advice of tax counsel or otherwise, that such action would be in the best interests of the General Partner and its stockholders and would not affect its qualification as a real estate investment trust under the IRS Code. Common stock acquired or transferred in breach of the limitation may be redeemed by us for the lesser of the price paid and the average closing price for the 10 trading days immediately preceding redemption or sold at the direction of the General Partner. The General Partner may elect to redeem such shares of common stock for Units, which are nontransferable except in very limited circumstances. Any transfer of shares of common stock which, as a result of such transfer, causes the General Partner to be in violation of any ownership limit, will be deemed void. Although the General Partner currently intends to continue to operate in a manner which will enable it to continue to qualify as a real estate investment trust under the IRS Code, it is possible that future economic, market, legal, tax or other considerations may cause its Board of Directors to revoke the election for the General Partner's to qualify as a real estate investment trust. Under the General Partner's organizational documents, its Board of Directors can make such revocation without the consent of its stockholders.
In addition, the consent of the holders of at least 85 percent of the Operating Partnership’s partnership units is required: (i) to merge (or permit the merger of) the Operating Partnership with another unrelated person, pursuant to a transaction in which the Operating Partnership is not the surviving entity; (ii) to dissolve, liquidate or wind up the Operating Partnership; or (iii) to convey or otherwise transfer all or substantially all of the Operating Partnership’s assets. As of February 18, 2022, the General Partner owned approximately 91.0 percent of the Operating Partnership’s outstanding common partnership units.
Tax liabilities as a consequence of failure to qualify as a real estate investment trust: The General Partner has elected to be treated and has operated so as to qualify as a real estate investment trust for federal income tax purposes since the General Partner's taxable year ended December 31, 1994. Although the General Partner believes it will continue to operate in such manner, it cannot guarantee that it will do so. Qualification as a real estate investment trust involves the satisfaction of various requirements (some on an annual and some on a quarterly basis) established under highly technical and complex tax provisions of the IRS Code. Because few judicial or administrative interpretations of such provisions exist and qualification determinations are fact sensitive, the General Partner cannot assure you that it will qualify as a real estate investment trust for any taxable year.
If the General Partner fails to qualify as a real estate investment trust in any taxable year, it will be subject to the following:
it will not be allowed a deduction for dividends paid to shareholders;
it will be subject to federal income tax at regular corporate rates, including any alternative minimum tax, if applicable; and
unless it is entitled to relief under certain statutory provisions, it will not be permitted to qualify as a real estate investment trust for the four taxable years following the year during which was disqualified.
A loss the General Partner's status as a real estate investment trust could have an adverse effect on us. Failure to qualify as a real estate investment trust also would eliminate the requirement that the General Partner pay dividends to its stockholders. In addition, any such dividends that the General Partner does pay to its stockholders would not constitute qualified REIT dividends and would accordingly not qualify for a deduction of up to 20 percent.
Other tax liabilities: Even if the General Partner qualifies as a real estate investment trust under the IRS Code, its subject to certain federal, state and local taxes on our income and property and, in some circumstances, certain other state and local taxes. From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and amount of such increase. These actions could adversely affect our financial condition and results of operations. In addition, our taxable REIT subsidiaries will be subject to federal, state and local income tax for income received in connection with certain non-customary services performed for tenants and/or third parties.
Risk of changes in the tax law applicable to real estate investment trusts: Since the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any such legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect taxation of us, and/or our investors.
OTHER RISKS
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our tenants and business partners, including personally identifiable information of our tenants and employees, in our data centers and on our networks and our business is at risk from and may be impacted by cybersecurity attacks. These attacks could include attempts to gain unauthorized access to our data and computer systems. Attacks can be both individual and/or highly organized attempts organized by very sophisticated hacking organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include data encryption, frequent password change events, firewall detection systems, anti-virus software and frequent backups; however, there is no guarantee such efforts will be successful in preventing a cyber-attack, and we consult with outside cybersecurity firms to advise on our cybersecurity measures. We also have implemented internal controls around our treasury function, including enhanced payment authorization procedures, verification requirements for new vendor setup and vendor information changes, and bolstered outgoing payment notification process and account reconciliation procedures. We have policies and procedures in place in order to identify cybersecurity incidents and elevate such incidents to senior management in order to appropriately address and remediate any cyber-attack. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions, and there can be no assurance that our actions, security measures, and controls designed to prevent, detect, or respond to intrusion; to limit access to data; to prevent loss, destruction, alteration, or exfiltration of business information; or to limit the negative impact from such attacks can provide absolute security against a cybersecurity incident. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, increased cybersecurity insurance premiums and damage our reputation, which could adversely affect our business.
We face possible risks associated with the physical effects of climate change.
We cannot predict with certainty whether climate change is occurring and, if so, at what rate. However, the physical effects of climate change could have a material adverse effect on our properties, operations, and business. To the extent climate change causes changes in weather patterns or severity, our markets could experience increase in storm intensity (including floods, tornadoes, hurricanes, or snow and ice storms), rising sea-levels, and changes in precipitation, temperature, air quality, and quality and availability of water. Over time, these conditions could result in physical damage to, or declining demand for, our properties or our inability to operate the buildings efficiently or at all. Climate change may also indirectly affect our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of required resources, including energy, other fuel sources, water, and waste and snow removal services, and increasing the risk and severity of flood and earthquakes at our properties. Should the impact of climate change be severe or occur for lengthy periods of time, our financial condition or results of operations could be adversely impacted. In addition, compliance with new or more stringent laws or regulations or stricter interpretations of existing laws may require material expenditure by us. For example, various federal, state, and local laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions. Among other things, "green" building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency, and waste management. Such codes could require us to make improvements to our existing properties, increase the costs of maintaining or improving our existing properties or developing new properties, or increase taxes and fees assessed on us or our properties. Expenditures required for compliance with such codes may affect our cash flow and results of operations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
‎

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
PROPERTY LIST
As of December 31, 2021, the Company’s Consolidated Properties consisted of 15 multifamily rental properties, as well as ten in-service commercial properties and two hotels. The Consolidated Properties are located primarily in the Northeast. The Consolidated Properties are easily accessible from major thoroughfares and are in close proximity to numerous amenities. The Consolidated Properties contain a total of approximately 4,545 apartment units and 4.9 million square feet of commercial space with the individual commercial properties ranging from 8,400 to 1,246,283 square feet. The Consolidated Properties, managed by on-site employees, generally have attractively landscaped sites and atriums in addition to quality design and construction. The Company’s commercial tenants include many service sector employers, including a large number of professional firms and national and international businesses. The Company believes that all of its in-service properties are well-maintained and do not require significant capital improvements.
Multifamily Rental Properties
Average
Net
% Leased
Base Rent
Percentage
Base Rent
Year
Rentable Area
12/31/21
($000’s)
of Total 2021
Per Home
Location
Built
(SF/Units/Rooms)
(%) (a)
(b) (c)
Base Rent (%)
($) (c) (d)
NEW JERSEY
The Upton (g)
Short Hills, NJ
99.5
4,259
1.60
2,205
BLVD 475 N
Jersey City, NJ
95.9
8,344
3.14
2,984
BLVD 475 S
Jersey City, NJ
96.8
8,342
3.14
2,565
BLVD 425
Jersey City, NJ
95.6
12,348
4.65
2,612
BLVD 401
Jersey City, NJ
96.2
10,162
3.83
2,832
Liberty Towers
Jersey City, NJ
95.5
21,663
8.16
2,916
Soho Lofts
Jersey City, NJ
97.1
14,297
5.39
3,255
Riverhouse11 at Port Imperial
Weehawken, NJ
97.6
10,553
3.98
3,054
Riverhouse9 at Port Imperial (g)
Weehawken, NJ
94.6
2,899
1.09
1,619
Signature Place
Morris Plains, NJ
99.0
5,650
2.12
2,415
Total New Jersey Multifamily Rental
3,269
96.5
98,517
37.10
2,701
NEW YORK
Quarry Place at Tuckahoe
Eastchester, NY
97.2
4,118
1.55
3,268
Total New York Multifamily Rental
97.2
4,118
1.55
3,268
MASSACHUSETTS
The Emery at Overlook Ridge
Revere, MA
96.0
7,487
2.82
1,993
Portside at Pier One
East Boston, MA
92.3
5,367
2.02
2,678
Portside 5/6
East Boston, MA
96.9
8,766
3.30
2,545
145 Front at City Square
Worcester, MA
94.6
8,262
3.11
1,923
Total Massachusetts Multifamily Rental
1,168
96.3
29,882
11.25
2,213
TOTAL MULTIFAMILY PROPERTIES
4,545
96.4
132,517
49.90
2,511
Office Properties
Average
Average
Net
% Leased
Base Rent
Percentage
Base Rent
Effective Rent
Year
Rentable Area
12/31/21
($000’s)
of Total 2021
Per Sq. Ft.
Per Sq. Ft.
Property Location
Location
Built
(SF/Units/Rooms)
(%) (a)
(b) (c)
Base Rent (%)
($) (c) (e)
($) (c) (f)
111 River Street (h)
Hoboken, NJ
566,215
81.3
21,041
7.93
45.71
42.03
Harborside Plaza 2
Jersey City, NJ
761,200
78.6
24,307
9.16
40.63
34.31
Harborside Plaza 3 (c)
Jersey City, NJ
726,022
94.3
23,220
8.75
33.92
28.66
Harborside Plaza 5
Jersey City, NJ
977,225
42.8
23,380
8.81
55.90
49.81
Harborside Plaza 6
Jersey City, NJ
231,856
20.5
2,966
1.11
62.40
60.59
101 Hudson Street (c) (h)
Jersey City, NJ
1,246,283
83.1
32,089
12.11
30.98
25.42
23 Main Street
Holmdel, NJ
350,000
100.0
4,566
1.72
13.05
10.31
TOTAL OFFICE PROPERTIES (q)
4,858,801
74.0
(i)
131,569
49.59
36.60
31.48
Retail/Garage Properties
100 Avenue at Port Imperial (j) (k)
Weehawken, NJ
8,400
100.0
0.10
32.50
31.19
500 Avenue at Port Imperial (l)
Weehawken, NJ
18,064
88.1
0.26
42.85
37.51
Port Imperial North Retail
West New York, NJ
30,745
58.0
0.15
22.54
18.56
TOTAL RETAIL/GARAGE PROPERTIES
57,209
73.7
1,357
0.51
32.20
28.23
Hotel Properties
Envue Autograph Collection
Weehawken, NJ
-
(m)
-
-
-
Residence Inn at Port Imperial
Weehawken, NJ
-
(n)
-
-
-
TOTAL HOTEL PROPERTIES
-
-
-
-
-
TOTAL COMMERCIAL PROPERTIES
74.0
(i)
132,926
50.10
36.54
31.43
TOTAL PROPERTIES
265,443
(o)(p)
100.00
Footnotes to Property List (dollars in thousands, except per square foot amounts):
(a)
Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases expiring December 31, 2021 aggregating 24,545 square feet (representing 0.5 percent of the Company’s total net rentable square footage) for which no new leases were signed.
