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VRE

Veris Residential NYSE:VRE Stock Report

Last Price

US$11.09

Market Cap

US$1.1b

7D

-16.0%

1Y

-35.6%

Updated

27 Sep, 2022

Data

Company Financials +
VRE fundamental analysis
Snowflake Score
Valuation4/6
Future Growth0/6
Past Performance0/6
Financial Health4/6
Dividends0/6

VRE Stock Overview

Veris Residential, Inc. is a forward-thinking, environmentally- and socially-conscious real estate investment trust (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.

Veris Residential, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Veris Residential
Historical stock prices
Current Share PriceUS$11.09
52 Week HighUS$19.90
52 Week LowUS$11.01
Beta1.02
1 Month Change-18.46%
3 Month Change-17.49%
1 Year Change-35.56%
3 Year Change-47.49%
5 Year Change-53.07%
Change since IPO-35.71%

Recent News & Updates

Aug 16

Veris Residential: Analysis Of The Newest 'Pure Play' Multi-Family REIT

Veris Residential is nearing the end of a transition from a diversified REIT to a pure multifamily play. As of Q2 2022, Veris Residential's multifamily portfolio generates 83% of total NOI for the REIT, up from 39% at the end of Q1 2021. Veris Residential is well positioned to benefit from spill over tenants looking for luxury class A apartments, but not able to afford Manhattan rents. Veris Residential's transition to multifamily faces some headwinds from inflation, recession and rising rates. However, this may not be an issue for long-term investors who see the luxury apartment space as a way to play a revival in urban markets in the Northeastern U.S. Introducing Veris Residential Veris Residential (VRE) is formerly Mac-Cali REIT. Mac-Cali was a diversified REIT owning multifamily, office and hotel properties. VRE's properties are all concentrated in the Northeast, with heavy presence in the NYC metro area. Currently, VRE is in the process of a strategic transition into a multifamily REIT, disposing of all their non multifamily properties. The below interactive map provides a deeper look into the locations of VRE's multifamily portfolio. Figure 1. Map of VRE MultiFamily Properties as of June 2022. Data Provided by REIT Data Market and Veris Residential Given the locations of VRE's apartments, it is no surprise VRE's properties are located in high-density urban environments. Figure 2 breaks down the urbanicity of VRE's multifamily portfolio. Our analysis shows that over 88% of VRE's apartment units are located in urban census tracts. In total, VRE is the largest pure Northeastern urban play in the multifamily REIT space. A complimentary coupling of characteristics that during the Covid era have been attributes REIT investors devalued, but are becoming more attractive as workers return to the office and rents rise due to inflation and lack of new supply. Veris Residential (VRE) Urbanicity Breakdown (REIT Data Market) Figure 2. Urbanicity of VRE Portfolio as of June 2022. Data from REIT Data Market and U.S. Census Property Portfolio Profile VRE owns class A properties built within the last 20 years. Figure 3 shows that most VRE properties have been constructed in the last 4 years, with the mean age of VRE's multifamily portfolio at 6 years old. In addition, VRE is reporting a occupancy rate of 97.1% across its multifamily portfolio as of Q2 2022. Veris Residential (VRE) Multifamily Portfolio Age (REIT Data Market) Figure 3. Age of VRE Portfolio of June 2022. Data from REIT Data Market and Veris Residential Newer apartment construction allows VRE to push environmental, social, and corporate governance ('ESG') principles across its portfolio. In its most recent earnings call, VRE stated that it is committed to "to reducing our Scope 1 and 2 emissions by 50% by 2030, a target we have validated by the Science-Based Targets Initiative and that we are well on the way to achieving". During the same earnings call, Mahbod Nia, CEO of VRE stated, "approximately 40% of our wholly-owned multifamily portfolio is Green certified, LEED or equivalent". The percentage of assets with Green certification almost double the nearest multifamily peer. Figure 4 is from VRE's most recent corporate presentation. Their newest development, Haus25, is an exemplar VRE property. Haus25 (Veris Residential (VRE)) Figure 4. Slide 8. From Veris Residential Corporate Presentation (June 2022) Of course, Class A luxury LEED certified apartments with golf simulators are targeting a specific type of demographic. Given VRE's multifamily assets are predominantly in northeastern urban areas, the location of VRE properties must be situated in zip codes where the tenants can afford their amenity-rich offerings. Demographic (unit weighted) VRE Renters as % of zip code Population 72% % of Renters in zip code Age 25-34 29% % Renters in zip code w/ >= Bachelor's 64% % Renters in zip code Paying Above $2000 51% % Renters in zip code Income > $100,000 47% Median zip code HH Income $102,289 % Renters in zip code Non-Married 52% Figure 5. Property Data from REIT Data Market, Demographics from American Community Survey (ACS 2016-2020) accessed via CensusData. We see from the demographic analysis of the zip codes where VRE owns properties that the population mix is higher educated, younger and renter dominated (for reference, it is worth comparing this demographic profile and the urbanicity breakdown above to the same analysis we did for Independence Realty Trust (IRT). The differences in the two REITs could not be more stark). The population mix in the locations where VRE owns property appear well suited for the amenity rich and class A apartments that dominate its portfolio. However, it is not a sure thing that a focus on ESG, green construction and golf simulators generate a rent premium for VRE relative to the market. Moreover, rent premiums may not always be desirable during times of recession as there is a risk of pricing out communities offering rents way above market means/medians. We compared average rent of a VRE property to the zip code average (data provided by Realty Mole) to understand where VRE's multifamily assets stood vs other listings in the same zip code. Our analysis showed a median percent difference of +7%, meaning VRE properties are offering a slight premium to zip code peers. Even with a slight premium to zip code peers, VRE properties remain less expensive than median rents in Manhattan, which hit another record, since a majority of VRE properties are located in New Jersey across the Hudson. VRE leadership sees its proximity of its New Jersey properties to New York as a key strength, both in taking advantage of rising New York rents, while also providing potential strength in a recession since rents for VRE New Jersey properties are "approximately half of those in Manhattan" according to data VRE provided in their most recent earnings call. However, it is worth noting, one survey from rent.com identified Jersey City, NJ as the city with the highest rent in the country with a YoY rent increase of 66.25%. VRE has a concentration of properties there. This survey is an outlier, but does provide data that undermines VRE's thesis of more recession proof properties. Peer Analysis it is important to point out, SeekingAlpha does not classify VRE as a MultiFamily REIT. SeekingAlpha continues to group VRE with "Office REITs". However, this is NOT how VRE sees itself or how it seeks to communicate company performance. Of course, they have a regulatory requirement and duty to report all business segments. But VRE will soon be out of all non multifamily real estate sectors. Indeed, VRE, as stated in the Q2 2022 earnings call, has [signed] definitive agreements for the sale of the Hyatt Hotel and 23 Main Street, [their] last remaining suburban office assets. So it is very important to understand what VRE means by "peers". VRE does not consider other office REITs its peers. Investors need to adjust their analysis as well. VRE provides a list of its peers in Figure 6. Veris Residential (VRE) vs MultiFamily Peers (Veris Residential (VRE)) Figure 6. Slide 31. Q2 2022 Supplemental Operating and Financial Data from VRE. Note: ORA is Online Reputation Assessment.