(b)
Total base rent for the year ended December 31, 2021, determined in accordance with generally accepted accounting principles (“GAAP”). Substantially all of the commercial leases provide for annual base rents plus recoveries and escalation charges based upon the tenant’s proportionate share of and/or increases in real estate taxes and certain operating costs, as defined, and the pass through of charges for electrical usage. For the 12 months ended December 31, 2021, total escalations and recoveries from tenants were: $16,821, or $5.40 per leased square foot, for office properties.
(c)
Excludes space leased by the Company.
(d)
Annualized base rent for the 12 months ended December 31, 2021 divided by units occupied at December 31, 2021, divided by 12.
(e)
Base rent for the 12 months ended December 31, 2021 divided by net rentable commercial square feet leased at December 31, 2021.
(f)
Total base rent, determined in accordance with GAAP, for 2021 minus 2021 amortization of tenant improvements, leasing commissions and other concessions and costs, determined in accordance with GAAP, divided by net rentable square feet leased at December 31, 2021.
(g)
As this property was acquired, commenced initial operations or initially consolidated by the Company during the 12 months ended December 31, 2021, the amounts represented in 2021 base rent reflect only that portion of those 12 months during which the Company owned or consolidated the property. Accordingly, these amounts may not be indicative of the property’s full year results. For comparison purposes, the amounts represented in 2021 average base rent per sq. ft. and per unit for this property have been calculated by taking the 12 months ended December 31, 2021 base rent for such property and annualizing these partial-year results, dividing such annualized amounts by the net rentable square feet leased or occupied units at December 31, 2021. These annualized per square foot and per unit amounts may not be indicative of the property’s results had the Company owned or consolidated the property for the entirety of the 12 months ended December 31, 2021.
(h)
Property is held for sale by the Company as of December 31, 2021.
(i)
Excludes properties being considered for repositioning, redevelopment, potential sale, or being prepared for lease up.
(j)
This property had Parking Income of $480 in 2021.
(k)
Excludes $(833) of adjustments to Base Rent in 2021.
(l)
This property had Parking Income of $2,064 in 2021.
(m)
This property had Hotel Income of $5,526 in 2021.
(n)
This property had Hotel Income of $5,092 in 2021.
(o)
Excludes approximately $27.8 million from properties which were disposed of or removed from service during the year ended December 31, 2021.
(p)
Includes $55.4 million from properties held for sale as of December 31, 2021.
(q)
Excludes Harborside Plaza 1, a 400,000 square foot office property which has been removed from service.
IN-DEVELOPMENT PROPERTIES
(dollars in thousands)
Expected
Costs
Property
Development
Incurred
Development
Initial
Property
Location
Type
# of Units
Costs
to Date
Start
Occupancy
Haus 25 - 25 Christopher Columbus
Jersey City, NJ
Multifamily
$
469,510
$
424,963
1Q 2019
2Q 2022
$
469,510
$
424,963
PERCENTAGE LEASED
The following table sets forth the year-end percentages of multifamily units and commercial square feet leased in the Company’s stabilized operating Consolidated Properties for the last five years:
Percent Leased (%)
December 31,
Multifamily
Commercial (a)(b)
96.4
74.0
85.4
78.7
92.1
80.7
(c)
94.2
83.2
(c)
95.8
87.6
(c)
(a)Percentage of square-feet leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases that expire at the period end date. For all years, excludes properties being prepared for lease up.
(b)Includes properties classified as held for sale as of December 31, 2021.
(c)Excludes properties being considered for repositioning or redevelopment. Inclusive of such properties, percentage of square feet leased as of 2019, 2018 and 2017 was 80.6, 81.7 and 85.6 percent, respectively.
‎
Significant Tenants
The following table sets forth a schedule of the Company’s 15 largest commercial tenants for the Consolidated Properties as of December 31, 2021 based upon annualized base rental revenue:
Percentage of
Annualized
Company
Square
Percentage
Year of
Number of
Base Rental
Annualized Base
Feet
Total Company
Lease
Properties (a)
Revenue ($) (b)
Rental Revenue (%)
Leased
Leased Sq. Ft. (%)
Expiration
John Wiley & Sons Inc.
10,888,238
9.1
290,353
8.6
2033 (c)
MUFG Bank Ltd.
9,939,269
8.3
237,350
7.0
2029 (d)
Merrill Lynch Pierce Fenner
9,417,902
7.9
388,207
11.4
E-Trade Financial Corporation
5,396,412
4.5
132,265
3.9
Vonage America Inc.
5,022,500
4.2
350,000
10.3
Arch Insurance Company
4,326,008
3.6
106,815
3.1
Sumitomo Mitsui Banking Corp
4,185,456
3.5
111,105
3.3
Brown Brothers Harriman & Co.
4,017,930
3.4
114,798
3.4
First Data Corporation
3,773,775
3.2
88,374
2.6
(e)
TP ICAP Americas Holdings Inc
3,446,090
2.9
100,759
3.0
(f)
Cardinia Real Estate LLC
3,174,886
2.7
79,771
2.3
New Jersey City University
3,010,854
2.5
84,929
2.5
Zurich American Ins. Co.
2,915,378
2.4
64,414
1.9
BETMGM, LLC
2,800,234
2.3
71,343
2.1
(g)
Amtrust Financial Services
2,614,328
2.3
76,892
2.3
Totals
74,929,260
62.8
2,297,375
67.7
(a)
Includes office property tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.
(b)
Annualized base rental revenue is based on actual December 2021 billings times 12. For leases whose rent commences after January 1, 2022, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(c)
In January 2022, the Company completed the disposition of the office property where the tenant leases space.
(d)
MUFG Bank Ltd. Entered into a Surrender Agreement in January 2022. 100,274 square feet expired on January 31, 2022.
(e)
32,193 square feet expire in 2026; 56,181 expire in 2029.
(f)
63,372 square feet expire in 2023; 37,387 square feet expire in 2033.
(g)
22,300 square feet expire in 2022; 49,043 square feet expire in 2032.
Schedule of Lease Expirations
The following table sets forth a schedule of lease expirations for the total of the Company’s office and stand-alone retail properties included in the Consolidated Properties beginning January 1, 2022, assuming that none of the tenants exercise renewal or termination options:
Average
Annual Base
Percentage Of
Rent Per Net
Net Rentable
Total Leased
Annualized
Rentable
Percentage Of
Area Subject
Square Feet
Base Rental
Square Foot
Annual Base
Number Of
To Expiring
Represented
Revenue Under
Represented
Rent Under
Year Of
Leases
Leases
By Expiring
Expiring
By Expiring
Expiring
Expiration
Expiring (a)
(Sq. Ft.)
Leases (%)
Leases ($) (b)
Leases ($)
Leases (%)
131,204
3.9
5,170,429
39.41
4.3
676,899
19.9
17,669,977
26.10
14.8
260,680
7.7
10,775,435
41.34
9.0
108,891
3.2
3,322,280
30.51
2.8
255,355
7.5
9,917,380
38.84
8.3
446,554
13.1
11,759,843
26.33
9.9
88,842
2.6
3,517,877
39.60
2.9
311,594
9.2
13,355,949
42.86
11.2
13,662
0.4
696,762
51.00
0.6
147,814
4.4
6,027,109
40.77
5.1
377,451
11.1
15,417,965
40.85
12.9
2033 and thereafter
576,553
17.0
21,711,742
37.66
18.2
Totals/Weighted
Average
3,395,499
(c)(d)
100.0
119,342,748
35.15
100.0
(a)
Includes office property tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.
(b)
Annualized base rental revenue is based on actual December 2021 billings times 12. For leases whose rent commences after January 1, 2022 annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(c)
Includes leases expiring December 31, 2021 aggregating 24,545 square feet and representing annualized rent of $0.9 million for which no new leases were signed.
(d)
Reconciliation to Company’s total net rentable square footage is as follows:
Square Feet
Square footage leased to commercial tenants
3,395,499
Square footage used for corporate offices, management offices, building use, retail tenants, food services, other ancillary service tenants and occupancy adjustments
199,154
Square footage unleased
1,264,148
Total net rentable commercial square footage (does not include land leases)
4,858,801
Market Diversification
The following table lists the Company’s markets, based on annualized contractual base rent of the Consolidated Properties:
Percentage Of
Annualized Base
Annualized
Rental Revenue
Base Rental
Market
Property Type
($) (a) (b)
Revenue (%)
Hudson County, NJ
Commercial/Multifamily
241,401,737
80.2
Suffolk/Worcester Counties, MA
Multifamily
34,225,284
11.4
Morris/Essex Counties, NJ
Multifamily
15,278,895
5.1
Monmouth County, NJ
Commercial
5,022,500
1.7
Westchester County, NY
Multifamily
4,946,124
1.6
Totals
300,874,540
100.0
(a)Annualized base rental revenue is based on actual December 2021 billings times 12. For leases whose rent commences after January 1, 2022, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(b)Includes leases in effect as of the period end date, some of which have commencement dates in the future, and leases expiring December 31, 2021 aggregating 24,545 square feet and representing annualized base rent of $0.9 million for which no new leases were signed.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company is a party or to which any of the Properties is subject.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
The shares of the General Partner's common stock are traded on the New York Stock Exchange (“NYSE”) under the symbol “VRE.” The Company’s common stock previously traded on the NYSE under the symbol “CLI” prior to its name change discussed in Item 1. There is no established public trading market for the Operating Partnership’s common units.
The following table sets forth the quarterly high, low, and closing price per share of the General Partner's Common Stock reported on the NYSE for the years ended December 31, 2021 and 2020, respectively:
For the Year Ended December 31, 2021
High
Low
Close
First Quarter
$
16.80
$
11.74
$
15.48
Second Quarter
$
17.95
$
15.28
$
17.15
Third Quarter
$
18.40
$
16.04
$
17.12
Fourth Quarter
$
19.90
$
16.45
$
18.38
For the Year Ended December 31, 2020
High
Low
Close
First Quarter
$
23.89
$
13.83
$
15.23
Second Quarter
$
18.83
$
12.90
$
15.29
Third Quarter
$
15.85
$
12.14
$
12.62
Fourth Quarter
$
15.06
$
10.35
$
12.46
On February 18, 2022, the closing Common Stock price reported on the NYSE was $17.43 per share.
On July 6, 2021, the General Partner filed with the NYSE its annual CEO Certification and Annual Written Affirmation pursuant to Section 303A.12 of the NYSE Listed Company Manual, each certifying that the General Partner was in compliance with all of the listing standards of the NYSE.
HOLDERS
On February 18, 2022, the General Partner had 249 common shareholders of record (this does not include beneficial owners for whom Cede & Co. or others act as nominee) and the Operating Partnership had 62 owners of limited partnership units and one owner of General Partnership units.
RECENT SALES OF UNREGISTERED SECURITIES; USES OF PROCEEDS FROM REGISTERED SECURITIES
None.
DIVIDENDS AND DISTRIBUTIONS
On September 30, 2020, the Company announced that its Board of Directors was suspending its common dividends and distributions attributable to the third and fourth quarters 2020. As the Company’s management estimated that as of September 2020 it had satisfied its dividends obligations as a REIT on taxable income expected for 2020, the Board made the strategic decision to suspend its common dividends and distributions for the remainder of 2020 in an effort to provide greater financial flexibility during the pandemic and to retain incremental capital to support leasing initiatives at its Harborside commercial office properties on the Jersey City waterfront. On March 19, 2021, the Company announced that its Board of Directors would continue to suspend its common dividend for the remainder of 2021 in order to conserve capital and allow for greater financial flexibility during this period of heightened economic uncertainty and based on the Company’s projected 2021 taxable income estimates. The Company believes that with its estimated taxable income/loss for 2021, it will meet its dividend obligations as a REIT for the year with no dividends paid. The Company anticipates its regular quarterly common dividend to remain suspended while it seeks to conclude its transition into a pureplay multifamily REIT.
The declaration and payment of dividends and distributions will continue to be determined by the Board of Directors of the General Partner in light of conditions then existing, including the Company’s earnings, cash flows, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors.
PERFORMANCE GRAPH
The following graph compares total stockholder returns from the last five fiscal years to the Standard & Poor’s 500 Index (“S&P 500”) and to the National Association of Real Estate Investment Trusts, Inc.’s FTSE NAREIT Equity REIT Index (“NAREIT”). The graph assumes that the value of the investment in the General Partner's Common Stock and in the S&P 500 and NAREIT indices was $100 at December 31, 2016 and that all dividends were reinvested. The price of the General Partner's Common Stock on December 31, 2016 (on which the graph is based) was $29.02. The past stockholder return shown on the following graph is not necessarily indicative of future performance.
Comparison of Five-Year Cumulative Total Return
‎

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. RESERVED

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements of Veris Residential, Inc. and Veris Residential, L.P. and the notes thereto (collectively, the “Financial Statements”). Certain defined terms used herein have the meaning ascribed to them in the Financial Statements.
Executive Overview
Veris Residential, Inc. together with its subsidiaries, (collectively, the “General Partner”), including Veris Residential, L.P. (the “Operating Partnership”), has been involved in all aspects of commercial real estate development, management and ownership for over 60 years and the General Partner has been a publicly traded real estate investment trust (“REIT”) since 1994.
The Operating Partnership conducts the business of providing management, leasing, acquisition, development, construction and tenant-related services for its General Partner. The Operating Partnership, through its operating divisions and subsidiaries, including the Veris property-owning partnerships and limited liability companies, is the entity through which all of the General Partner’s operations are conducted. Unless stated otherwise or the context requires, the “Company” refers to the General Partner and its subsidiaries, including the Operating Partnership and its subsidiaries. The Company owns or has interests in 36 properties (collectively, the “Properties”), consisting of 22 multifamily rental properties containing 6,691 apartment units as well as non-core assets comprised of seven office properties, four parking/retail properties, three hotels plus developable land. The Properties are located in three states in the Northeast, plus the District of Columbia.
The Company is a forward-thinking, environmentally and socially conscious REIT that primarily owns, operates, acquires, and develops holistically-inspired, Class A multifamily properties that meet the sustainability conscious lifestyle needs of today's residents while seeking to positively impact the communities it serves and the planet at large. The Company is guided by an experienced management team and Board of Directors and is underpinned by leading corporate governance principles, a best-in-class and sustainable approach to operations, and an inclusive culture based on equality and meritocratic empowerment.
STRATEGIC DIRECTION
In December 2021, the Company announced that it had rebranded to Veris Residential, Inc. reflecting its on-going transition into a multifamily Company as well as its new corporate values and focus on conducting business in a socially, ethically, and environmentally responsible manner, while seeking to maximize value for all stakeholders.
The Company expects to continue to pursue opportunities to streamline its portfolio and enhance the stability of its revenue stream, as well as pursue overall expense savings from internal reorganizations which may result from the transition of the Company’s real estate portfolio.
On December 19, 2019, the Company announced that its Board had determined to sell the Company’s entire suburban New Jersey office portfolio totaling approximately 6.6 million square feet, which had excluded the Company’s office properties in Jersey City and Hoboken, New Jersey (collectively, the “Suburban Office Portfolio”). As the decision to sell the Suburban Office Portfolio represented a strategic shift in the Company’s operations, these properties’ results (other than a single property not qualified to be classified as held for sale) are being classified as discontinued operations for all periods presented herein. See Note 7: Discontinued Operations - to the Financial Statements.
Between late 2019 and December 31, 2021, the Company completed the sale of all but one of its 37 properties in its Suburban Office Portfolio, totaling 6.3 million square feet, for net sales proceeds of $1.0 billion.
Starting in the third quarter 2021, and as a result of the recent completion of the Suburban Office Portfolio dispositions for all but one asset, the Company’s multifamily properties accounted for more than half of the Company’s total revenue for the first time (See Note 18: Segment Reporting - to the Financial Statements). As of December 31, 2021, the Company has classified two office properties located in Jersey City and Hoboken, New Jersey totaling approximately 1.8 million square feet as held for sale which is consistent with the Company’s ongoing efforts and strategy to continue to transition into a primarily multifamily residential company.
Critical Accounting Policies and Estimates
The accompanying consolidated financial statements include all accounts of the Company, its majority-owned and/or controlled subsidiaries, which consist principally of the Operating Partnership and variable interest entities for which the Company has determined itself to be the primary beneficiary, if any. See Note 2: Significant Accounting Policies - to the Financial Statements, for the Company’s treatment of unconsolidated joint venture interests. Intercompany accounts and transactions have been eliminated.
Accounting Standards Codification (“ASC”) 810, Consolidation, provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIEs. Generally, the consideration of whether an entity is a VIE applies when either: (1) the equity investors (if any) lack (i) the ability to make decisions about the entity's activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and substantially all of the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the variable interest entity’s performance: and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.
The financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on management’s historical experience that are believed to be reasonable at the time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates. Certain reclassifications have been made to prior period amounts in order to conform with current period presentation, primarily related to classification of certain properties as discontinued operations. The Company’s critical accounting policies are those which require assumptions to be made about matters that are highly uncertain. Different estimates could have a material effect on the Company’s financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances.
Rental Property
Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. The Company adopted Financial Accounting Standards Board (“FASB”) guidance Accounting Standards Update (“ASU”) 2017-01 on January 1, 2017, which revises the definition of a business and is expected to result in more transactions to be accounted for as asset acquisitions and significantly limit transactions that would be accounted for as business combinations. Where an acquisition has been determined to be an asset acquisition, acquisition-related costs are capitalized. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Interest capitalized by the Company for the years ended December 31, 2021, 2020 and 2019 was $30.5 million, $26.4 million and $19.3 million, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.
The Company considers a construction project as substantially completed and held available for occupancy upon the substantial completion of improvements, but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup). If portions of a rental project are substantially completed and occupied by tenants or residents, or held available for occupancy, and other portions have not yet reached that stage, the substantially completed portions are accounted for as a separate project. The Company allocates costs incurred between the portions under construction and the portions substantially completed and held available for occupancy, primarily based on a percentage of the relative commercial square footage or multifamily units of each portion, and capitalizes only those costs associated with the portion under construction.
Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:
Leasehold interests
Remaining lease term
Buildings and improvements
5 to 40 years
Tenant improvements
The shorter of the term of the
related lease or useful life
Furniture, fixtures and equipment
5 to 10 years
Upon acquisition of rental property, the Company estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities assumed, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships. For asset acquisitions, the Company allocates the purchase price to the assets acquired and liabilities assumed based on their relative fair values. The Company records goodwill or a gain on bargain purchase (if any) if the net assets acquired/liabilities assumed differ from the purchase consideration of a business combination transaction. In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.
Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining terms of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases.
Other intangible assets acquired include amounts for in-place lease values and tenant relationship values, which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant. Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses. Characteristics considered by management in valuing tenant relationships include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals. The values of in-place leases are amortized to expense over the remaining initial terms of the respective leases. The values of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships or leases.
On a periodic basis, management assesses whether there are any indicators that the value of the Company’s rental properties held for use may be impaired. In addition to identifying any specific circumstances which may affect a property or properties, management considers other criteria for determining which properties may require assessment for potential impairment. The criteria considered by management, depending on the type of property, may include reviewing low leased percentages, significant near-term lease expirations, current and historical operating and/or cash flow losses, construction cost overruns and/or other factors, including those that might impact the Company’s intent and ability to hold the property. A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property over its estimated holding period is less than the carrying value of the property. If there are different possible scenarios for a property, the Company will take a probability-weighted approach to estimating future cash flow scenarios. To the extent impairment has occurred, the impairment loss is measured as the excess of the carrying value of the property over the fair value of the property. The Company’s estimates of aggregate future cash flows expected to be generated and estimated fair values for each property are based on a number of assumptions, including but not limited to estimated holding periods, outcome probabilities, market capitalization rates and discount rates, if applicable. For developable land holdings, an estimated per-unit market value assumption is also considered based on development rights or plans for the land. These assumptions are generally based on management’s experience in its local real estate markets and the effects of current market conditions. The assumptions are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property. As these factors are difficult to predict and are subject to
future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved, and additional losses or impairments may be realized in the future.
Real Estate Held for Sale and Discontinued Operations
When assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the sales price, net of expected selling costs, of such assets. The Company generally considers assets (as identified by their disposal groups) to be held for sale when the transaction has received appropriate corporate authority, it is probable to be sold within the following 12 months, and there are no significant contingencies relating to a sale. If, in management’s opinion, the estimated net sales price, net of expected selling costs, of the disposal groups which have been identified as held for sale is less than the carrying value of the assets, a valuation allowance (which is recorded as unrealized losses on disposition of rental property) is established. In the absence of an executed sales agreement with a set sales price, management’s estimate of the net sales price may be based on a number of assumptions, including but not limited to the Company’s estimates of future cash flows, market capitalization rates and discount rates, if applicable. For developable land holdings, an estimated per-unit market value assumption is also considered based on development rights or plans for the land. In addition, the Company classifies assets held for sale or sold as discontinued operations if the disposal groups represent a strategic shift that will have a major effect on the Company’s operations and financial results. For any disposals qualifying as discontinued operations, the assets and their results are presented in discontinued operations in the financial statements for all periods presented. See Note 7: Discontinued Operations - to the Financial Statements.
If circumstances arise that previously were considered unlikely and, as a result, the Company has determined that an asset previously classified as held for sale no longer meets the held for sale criteria, the asset is reclassified as held and used. An asset that is reclassified is measured and recorded individually at the lower of (a) its carrying value before the asset was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the asset been continuously classified as held and used, or (b) the fair value at the date the asset, qualified as held for sale.
Investments in Unconsolidated Joint Ventures
The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting. The Company applies the equity method by initially recording these investments at cost, as Investments in Unconsolidated Joint Ventures, subsequently adjusted for equity in earnings and cash contributions and distributions. The outside basis portion of the Company’s joint ventures is amortized over the anticipated useful lives of the underlying ventures’ tangible and intangible assets acquired and liabilities assumed. Generally, the Company would discontinue applying the equity method when the investment (and any advances) is reduced to zero and would not provide for additional losses unless the Company has guaranteed obligations of the venture or is otherwise committed to providing further financial support for the investee. If the venture subsequently generates income, the Company only recognizes its share of such income to the extent it exceeds its share of previously unrecognized losses.
If the venture subsequently makes distributions and the Company does not have an implied or actual commitment to support the operations of the venture, the Company will not record a basis less than zero, rather such amounts will be recorded as equity in earnings of unconsolidated joint ventures.