Jul 28

Veris Residential: Look At Total Return, Not Just Dividends

Veris Residential is a REIT which does not currently pay a dividend. Still, it has outperformed peers which make regular payments to shareholders. The main reason seems related to the fact that its diversification strategy from office to residential is working. There are risks as flagged by SA, but due to favorable rental-based valuations, it is a buy. Due to key economic metrics like growth and inflation not being aligned with expectations, do expect continued volatility, but also remember that REITs have outperformed during recessions. Veris Residential, Inc. (VRE) is a real estate investment trust ("REIT") that does not currently pay a dividend. Due to the Covid-19 pandemic and people working from their homes adversely impacting office space rental, its share price has suffered from a net downtrend since 2020, and was down by 22.62% during the past year alone. For comparison purposes, we have also shown the price performances of Piedmont Office Realty Trust (PDM) and Brandywine Realty (BDN), two other office REITs whose stock has dropped by even more, or 29.11% as seen in the chart below. These two pay dividends. Comparison of price performances (www.ycharts.com) The reason for Veris suffering less could be linked to the fact its strategy to diversify into multifamily units is bearing fruit. Thus, the aim of this thesis is to elaborate on the transition from operating as an office REIT to a residential one while not forgetting to assess how this is working out from the financial perspective. The Diversification Strategy Veris is focusing on mainly diversifying into multifamily units, and it is gradually reducing its suburban office footprint. During the first quarter of 2021, it was formerly known as Mack-Cali. The company had both office spaces and multifamily units, but there has been a transition from office spaces to family residences. Thus, during the first quarter of 2022 (Q1), as shown in the figure below, 24% of the REIT's net operating income was generated by the suburban office segment when it was still under the Mack-Cali brand. This has been reduced to only 3% in Q1-2022, as shown in the pale blue section of the pie chart. The transition from Office to Residential REIT (www.seekingalpha.com) Furthermore, net income from the waterfront segment also decreased from 37% to 33%, while multifamily units increased substantially from 39% to 64%. Therefore, the shift to residential rental properties is well underway, while the company almost stopped operating in suburban office space. Looking deeper into the waterfront offices segment, 600,000 square feet were leased during a period of 12 months in 2021, compared to 500,000 square feet during Q1 alone, showing that the company is benefiting from the return to the office trend. However, compared to the classical suburban office space which most people were used to before the pandemic, the waterfront constitutes a more premium asset class. Properties there can fetch higher rents as they are located in front of rivers, normally associated with greenery. In terms of figures, at the end of March, 70.9% of waterfront assets were leased. However, going a step further towards judicious use of capital, Veris has a strategy to dispose of its non-strategic waterfront offices. Thus, in the first quarter, 29% of them were sold. This strategy to diversify and sell nonstrategic assets seems to be working as depicted in the financial part. The Financials Like many other office REITs, the company was impacted by the Covid slump, which saw many companies and freelancers canceling their leases and caused revenues to fall by $19.7 million from the December 2019 quarter to June 2020, as shown in the table below. However, the company was back to growth in the June 2021 quarter when it grew at 3.89% on a year-on-year basis. Growth eventually reached the phenomenal rate of 32% mark in the last reported quarter or Q1. Quarterly income statement (www.seekingalpha.com) As shown in the above table, the company's operating income also surged to $22.9 million in contrast to a loss of $2.1 million in the same period last year. This figure is even better than what it achieved in the final quarter of 2019, but it is always fruitful to perform an industry-level comparison. In this respect, Veris' year-to-year growth in 2021 was better than peers Piedmont and Brandywine Realty. On the other hand, its operating margins were lower, as shown in the table below. Its operating cash flow ("OCF") was way lower. Comparison of metrics with peers (www.seekingalpha.com) Now, its cash flow has been the subject of further analysis by SA. For this matter, Veris' OCF regreasing by -34.31% for the fiscal year 2021 has been flagged as a risk to future performance. This regression is in sharp contrast to the real estate sector's median of 16.49%. However, to be realistic, the company still generated $61.46 million of OCF in 2021 and $186.46 million of levered free cash flow. More importantly, in the latest quarter, it delivered $31.5 million of OCF representing a 20.44% YoY progression and $229.2 million of FCF. Therefore, historically speaking, the company has underperformed on cash metrics. But for those looking ahead, Veris deserves further analysis, and for this matter, I look at debt. Debt, Valuations and Risks First, the debt-to-equity ratio of 112% is not out of range when compared with peers as shown in the table above. The company has repaid its collateral-backed loans using proceeds from $1 billion in nonstrategic asset sales. On a further positive note, it only has to effectuate $238 of repayment in 2022 and 2023. Most debt maturities are scheduled in 2024 and 2026. To sustain its growth trajectory, Veris has acquired The James Building in New Jersey for $130 million at a 4.0% cap rate. It has also developed Jersey City-located Haus25, including 750 units which were leased at the tune of 44% in May. This development includes the type of hospitality-style amenities in demand by the new generation of income earners, enabling Veris to charge a premium. In consequence, its Average Monthly Rent per Home of $3,103 surpasses eight other REITs in the Multifamily Residential category by nearly $400 which has, in turn, played favorably on valuations, namely the trailing Price-to-Rental revenue. At a multiple of 4.44x as shown in the table below, these are undervalued with respect to the sector median by more than 40%. Thus, based on the current share price of $13.8, Veris' stock could rise to $19.3. Valuations grade (www.seekingalpha.com) The stock is also undervalued when considering price-to-sales and price-to-book metrics as shown in green above. On the other hand, Veris remains overvalued when considering funds from operations ("FFO") and profitability, which earns it an overall valuation grade of D-, and this is where the risk factor shows up.

Shareholder Returns

VREUS REITsUS Market
7D-16.0%-7.8%-5.8%
1Y-35.6%-20.4%-22.1%

Return vs Industry: VRE underperformed the US REITs industry which returned -19.7% over the past year.

Return vs Market: VRE underperformed the US Market which returned -23.7% over the past year.

Price Volatility

Is VRE's price volatile compared to industry and market?
VRE volatility
VRE Average Weekly Movement4.6%
REITs Industry Average Movement3.9%
Market Average Movement6.9%
10% most volatile stocks in US Market15.7%
10% least volatile stocks in US Market2.8%

Stable Share Price: VRE is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: VRE's weekly volatility (5%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
1994234Mahbod Niahttps://www.mack-cali.com

Veris Residential, Inc. is a forward-thinking, environmentally- and socially-conscious real estate investment trust (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. For additional information on Veris Residential, Inc. and our properties available for lease, please visit http://www.verisresidential.com/.

Veris Residential, Inc. Fundamentals Summary

How do Veris Residential's earnings and revenue compare to its market cap?
VRE fundamental statistics
Market CapUS$1.12b
Earnings (TTM)-US$44.44m
Revenue (TTM)US$351.72m

2.9x

P/S Ratio

-22.7x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
VRE income statement (TTM)
RevenueUS$351.72m
Cost of RevenueUS$150.03m
Gross ProfitUS$201.69m
Other ExpensesUS$246.13m
Earnings-US$44.44m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-0.49
Gross Margin57.34%
Net Profit Margin-12.63%
Debt/Equity Ratio112.3%

How did VRE perform over the long term?

See historical performance and comparison