On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management’s estimate of the value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying value of the investment over the value of the investment. The Company’s estimates of value for each investment (particularly in real estate joint ventures) are based on a number of assumptions including but not limited to estimates of future and stabilized cash flows, market capitalization rates and discount rates, if applicable. These assumptions are based on management's experience in its local real estate markets and the effects of current market conditions. The assumptions are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and operating costs. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the values estimated by management in its impairment analyses may not be realized, and actual losses or impairment may be realized in the future. See Note 4: Investments in Unconsolidated Joint Ventures - to the Financial Statements.
Revenue Recognition
Revenue from leases includes fixed base rents under leases, which are recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the cumulative amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements.
The Company elected a practical expedient for its rental properties (as lessor) to avoid separating non-lease components that otherwise would need to be accounted for under the recently-adopted revenue accounting guidance (such as tenant reimbursements of property operating expenses) from the associated lease component since (1) the non-lease components have the same timing and pattern of transfer as the associated lease component and (2) the lease component, if accounted for separately, would be classified as an operating lease; this enables the Company to account for the combination of the lease component and non-lease components as an operating lease since the lease component is the predominant component of the combined components.
Due to the Company’s adoption of the practical expedient discussed above to not separate non-lease component revenue from the associated lease component, the Company is aggregating revenue from its lease components and non-lease components (comprised predominantly of tenant operating expense reimbursements) into the line entitled “Revenue from leases.”
Revenue from leases also includes reimbursements and recoveries from tenants received from tenants for certain costs as provided in the lease agreements. These costs generally include real estate taxes, utilities, insurance, common area maintenance and other recoverable costs. See Note 14: Tenant Leases - to the Financial Statements.
Real estate services revenue includes property management, development, construction and leasing commission fees and other services, and payroll and related costs reimbursed from clients. Fee income derived from the Company’s unconsolidated joint ventures (which are capitalized by such ventures) are recognized to the extent attributable to the unaffiliated ownership interests.
Parking income is comprised of income from parking spaces leased to tenants and others.
Hotel income includes all revenue generated from hotel properties.
Other income includes income from tenants for additional services arranged for by the Company and income from tenants for early lease terminations.
All bad debt expense is being recorded as a reduction of the corresponding revenue account starting on January 1, 2019. Management performs a detailed review of amounts due from tenants for collectability based on factors affecting the billings and status of individual tenants. The factors considered by management in determining which individual tenant’s revenues are affected include the age of the receivable, the tenant’s payment history, the nature of the charges, any communications regarding the charges and other related information. Management’s estimate of bad debt write-off’s requires management to exercise judgment about the timing, frequency and severity of collection losses, which affects the revenue recorded.
Redeemable Noncontrolling Interests
The Company evaluates the terms of the partnership units issued in accordance with the FASB’s Distinguishing Liabilities from Equity guidance. Units which embody an unconditional obligation requiring the Company to redeem the units for cash after a specified or determinable date (or dates) or upon the occurrence of an event that is not solely within the control of the issuer are determined to be contingently redeemable under this guidance and are included as Redeemable noncontrolling interests and classified within the mezzanine section between Total liabilities and Stockholders’ equity on the Company’s Consolidated Balance Sheets. The carrying amount of the redeemable noncontrolling interests will be changed by periodic accretions, so that the carrying amount will equal the estimated future redemption value at the redemption date.
Results From Operations
The following comparisons for the year ended December 31, 2021 (“2021”), as compared to the year ended December 31, 2020 (“2020”), and for 2020 as compared to the year ended December 31, 2019 (“2019”) make reference to the following:
(i)“Same-Store Properties,” which represent all in-service properties owned by the Company at December 31, 2019, (for the 2021 versus 2020 comparisons), and which represent all in-service properties owned by the Company at December 31, 2018 (for the 2020 versus 2019 comparisons), excluding properties sold, disposed of, removed from service, or being redeveloped or repositioned from January 1, 2019 through December 31, 2021;
(ii)“Acquired and Developed Properties,” which represent all properties acquired by the Company or commencing initial operation from January 1, 2020 through December 31, 2021 (for the 2021 versus 2020 comparisons), and which represents all properties acquired by the Company or commencing initial operations from January 1, 2019 through December 31, 2020 (for the 2020 versus 2019 comparisons); and
(iii)“Properties Sold” which represent properties sold, disposed of, or removed from service (including properties being redeveloped or repositioned) by the Company from January 1, 2019 through December 31, 2021.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Years Ended
December 31,
Dollar
Percent
(dollars in thousands)
Change
Change
Revenue from rental operations and other:
Revenue from leases
$
282,791
$
272,970
$
9,821
3.6
%
Parking income
15,003
15,604
(601)
(3.9)
Hotel income
10,618
4,287
6,331
147.7
Other income
11,309
9,311
1,998
21.5
Total revenues from rental operations
319,721
302,172
17,549
5.8
Property expenses:
Real estate taxes
47,859
45,801
2,058
4.5
Utilities
14,802
13,717
1,085
7.9
Operating services
71,851
68,313
3,538
5.2
Total property expenses
134,512
127,831
6,681
5.2
Non-property revenues:
Real estate services
9,596
11,390
(1,794)
(15.8)
Total non-property revenues
9,596
11,390
(1,794)
(15.8)
Non-property expenses:
Real estate services expenses
12,857
13,555
(698)
(5.1)
General and administrative
57,198
71,058
(13,860)
(19.5)
Dead deal and transaction-related costs
12,221
2,583
9,638
373.1
Depreciation and amortization
111,618
122,035
(10,417)
(8.5)
Property impairments
13,467
36,582
(23,115)
(63.2)
Land and other impairments, net
23,719
16,817
6,902
41.0
Total non-property expenses
231,080
262,630
(31,550)
(12.0)
Operating income (loss)
(36,275)
(76,899)
40,624
52.8
Other (expense) income:
Interest expense
(65,192)
(80,991)
15,799
19.5
Interest and other investment income (loss)
1,118.6
Equity in earnings (loss) of unconsolidated joint ventures
(4,251)
(3,832)
(419)
(10.9)
Realized gains (losses) and unrealized losses on disposition
of rental property, net
3,022
5,481
(2,459)
(44.9)
Gain on disposition of developable land
2,115
5,787
(3,672)
(63.5)
Gain on sale from unconsolidated joint ventures
(1,886)
35,184
(37,070)
(105.4)
Gain (loss) from extinguishment of debt, net
(47,078)
(272)
(46,806)
(17,208.1)
Total other (expense) income
(112,746)
(38,600)
(74,146)
(192.1)
Income (loss) from continuing operations
(149,021)
(115,499)
(33,522)
(29.0)
Discontinued operations:
Income from discontinued operations
13,930
70,700
(56,770)
(80.3)
Realized gains (losses) and unrealized gains (losses) on
disposition of rental property and impairments, net
25,552
11,201
14,351
128.1
Total discontinued operations
39,482
81,901
(42,419)
(51.8)
Net income (loss)
$
(109,539)
$
(33,598)
$
(75,941)
(226.0)
%
The following is a summary of the changes in revenue from rental operations and other, and property expenses, in 2021 as compared to 2020 divided into Same-Store Properties, Acquired and Developed Properties and Properties Sold in 2020 and 2021 (excluding properties classified as discontinued operations):
Total
Same-Store
Acquired and Developed
Properties
Company
Properties
Properties
Sold in 2020 and 2021
Dollar
Percent
Dollar
Percent
Dollar
Percent
Dollar
Percent
(dollars in thousands)
Change
Change
Change
Change
Change
Change
Change
Change
Revenue from rental
operations and other:
Revenue from leases
$
9,821
3.6
%
$
1,638
0.6
%
$
13,014
4.8
%
$
(4,831)
(1.8)
%
Parking income
(601)
(3.9)
(1,074)
(7.0)
3.8
(114)
(0.7)
Hotel income
6,331
147.7
6,331
147.7
-
-
-
-
Other income
1,998
21.5
1,588
17.1
4.8
(39)
(0.4)
Total
$
17,549
5.8
%
$
8,483
2.8
%
$
14,050
4.6
%
$
(4,984)
(1.6)
%
Property expenses:
Real estate taxes
$
2,058
4.5
%
$
1,704
3.7
%
$
1,496
3.3
%
$
(1,142)
(2.5)
%
Utilities
1,085
7.9
6.6
4.1
(386)
(2.8)
Operating services
3,538
5.2
1,661
2.5
2,756
4.0
(879)
(1.3)
Total
$
6,681
5.2
%
$
4,270
3.3
%
$
4,818
3.8
%
$
(2,407)
(1.9)
%
OTHER DATA:
Number of Consolidated Properties
Commercial Square feet (in thousands)
4,916
4,885
5,755
Multifamily portfolio (number of units)
4,545
3,713
1,025
Revenue from leases. Revenue from leases for the Same-Store Properties increased $1.6 million, or 0.6 percent, for 2021 as compared to 2020, of which an increase of $3.2 million at the commercial properties is due to an increase in escalation settle-ups. This is partially offset by a decrease of $1.6 million of the multifamily properties, due primarily to lower in-place rents in 2021 as compared to 2020 as a result of increased rent concessions. Revenue from leases at the Acquired and Developed Properties increased $13.0 million in 2021 as compared to 2020, due to the commencement of operations of three multifamily properties and one retail property.
Parking income. Parking income for the Same-Store Properties decreased $1.1 million, or 7.0 percent for 2021 as compared to 2020 due primarily to a decrease in usage at the parking garages, in 2021 as compared to 2020, which was more impacted by the COVID-19 pandemic, as well as the recognition in 2020 of approximately $0.6 million income from a settlement of prior period unpaid parking fees by a tenant in Jersey City, New Jersey.
Hotel income. Hotel income for the Same-Store properties increased $6.3 million, or 147.7 percent, for 2021 as compared to 2020, primarily due to fully reopening the hotels in 2021 following a partial shutdown of hotel operations in 2020 as a result of the COVID-19 pandemic.
Other income. Other income for the Same-Store Properties increased $1.6 million, or 17.1 percent for 2021 as compared to 2020 due primarily to the recognition in 2021 of forfeited deposits received from potential buyers in disposition deals that were not completed, as well as post property sales items received in 2021.
Real estate taxes. Real estate taxes on the Same-Store Properties increased $1.7 million, or 3.7 percent, for 2021 as compared to 2020 due primarily to the expiration in early 2021 of the PILOT agreements on two multifamily properties located in Jersey City, New Jersey.
Utilities. Utilities for the Same-Store Properties increased $0.9 million, or 6.6 percent, for 2021 as compared to 2020, due primarily to higher electricity rates in 2021 as compared to 2020.
Operating services. Operating services for the Same-Store properties increased $1.7 million, or 2.5 percent, for 2021 as compared to 2020, due primarily to an increase in severance and related expenses in 2021 as compared to 2020.
Real estate services revenue. Real estate services revenue (primarily reimbursement of property personnel costs) decreased $1.8 million, or 15.8 percent, for 2021 as compared to 2020, due primarily to decreased third party development and management activity in 2021 as compared to 2020.
Real estate services expenses. Real estate services expenses decreased $0.7 million, or 5.1 percent, for 2021 as compared to 2020, due primarily to lower salaries and related expenses from a reduction in third-party services activities in 2021 as compared to 2020.
General and administrative. General and administrative expenses decreased $13.9 million, or 19.5 percent in 2021 as compared to 2020. This decrease is due primarily to costs incurred for a contested election of the Board of Directors of $12.8 million in 2020 and a decrease in severance and related costs of $2.5 million ($7.6 million in 2021 versus $10.1 million in 2020). These were partially offset by $2.1 million of costs from CEO and related management changes in 2021.
Dead deal and transaction costs. The Company incurred costs of $12.2 million in 2021 and $2.6 million in 2020 in connection with transactions that were not consummated and ATM Program costs.
Depreciation and amortization. Depreciation and amortization decreased $10.4 million, or 8.5 percent, for 2021 over 2020. This decrease was due primarily to lower depreciation of fully-amortized assets of approximately $13.6 million for the Same-Store Properties for 2021 as compared to 2020 and a decrease of approximately $1.6 million for properties sold or removed from service, partially offset by an increase in depreciation of $4.7 million for 2021 as compared to 2020 from the Acquired and Developed Properties.
Property impairments. In 2021, the Company recorded impairment charges of $7.4 million on its held and used hotel properties in Weehawken, New Jersey and $6.0 million on its then held and used office property in Hoboken, New Jersey. In 2020, the Company recorded impairment charges of $36.6 million on its held and used hotel properties in Weehawken, New Jersey.
Land and other impairments. In 2021, the Company recorded $20.8 million of impairments on developable land parcels and $2.9 million of goodwill impairment. In 2020, the Company recorded valuation impairment charges of $16.8 million on developable land parcels.
Interest expense. Interest expense decreased $15.8 million, or 19.5 percent, for 2021 as compared to 2020. This decrease was primarily the result of lower average debt balances in 2021 as compared to 2020, due to the Company’s redemption of its Senior Unsecured Notes in 2021, using proceeds from sales of office properties.
Interest and other investment income. Interest and other investment income increased $0.5 million for 2021 as compared to 2020 primarily due to interest received on a note receivable, partially offset by the write-down of a note receivable in 2021.
Equity in earnings (loss) of unconsolidated joint ventures. Equity in earnings of unconsolidated joint ventures decreased $0.4 million, or 11.0 percent, for 2021 as compared to 2020. The decrease is primarily due to an increase in concessions and discounts to tenants in 2021 as compared to 2020 resulting in a reduction of $1.7 million of rental revenue for 2021 as compared to 2020 from the Urby at Harborside venture.
Realized gains (losses) and unrealized losses on disposition of rental property, net. The Company had realized gains (unrealized losses) on disposition of rental property of $3.0 million in 2021 and $5.5 million in 2020. See Note 3: Recent Transactions - Dispositions - to the Financial Statements.
Gain on disposition of developable land. In 2021, the Company recorded a gain of $2.1 million on the sale of land holdings in Newark and Hamilton, New Jersey. In 2020, the Company recorded a gain of $5.8 million on the sale of land holdings located in Mount Pleasant, New York; Middletown, New Jersey; and Greenbelt, Maryland. See Note 3: Recent Transactions - Dispositions to the Financial Statements.
Gain on sale from unconsolidated joint ventures. In 2021, the Company recorded a loss of $1.9 million on the sale of its interest in a joint venture which owns an office property in West Orange, New Jersey. In 2020, the Company recorded a $35.2 million gain for its share on the sale the joint venture - owned property in Arlington, Virginia and land in Hillsborough, New Jersey. See Note 4: Investments in Unconsolidated Joint Ventures - to the Financial Statements.
Loss from extinguishment of debt, net. In 2021, the Company recognized losses from early extinguishment of debt of $47.1 million which consists of $24.2 million in connection with the redemption of the Company’s Senior Unsecured Notes and $22.6 million in connection with the sale of Short Hills office portfolio and related defeasement of the mortgage loan. In 2020, the Company recorded a loss on early retirement of debt of $0.3 million in connection with the repayment of a construction loan on a multifamily property located in Malden, Massachusetts.
Discontinued operations. For all periods presented, the Company classified 36 office properties totaling 6.3 million square feet as discontinued operations, some of which were sold during the periods. The income from these properties decreased $56.8 million for
2021 as compared to 2020, due primarily to the sale of 16 properties in 2021 and 20 properties in 2020. Included within discontinued operations are realized gains (losses) and unrealized losses on disposition of rental property and impairments, net, of a gain of $25.6 million in 2021 and a gain of $11.2 million in 2020.
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 2019
Years Ended
December 31,
Dollar
Percent
(dollars in thousands)
Change
Change
Revenue from rental operations and other:
Revenues from leases
$
272,970
$
302,409
$
(29,439)
(9.7)
%
Parking income
15,604
21,857
(6,253)
(28.6)
Hotel income
4,287
9,841
(5,554)
(56.4)
Other income
9,311
9,222
1.0
Total revenues from rental operations
302,172
343,329
(41,157)
(12.0)
Property expenses:
Real estate taxes
45,801
44,785
1,016
2.3
Utilities
13,717
17,881
(4,164)
(23.3)
Operating services
68,313
70,409
(2,096)
(3.0)
Total property expenses
127,831
133,075
(5,244)
(3.9)
Non-property revenues:
Real estate services
11,390
13,873
(2,483)
(17.9)
Total non-property revenues
11,390
13,873
(2,483)
(17.9)
Non-property expenses:
Real estate services expenses
13,555
15,918
(2,363)
(14.8)
General and administrative
71,058
59,805
11,253
18.8
Dead deal and transaction-related costs
2,583
-
2,583
-
Depreciation and amortization
122,035
133,597
(11,562)
(8.7)
Property impairments
36,582
-
36,582
-
Land and other impairments, net
16,817
32,444
(15,627)
(48.2)
Total non-property expenses
262,630
241,764
20,866
8.6
Operating income
(76,899)
(17,637)
(59,262)
(336.0)
Other (expense) income:
Interest expense
(80,991)
(90,569)
9,578
10.6
Interest and other investment income
2,412
(2,369)
(98.2)
Equity in earnings (loss) of unconsolidated joint ventures
(3,832)
(1,319)
(2,513)
(190.5)
Gain on change of control of interests
-
13,790
(13,790)
(100.0)
Realized gains (losses) and unrealized losses on disposition
of rental property, net
5,481
343,102
(337,621)
(98.4)
Gain on disposition of developable land
5,787
5,265
1,008.6
Gain on sale from unconsolidated joint ventures
35,184
34,281
3,796.3
Gain (loss) from extinguishment of debt, net
(272)
1,648
(1,920)
(116.5)
Total other (expense) income
(38,600)
270,489
(309,089)
(114.3)
Income (loss) from continuing operations
(115,499)
252,852
(368,351)
(145.7)
Discontinued operations:
Income from discontinued operations
70,700
24,334
46,366
190.5
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net
11,201
(133,350)
144,551
108.4
Total discontinued operations, net
81,901
(109,016)
190,917
175.1
Net income (loss)
$
(33,598)
$
143,836
$
(177,434)
(123.4)
%
The following is a summary of the changes in revenue from rental operations and other, and property expenses, in 2020 as compared to 2019 divided into Same-Store Properties, Acquired and Developed Properties and Properties Sold in 2019 and 2020:
Total
Same-Store
Acquired and Developed
Properties
Company
Properties
Properties
Sold in 2019 and 2020
Dollar
Percent
Dollar
Percent
Dollar
Percent
Dollar
Percent
(dollars in thousands)
Change
Change
Change
Change
Change
Change
Change
Change
Revenue from rental
operations and other:
Revenue from leases
$
(29,439)
(9.7)
%
$
(8,595)
(2.8)
%
$
28,928
9.6
%
$
(49,772)
(16.5)
%
Parking income
(6,253)
(28.6)
(6,666)
(30.5)
1,446
6.6
(1,033)
(4.7)
Hotel Income
(5,554)
(56.4)
(3,138)
(31.8)
(2,416)
(24.6)
-
-
Other income
1.0
1,963
21.3
7.5
(2,568)
(27.8)
Total
$
(41,157)
(12.0)
%
$
(16,436)
(4.8)
%
$
28,652
8.3
%
$
(53,373)
(15.5)
%
Property expenses:
Real estate taxes
$
1,016
2.3
%
$
1,409
3.2
%
$
7,354
16.4
%
$
(7,747)
(17.3)
%
Utilities
(4,164)
(23.3)
(1,236)
(6.9)
1,289
7.2
(4,217)
(23.6)
Operating services
(2,096)
(3.0)
(4,794)
(6.8)
11,429
16.2
(8,731)
(12.4)
Total
$
(5,244)
(3.9)
%
$
(4,621)
(3.5)
%
$
20,072
15.1
%
$
(20,695)
(15.5)
%
OTHER DATA:
Number of Consolidated Properties
Commercial Square feet (in thousands)
4,916
4,885
10,916
Multifamily portfolio (number of units)
4,039
2,377
1,662
1,745
Revenue from leases. Revenue from leases for the Same-Store Properties decreased $8.6 million, or 2.8 percent, for 2020 as compared to 2019, of which a decrease of $5.7 million is due to the multifamily properties, due primarily to a decrease in average same store occupancy from 93.9 to 89.4 percent at the multifamily residential portfolio in 2020, as compared to 2019, primarily as a result of the impacts from the COVID-19 pandemic in 2020. A decrease of $2.9 million is due to the commercial properties, due primarily to a decrease in occupancy for 2020 as compared to 2019. Revenue from leases at the Acquired and Developed Properties increased $28.9 million in 2020 as compared to 2019, due to the commencement of operations of three multifamily properties.
Parking income. Parking income for the Same-Store Properties decreased $6.7 million, or 30.5 percent for 2020 as compared to 2019 due primarily to a reduction in usage at the commercial properties, due to the COVID-19 pandemic in 2020.
Hotel income. Hotel income for the Same-Store properties decreased $3.1 million, or 31.8 percent, for 2020 as compared to 2019 due to the partial shutdown of hotel operations related to the COVID-19 pandemic in 2020.
Other income. Other income for the Same-Store Properties increased $2.0 million, or 21.3 percent for 2020 as compared to 2019 due primarily to an increase in lease breakage fees for both, multifamily and commercial properties recognized in 2020, as compared to 2019.
Real estate taxes. Real estate taxes on the Same-Store Properties increased $1.4 million, or 3.1 percent, for 2020 as compared to 2019 due primarily to a decrease in tax appeal proceeds received 2020 as compared to 2019.
Utilities. Utilities for the Same-Store Properties decreased $1.2 million, or 6.9 percent, for 2020 as compared to 2019, due primarily to decreased usage in 2020 as compared to 2019 as a result of lower occupancy in 2020 as compared to 2019.
Operating services. Operating services for the Same-Store properties decreased $4.8 million, or 6.8 percent, for 2020 as compared to 2019, due primarily to a reduction in property maintenance and other services expense in 2020 as compared to 2019.
Real estate services revenue. Real estate services revenue (primarily reimbursement of property personnel costs) decreased $2.5 million, or 17.9 percent, for 2020 as compared to 2019, due primarily to a reduction in third-party development and property management activity in multifamily services in 2020 as compared to 2019.
Real estate services expenses. Real estate services expenses decreased $2.4 million, or 14.8 percent, for 2020 as compared to 2019, due primarily to decreased salaries and related expenses from less third-party service activities in 2020.
General and administrative. General and administrative expenses increased $11.3 million, or 18.8 percent in 2020 as compared to 2019. This increase is due primarily to an increase in management restructuring costs, including severance, separation and related costs of $8.8 million ($10.1 million in 2020 versus $1.3 million in 2019), and an increase in costs incurred in connection with contested elections of the Board of Directors of $8.7 million ($12.8 million in 2020 versus $4.1 million in 2019). These were partially offset by a reduction in salaries and related expenses and leasing personnel costs of $2.8 million for 2020 as compared to 2019 and a reduction in travel, office and public relations events expenditures of $2.7 million for 2020 as compared to 2019 due to the COVID-19 pandemic.
Dead deal and transaction costs. The Company incurred costs of $2.6 million in 2020 in connection with transaction and capital market activities.
Depreciation and amortization. Depreciation and amortization decreased $11.6 million, or 8.7 percent, for 2020 over 2019. This decrease was due primarily to lower depreciation of approximately $14.1 million for properties sold or removed from service during 2019 and 2020, partially offset by an increase in depreciation of $2.5 million for 2020 as compared to 2019 from the Acquired and Developed Properties.
Property impairments. In 2020, the Company recorded impairment charges of $36.6 million on its hotel properties in Weehawken, New Jersey.
Land and other impairments. In 2020, the Company recorded $16.8 million of impairments on developable land parcels. In 2019, the Company recorded impairment charges of $32.4 million on developable land parcels.
Interest expense. Interest expense decreased $9.6 million, or 10.6 percent, for 2020 as compared to 2019. This decrease was primarily the result of lower average interest rates in 2020, as compared to 2019.
Interest and other investment income. Interest and other investment income decreased $2.4 million for 2020 as compared to 2019 primarily due to lower average notes receivable balances outstanding in 2020 as compared to 2019.
Equity in earnings (loss) of unconsolidated joint ventures. Equity in earnings of unconsolidated joint ventures decreased $2.5 million for 2020 as compared to 2019. The decrease is primarily due to a decrease of $2.8 million for 2020 as compared to 2019 from the Hyatt Regency Hotel Jersey City venture, because the hotel was shut down beginning in March 2020 on account of the COVID-19 pandemic, and a decrease of $0.5 million for 2020 as compared to 2019 from the Urby at Harborside venture. These were partially offset by an increase of $1.1 million for 2020 as compared to 2019 from the 12 Vreeland Road venture, due to impairment charges recorded of $2.6 million in 2020 and $3.7 million in 2019.
Gain on change of control of interests. The Company recorded a gain on change of control of interests of $13.8 million in 2019 as a result of its acquisition of the controlling interest of its equity partners in a joint venture that owns a multifamily property located in Jersey City, New Jersey.
Realized gains (losses) and unrealized losses on disposition of rental property, net. The Company had realized gains (unrealized losses) on disposition of rental property of $5.5 million in 2020 and $343.1 million in 2019. See Note 3: Recent Transactions - Dispositions - to the Financial Statements.
Gain on disposition of developable land. In 2020, the Company recorded a gain of $5.8 million on the sale of land holdings located in Mount Pleasant, New York; Middletown, New Jersey; and Greenbelt, Maryland. The Company recorded a gain of $0.5 million in 2019 on the sale of land holdings located in Malden and Revere, Massachusetts. See Note 3: Recent Transactions - Dispositions to the Financial Statements.
Gain on sale from unconsolidated joint ventures. In 2020, the Company recorded a $35.2 million gain for its share on the sale of the joint venture - owned property in Arlington, Virginia and land in Hillsborough, New Jersey. In 2019, the Company recorded a $0.9 million gain on the sale of its interests in a joint venture, which owned a property in Red Bank, New Jersey. See Note 4: Investments in Unconsolidated Joint Ventures - to the Financial Statements.
Gain/(loss) from extinguishment of debt, net. In 2020, the Company recorded a loss on early retirement of debt of $0.3 million in connection with the repayment of a construction loan on a multifamily property located in Malden, Massachusetts. In 2019, the Company recognized a gain from early retirement of debt of $1.6 million in connection with the early termination of a portion of interest rate swap agreements, in connection with the prepayment of term loan balances in 2019.
Discontinued operations. In 2019, the Company classified 37 office properties totaling 6.6 million square feet as discontinued operations, some of which were sold during 2019 and 2020. In 2020, the Company reclassified one of the discontinued operations properties as held for use. The income from these properties increased $46.4 million for 2020 as compared to 2019, due primarily to a decrease in depreciation and amortization costs. Upon classifying these properties as held for sale in December 2019, the Company ceased recording depreciation and amortization on the long lived assets, thereby resulting in a decrease of depreciation and amortization in 2020 compared to 2019. The Company recognized realized gains (losses) and unrealized losses on disposition of rental property and impairments, net, of a gain of $11.2 million in 2020 and a loss of $133.4 million in 2019.
Liquidity and Capital Resources
Liquidity
Overview
Rental revenue is the Company’s principal source of funds to pay its material cash commitments consisting of operating expenses, debt service, capital expenditures and dividends, excluding non-recurring capital expenditures. To the extent that the Company’s cash flow from operating activities is insufficient to finance its non-recurring capital expenditures such as property acquisitions, development and construction costs and other capital expenditures, the Company has and expects to continue to finance such activities through borrowings under its revolving credit facility, other debt and equity financings, proceeds from the sale of properties and joint venture capital.
The Company expects to meet its short-term liquidity requirements generally through its working capital, which may include proceeds from the sales of rental properties and land, net cash provided by operating activities and draw from its revolving credit facility.
The COVID-19 pandemic continues to have a significant impact in the U.S. and around the globe. The global impact of the outbreak is rapidly evolving and has included quarantines, restrictions on business activities, including construction activities, restrictions on group gatherings, and restrictions on travel. These actions have and may in the future create disruption in the global economy and supply chains. The extent to which COVID-19 impacts the Company’s results will depend on future developments, many of which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact. If the outbreak continues, there will likely be continued negative economic impacts, market volatility, and business disruption which could negatively impact the Company’s tenants’ ability to pay rent, the Company’s ability to lease vacant space, the Company’s ability to complete development and redevelopment projects and the Company’s ability to dispose of assets held for sale and these consequences, in turn, could materially impact the Company’s results of operations.
Construction Projects
The Company is developing a 750-unit multifamily project at 25 Christopher Columbus, also known as Haus 25, in Jersey City, New Jersey which began construction in the first quarter of 2019. The construction project, which is estimated to cost $469.5 million, of which $425 million have been incurred through December 31, 2021, is expected to be ready for occupancy in the second quarter of 2022. The Company has funded $169.5 million of the construction costs and the remaining construction costs are expected to be funded from a $300 million construction loan (of which $255.5 million was drawn as of December 31, 2021).
REIT Restrictions
To maintain its qualification as a REIT under the IRS Code, the General Partner must make annual distributions to its stockholders of at least 90 percent of its REIT taxable income, determined without regard to the dividends paid deduction and by excluding net capital gains. However, any such distributions, whether for federal income tax purposes or otherwise, would be paid out of available cash, including borrowings and other sources, after meeting operating requirements, preferred stock dividends and distributions, and scheduled debt service on the Company’s debt. If and to the extent the Company retains and does not distribute any net capital gains, the General Partner will be required to pay federal, state and local taxes on such net capital gains at the rate applicable to capital gains of a corporation.
In September 2020, the Company announced that its Board of Directors had made the strategic decision to suspend its common dividends and distributions attributable to the third and fourth quarters 2020 as the Company’s management estimated that it had satisfied its dividend obligations as a REIT on taxable income expected for 2020. The Board made this strategic decision to suspend its common dividends and distributions for the remainder of 2020 in an effort to provide greater financial flexibility during the pandemic and to retain incremental capital to support leasing initiatives at its Harborside commercial office properties on the Jersey City waterfront. In March 2021, the Company announced that its Board of Directors would continue to suspend its common dividend for the remainder of 2021 in order to conserve capital and allow for greater financial flexibility during this period of heightened economic uncertainty and
based on the Company’s projected 2021 taxable income estimates. The Company believes that with this suspension, it will satisfy its dividend obligation as a REIT on taxable income estimated for 2021.
Property Lock-Ups
Certain Company properties acquired by contribution from unrelated common unitholders of the Operating Partnership, were subject to restrictions on disposition, except in a manner which did not result in recognition of built-in-gain allocable to such unitholders or which reimbursed the unitholders for the tax consequences thereof (collectively, the “Property Lock-Ups”). While these Property Lock-Ups have expired, the Company is generally required to use commercially reasonable efforts to prevent any disposition of the subject properties from resulting in the recognition of built-in gain to these unitholders, which include members of the Mack Group (which includes William L. Mack, a former director and David S. Mack, a former director). As of December 31, 2021, taking into account tax-free exchanges on the originally contributed properties, either wholly or partially, over time, five of the Company’s properties, as well as certain land and development projects, with an aggregate carrying value of approximately $1.0 billion, are subject to these conditions.
Unencumbered Properties
As of December 31, 2021, the Company had one unencumbered property with a carrying value of $18.6 million representing 3.7 percent of the Company’s total consolidated property count.
Cash Flows
Cash, cash equivalents and restricted cash decreased by $0.8 million to $51.5 million at December 31, 2021, compared to $52.3 million at December 31, 2020. This decrease is comprised of the following net cash flow items:
(1)
$56.1 million provided by operating activities.
(2)
$446.2 million provided by investing activities, consisting primarily of the following:
(a)
$645 million net cash from investing activities - discontinued operations, primarily comprised of sales proceeds from assets classified as held for sale; plus
(b)
$7.3 million received from repayments of notes receivables; plus
(c)
$52.4 million received from proceeds from the sales of rental property; plus
(d)
$65.1 million used for additions to rental property and improvements; minus
(e)
$211.6 million used for the development of rental property, other related costs and deposits.
(3)
$503.2 million used in financing activities, consisting primarily of the following:
(a)
$73 million used for repayments of revolving credit facility and term loan; plus
(b)
$150 million used for repayment of term loans; plus
(c)
$573.7 million used for repayment of senior unsecured notes; plus
(d)
$193 million used for repayments of mortgages, loans payable and other obligations; plus
(e)
$26 million used for distribution to redeemable noncontrolling interests; plus
(f)
$49.9 million used for payment of early debt extinguishment costs, minus
(g)
$196 million from borrowings under the revolving credit facility; minus
(h)
$226.4 million from proceeds received from mortgages and loans payable; minus
(i)
$150 million from borrowings from term loans.
Debt Financing
Summary of Debt
The following is a breakdown of the Company’s debt between fixed and variable-rate financing as of December 31, 2021:
Balance
Weighted Average
Weighted Average
($000’s)
% of Total
Interest Rate (a)
Maturity in Years
Fixed Rate Secured
$
1,682,662
70.10
%
3.71
%
5.25
Variable Rate Secured Debt
717,628
29.90
%
3.32
%
2.74
Totals/Weighted Average:
$
2,400,290
100.00
%
3.60
%
(b)
4.50
Unamortized deferred financing costs
(11,220)
Total Debt, Net
$
2,389,070
(a)The actual weighted average LIBOR rate for the Company’s outstanding variable rate debt was 0.11 percent as of December 31, 2021, plus the applicable spread.
(b)Excludes amortized deferred financing costs primarily pertaining to the Company’s revolving credit facility which amounted to $3.1 million for the year ended December 31, 2021.
Debt Maturities
Scheduled principal payments and related weighted average annual effective interest rates for the Company’s debt as of December 31, 2021 are as follows:
Scheduled
Principal
Weighted Avg.
Amortization
Maturities
Total
Effective Interest Rate of
Period
($000’s)
($000’s)
($000’s)
Future Repayments (a)
$
$
87,175
$
87,725
2.24
%
2,047
147,998
150,045
3.55
%
2024 (b)
3,403
711,453
714,856
3.77
%
3,300
-
3,300
3.98
%
3,407
733,000
736,407
3.47
%
Thereafter
9,415
698,542
707,957
3.73
%
Sub-total
22,122
2,378,168
2,400,290
3.60
%
Unamortized deferred financing costs
(11,220)
-
(11,220)
-
Totals/Weighted Average
$
10,902
$
2,378,168
$
2,389,070
3.60
%
(c)
(a)The actual weighted average LIBOR rate for the Company’s outstanding variable rate debt was 0.11 percent as of December 31, 2021, plus the applicable spread.
(b)Excludes amortized deferred financing costs primarily pertaining to the Company’s revolving credit facility which amounted to $3.1 million for the year ended December 31, 2021.
(c)Includes outstanding borrowings of the Company’s revolving credit facility of $148 million.
Senior Unsecured Notes
On May 6, 2021, the Company retired these notes earlier than their maturity, using net sales proceeds from completed suburban office property sales and borrowings under its 2021 credit facility and term loan. In conjunction with the notes being discharged, the Company incurred costs of $24.2 million (including a make-whole premium) which was expensed as loss from extinguishment of debt during the year ended December 31, 2021. See Note 9: Revolving Credit Facility and Term Loans.
Revolving Credit Facility and Term Loans
On May 6, 2021, the Company entered into a revolving credit and term loan agreement (“2021 Credit Agreement”) with a group of seven lenders that provides for a $250 million senior secured revolving credit facility (the “2021 Credit Facility”) and a $150 million senior secured term loan facility (the “2021 Term Loan”), and delivered written notice to the administrative agents to terminate the 2017 credit agreement, which termination became effective May 13, 2021.
The terms of the 2021 Credit Facility include: (1) a three-year term ending in May 2024; (2) revolving credit loans may be made to the Company in an aggregate principal amount of up to $250 million (subject to increase as discussed below), with a sublimit under the
2021 Credit Facility for the issuance of letters of credit in an amount not to exceed $50 million; and (3) a first priority lien in unencumbered properties of the Company with an appraised value greater than or equal to $800 million which must include the Company’s Harborside 2/3 and Harborside 5 properties; and (4) a facility fee payable quarterly equal to 35 basis points if usage of the 2021 Credit Facility is less than or equal to 50%, and 25 basis points if usage of the 2021 Credit Facility is greater than 50%.
The terms of the 2021 Term Loan included: (1) an eighteen month term ending in November 2022; (2) a single draw of the term loan commitments up to an aggregate principal amount of $150 million; and (3) a first priority lien in unencumbered properties of the Company with an appraised value greater than or equal to $800 million which must include the Company’s Harborside 2/3 and Harborside 5 properties.
Interest on borrowings under the 2021 Credit Facility and 2021 Term Loan shall be based on applicable base rate (the “Base Rate”) plus a margin ranging from 125 basis points to 275 basis points depending on the Base Rate elected, currently 0.12%. The Base Rate shall be either (A) the highest of (i) the Wall Street Journal prime rate, (ii) the greater of the then effective (x) Federal Funds Effective Rate, or (y) Overnight Bank Funding Rate plus 50 basis points, and (iii) a LIBO Rate, as adjusted for statutory reserve requirements for eurocurrency liabilities (the “Adjusted LIBO Rate”) and calculated for a one-month interest period, plus 100 basis points (such highest amount being the “ABR Rate”), or (B) the Adjusted LIBO Rate for the applicable interest period; provided, however, that the ABR Rate shall not be less than 1% and the Adjusted LIBO Rate shall not be less than zero.
The 2021 Credit Agreement, which applies to both the 2021 Credit Facility and 2021 Term Loan, includes certain restrictions and covenants which limit, among other things the incurrence of additional indebtedness, the incurrence of liens and the disposition of real estate properties, and which require compliance with financial ratios relating to the minimum collateral pool value ($800 million), maximum collateral pool leverage ratio (40 percent), minimum number of collateral pool properties (two), the maximum total leverage ratio (65 percent), the minimum debt service coverage ratio (1.10 times until May 6, 2022, 1.20 times from May 7, 2022 through May 6, 2023, and 1.40 times thereafter), and the minimum tangible net worth ratio (80% of tangible net worth as of December 31, 2020 plus 80% of net cash proceeds of equity issuances by the General Partner or the Operating Partnership).
The 2021 Credit Agreement contains “change of control” provisions that permit the lenders to declare a default and require the immediate repayment of all outstanding borrowings under the 2021 Credit Facility. These change of control provisions, which have been an event of default under the agreements governing the Company’s revolving credit facilities since June 2000, are triggered if, among other things, a majority of the seats on the Board of Directors (other than vacant seats) become occupied by directors who were neither nominated by the Board of Directors, nor appointed by the Board of Directors. Furthermore, construction loans secured by two multifamily residential property development projects contain cross-acceleration provisions that would constitute an event of default requiring immediate repayment of the construction loans if the change of control provisions under the 2021 Credit Facility are triggered and the lenders declare a default and exercise their rights under the 2021 Credit Facility and accelerate repayment of the outstanding borrowings thereunder. If these change of control provisions were triggered, the Company could seek a forbearance, waiver or amendment of the change of control provisions from the lenders, however there can be no assurance that the Company would be able to obtain such forbearance, waiver or amendment on acceptable terms or at all. If an event of default has occurred and is continuing, the entire outstanding balance under the 2021 Credit Agreement may (or, in the case of any bankruptcy event of default, shall) become immediately due and payable, and the Company will not make any excess distributions except to enable the General Partner to continue to qualify as a REIT under the IRS Code.
On May 6, 2021, the Company drew the full $150 million available under the 2021 Term Loan and borrowed $145 million from the 2021 Credit Facility to retire the Company’s Senior Unsecured Notes. In June 2021, the Company paid down a total of $123 million of borrowings under the 2021 Term Loan, using sales proceeds from several of the Company’s suburban office property dispositions. On July 27, 2021, the Company repaid the outstanding balance of the 2021 Term Loan of $27 million, using proceeds from the disposition of a suburban office property previously held for sale. (See Note 3: Recent Transactions - Real Estate Held for Sale/Discontinued Operations/Dispositions).
The terms of the 2017 credit facility included: (1) a four-year term ending in January 2021, with two six-month extension options, subject to the Company not being in default on the facility and with the payment of a fee of 7.5 basis points for each extension; (2) revolving credit loans may be made to the Company in an aggregate principal amount of up to $600 million, with a sublimit under the 2017 credit facility for the issuance of letters of credit in an amount not to exceed $60 million (subject to increase as discussed below), of which $10.6 million of letters of credit had been issued as of May 6, 2021; (3) an interest rate based on the Operating Partnership’s unsecured debt ratings from Moody’s or S&P, or, at the Operating Partnership’s option, if it no longer maintained a debt rating from Moody’s or S&P or such debt ratings fell below Baa3 and BBB-, based on a defined leverage ratio; and (4) a facility fee, payable quarterly based on the Operating Partnership’s unsecured debt ratings from Moody’s or S&P, or, at the Operating Partnership’s option, if it no longer maintained a debt rating from Moody’s or S&P or such debt ratings fell below Baa3 and BBB-, based on a defined leverage ratio. In January 2021, the Company elected to exercise the first option to extend the 2017 credit facility maturity date for a
period of six months. Accordingly, the term of the 2017 credit facility was extended through its termination in May 2021, with the Company’s payment of the 7.5 basis point extension fee.
After electing to use the defined leverage ratio in 2018 to determine the interest rate, the interest rate under the 2017 credit facility was based on the following total leverage ratio grid:
Interest Rate -
Applicable
Interest Rate -
Basis Points
Applicable
Above LIBOR for
Basis Points
Alternate Base
Facility Fee
Total Leverage Ratio
Above LIBOR
Rate Loans
Basis Points
<45%
125.0
25.0
20.0
≥45% and <50%
130.0
30.0
25.0
≥50% and <55% (ratio through May 6, 2021)
135.0
35.0
30.0
≥55%
160.0
60.0
35.0
Mortgages, Loans Payable and Other Obligations
The Company has other mortgages, loans payable and other obligations which consist of various loans collateralized by certain of the Company’s rental properties. Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only.
Debt Strategy
The Company does not intend to reserve funds to retire the Company’s outstanding borrowings under its revolving credit facility or its mortgages, loans payable and other obligations upon maturity. Instead, the Company will seek to retire such debt primarily with available proceeds to be received from the Company’s planned sales of its assets, as well as obtaining additional mortgage financings on or before the applicable maturity dates. If it cannot raise sufficient proceeds to retire the maturing debt, the Company may draw on its revolving credit facility to retire the maturing indebtedness, which would reduce the future availability of funds under such facility. As of February 18, 2022, the Company had outstanding borrowings of $125.0 million under its revolving credit facility and no outstanding borrowings under its term loan. The Company is reviewing various financing and refinancing options, including the issuance of additional, or exchange of current, unsecured debt of the Operating Partnership or common and preferred stock of the General Partner, and/or obtaining additional mortgage debt of the Operating Partnership, some or all of which may be completed in 2022. The Company currently anticipates that its available cash and cash equivalents, cash flows from operating activities and proceeds from the sale of real estate assets and joint ventures investments, together with cash available from borrowings and other sources, will be adequate to meet the Company’s capital and liquidity needs in the short term. However, if these sources of funds are insufficient or unavailable, due to current economic conditions or otherwise, or if capital needs to fund acquisition and development opportunities in the multifamily rental sector arise, the Company’s ability to make the expected distributions discussed in “REIT Restrictions” above may be adversely affected.
Equity Financing and Registration Statements
Common Equity
The following table presents the changes in the General Partner’s issued and outstanding shares of common stock and the Operating Partnership’s common units for the years ended December 31, 2021 and 2020, respectively.
Common
Common
Units/Vested
Stock
LTIP Units
Total
Outstanding at January 1, 2021
90,712,417
9,649,031
100,361,448
Restricted stock issued
55,554
-
55,554
Conversion of deferred stock units for common stock
-
-
-
Common units redeemed for common stock
175,257
(175,257)
-
Conversion of LTIP units for common units
-
205,434
205,434
Vested RSU/LTIP units
2,501
65,176
67,677
Cancellation of restricted stock
(262)
-
(262)
Shares issued under Dividend Reinvestment and Stock Purchase Plan
2,541
-
2,541
Redemption of common units
-
(730,850)
(730,850)
Outstanding at December 31, 2021
90,948,008
9,013,534
99,961,542
Common
Common
Units/Vested
Stock
LTIP Units
Total
Outstanding at January 1, 2020
90,595,176
9,612,064
100,207,240
Restricted stock issued
52,974
-
52,974
Conversion of deferred stock units for common stock
61,277
-
61,277
Common units redeemed for common stock
-
-
-
Conversion of LTIP units for common units
-
38,626
38,626
Vested LTIP Units
-
136,957
136,957
Cancellation of common units
-
(1)
(1)
Shares issued under Dividend Reinvestment and Stock Purchase Plan
2,990
-
2,990
Redemption of common units
-
(138,615)
(138,615)
Outstanding at December 31, 2020
90,712,417
9,649,031
100,361,448
Dividend Reinvestment and Stock Purchase Plan
The Company has a Dividend Reinvestment and Stock Purchase Plan (the “DRIP”) which commenced in March 1999 under which approximately 5.5 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 Securities and Exchange Commission (“SEC”) for the approximately 5.5 million shares of the General Partner’s common stock reserved for issuance under the DRIP.
Shelf Registration Statements
The General Partner has an effective shelf registration statement on Form S-3 filed with the SEC for an aggregate amount of $2.0 billion in common stock, preferred stock, depositary shares, and/or warrants of the General Partner, under which $200 million of shares of common stock have been allocated for sales pursuant to the Company’s ATM Program commenced in December 2021 and no securities have been sold as of February 18, 2022.
The General Partner and the Operating Partnership also have an effective shelf registration statement on Form S-3 filed with the SEC for an aggregate amount of $2.5 billion in common stock, preferred stock, depositary shares and guarantees of the General Partner and debt securities of the Operating Partnership, under which no securities have been sold as of February 18, 2022.
Off-Balance Sheet Arrangements
Unconsolidated Joint Venture Debt
The debt of the Company’s unconsolidated joint ventures generally provides for recourse to the Company for customary matters such as intentional misuse of funds, environmental conditions and material misrepresentations. The Company has agreed to guarantee repayment of a portion of the debt of its unconsolidated joint ventures. As of December 31, 2021, the outstanding balance of such debt, subject to guarantees, totaled $191.2 million of which $22 million was guaranteed by the Company.
The Company’s off-balance sheet arrangements are further discussed in Note 4: Investments in Unconsolidated Joint Ventures to the Financial Statements.
Funds from Operations
Funds from operations (“FFO”) (available to common stock and unit holders) is defined as net income (loss) before noncontrolling interests in Operating Partnership, computed in accordance with GAAP, excluding gains or losses from depreciable rental property transactions (including both acquisitions and dispositions), and impairments related to depreciable rental property, plus real estate-related depreciation and amortization. The Company believes that FFO is helpful to investors as one of several measures of the performance of an equity REIT. The Company further believes that as FFO excludes the effect of depreciation, gains (or losses) from property transactions and impairments related to depreciable rental property (all of which are based on historical costs which may be of limited relevance in evaluating current performance), FFO can facilitate comparison of operating performance between equity REITs.
FFO should not be considered as an alternative to net income available to common shareholders as an indication of the Company’s performance or to cash flows as a measure of liquidity. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company’s FFO is comparable to the FFO of real estate companies that use the current definition of the National Association of Real Estate Investment Trusts (“NAREIT”).
As the Company considers its primary earnings measure, net income available to common shareholders, as defined by GAAP, to be the most comparable earnings measure to FFO, the following table presents a reconciliation of net income available to common shareholders to FFO, as calculated in accordance with NAREIT’s current definition, for the years ended December 31, 2021, 2020 and 2019 (in thousands):
Year Ended December 31,
Net income (loss) available to common shareholders
$
(119,042)
$
(51,387)
$
111,861
Add (deduct): Noncontrolling interests in Operating Partnership
(15,469)
(13,277)
23,724
Noncontrolling interests in discontinued operations
3,590
7,878
(10,460)
Real estate-related depreciation and amortization on
continuing operations (a)
120,416
132,816
144,932
Real estate-related depreciation and amortization
on discontinued operations
4,806
70,614
Property impairments on continuing operations
13,467
36,582
-
Property impairments on discontinued operations
-
-
11,696
Impairment of unconsolidated joint venture investment
-
-
-
(included in Equity in earnings)
(2)
2,562
3,661
Gain on change of control of interests
-
-
(13,790)
Gain on sale from unconsolidated joint ventures
1,886
(35,184)
(903)
Continuing operations: Realized (gains) losses and unrealized (gains) losses
on disposition of rental property, net
(3,022)
(5,481)
(343,102)
Discontinued operations: Realized (gains) losses and unrealized (gains) losses
on disposition of rental property, net
(25,552)
(11,201)
117,898
Funds from operations available to common stock
and Operating Partnership unitholders (b)
$
(22,754)
$
68,114
$
116,131
(a)Includes the Company’s share from unconsolidated joint ventures, and adjustments for noncontrolling interests, of $10.1 million, $12.4 million and $13.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. Excludes non-real estate-related depreciation and amortization of $1,304, $1,610 and $2,092 for the years ended December 31, 2021, 2020 and 2019, respectively.
(b)Net income available to common shareholders in 2021, 2020 and 2019 included $23.7 million, $16.8 million and $36.2 million, respectively, of land impairment charges and $2.1 million, $5.8 million and $0.5 million, respectively, from a gain on disposition of developable land, which are included in the calculation to arrive at funds from operations as such gains and charges relate to non-depreciable assets.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. In pursuing its business plan, the primary market risk to which the Company is exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Company’s yield on invested assets and cost of funds and, in turn, its ability to make distributions or payments to its investors.
Approximately $1.7 billion of the Company’s long-term debt as of December 31, 2021 bears interest at fixed rates and therefore the fair value of these instruments is affected by changes in market interest rates. The following table presents principal cash flows (in thousands) based upon maturity dates of the debt obligations and the related weighted-average interest rates by expected maturity dates for the fixed rate debt. The interest rates on the Company’s variable rate debt as of December 31, 2021 ranged from LIBOR plus 158 basis points to LIBOR plus 340 basis points. Assuming interest-rate swaps and caps are not in effect, if market rates of interest on the Company’s variable rate debt increased or decreased by 100 basis points, then the increase or decrease in interest costs on the Company’s variable rate debt would be approximately $7.1 million annually and the increase or decrease in the fair value of the Company’s fixed rate debt as of December 31, 2021 would be approximately $78.4 million.
December 31, 2021
Debt,
including current portion
Fair
($s in thousands)
Thereafter
Sub-total
Other (a)
Total
Value
Fixed Rate
$
$
61,045
$
311,403
$
3,300
$
598,407
$
707,957
$
1,682,662
$
(7,309)
$
1,675,353
$
1,701,632
Average Interest Rate
4.85
%
3.59
%
3.43
%
3.98
%
3.85
%
3.73
%
3.71
%
Variable Rate
$
87,175
$
89,000
$
403,453
$
-
$
138,000
$
-
$
717,628
$
(3,911)
$
713,717
$
713,717
While the Company has not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in losses to the Company which could adversely affect its operating results and liquidity.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company and the Report of PricewaterhouseCoopers LLP, together with the notes to the Consolidated Financial Statements of the Company, as set forth in the index in Item 15: Exhibits and Financial Statements, are filed under this Item 8: Financial Statements and Supplementary Data and are incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Veris Residential, Inc.
Disclosure Controls and Procedures. The General Partner’s management, with the participation of the General Partner’s chief executive officer and chief financial officer, has evaluated the effectiveness of the General Partner’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the General Partner’s chief executive officer and chief financial officer have concluded that, as of the end of such period, the General Partner’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the General Partner in the reports that it files or submits under the Exchange Act.
Management’s Report on Internal Control Over Financial Reporting. Internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is a process designed by, or under the supervision of, the General Partner’s chief executive officer and chief financial officer, or persons performing similar functions, and effected by the General Partner’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The General Partner’s management, with the participation of the General Partner’s chief executive officer and chief financial officer, has established and maintained policies and procedures designed to maintain the adequacy of the General Partner’s internal control over financial reporting, and includes those policies and procedures that:
(1)Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the General Partner;
(2)Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the General Partner are being made only in accordance with authorizations of management and directors of the General Partner; and
(3)Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the General Partner’s assets that could have a material effect on the financial statements.
The General Partner’s management has evaluated the effectiveness of the General Partner’s internal control over financial reporting as of December 31, 2021 based on the criteria established in a report entitled Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on our assessment and those criteria, the General Partner’s management has concluded that the General Partner’s internal control over financial reporting was effective as of December 31, 2021.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
The effectiveness of the General Partner’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes In Internal Control Over Financial Reporting. There have not been any changes in the General Partner’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the General Partner’s internal control over financial reporting.
Veris Residential, L.P.
Disclosure Controls and Procedures. The General Partner’s management, with the participation of the General Partner’s chief executive officer and chief financial officer, has evaluated the effectiveness of the Operating Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, the General Partner’s chief executive officer and chief financial officer have concluded that, as of the end of such period, the Operating Partnership’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Operating Partnership in the reports that it files or submits under the Exchange Act.
Management’s Report on Internal Control Over Financial Reporting. Internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is a process designed by, or under the supervision of, the General Partner’s chief executive officer and chief financial officer, or persons performing similar functions, and effected by the General Partner’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The General Partner’s management, with the participation of the General Partner’s chief executive officer and chief financial officer, has established and maintained policies and procedures designed to maintain the adequacy of the Operating Partnership’s internal control over financial reporting, and includes those policies and procedures that:
(1)Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Operating Partnership;
(2)Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Operating Partnership are being made only in accordance with authorizations of management and directors of the General Partner; and
(3)Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Operating Partnership’s assets that could have a material effect on the financial statements.
The General Partner’s management has evaluated the effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2021 based on the criteria established in a report entitled Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on our assessment and those criteria, the General Partner’s management has concluded that the Operating Partnership’s internal control over financial reporting was effective as of December 31, 2021.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
The effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes In Internal Control Over Financial Reporting. There have not been any changes in the Operating Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
On February 23, 2022, David Smetana, the Company’s Chief Financial Officer, notified the Company that he would step down as Chief Financial Officer and terminate his employment with the Company effective March 31, 2022. This information is being disclosed under this Item 9B of Form 10-K in lieu of Item 5.02(b) of Form 8-K.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 will be set forth in the General Partner’s definitive proxy statement for its annual meeting of shareholders expected to be held on June 15, 2022, and is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 will be set forth in the General Partner’s definitive proxy statement for its annual meeting of shareholders expected to be held on June 15, 2022, and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 will be set forth in the General Partner’s definitive proxy statement for its annual meeting of shareholders expected to be held on June 15, 2022, and is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 will be set forth in the General Partner’s definitive proxy statement for its annual meeting of shareholders expected to be held on June 15, 2022, and is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 will be set forth in the General Partner’s definitive proxy statement for its annual meeting of shareholders expected to be held on June 15, 2022, and is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. All Financial Statements
Reports of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020, and 2019.
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
(i)Veris Residential, Inc. and Veris Residential, L.P.:
Schedule III - Real Estate Investments and Accumulated Depreciation as of December 31, 2021 with reconciliations for the years ended December 31, 2021, 2020 and 2019.
All other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto.
(a) 3. Exhibits
The exhibits required by this item are set forth on the Exhibit Index attached hereto.