VERIS RESIDENTIAL, INC. The following discussion should be read in conjunction with the Consolidated Financial Statements ofVeris Residential, Inc. andVeris 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
The Operating Partnership conducts the business of providing management, leasing, acquisition, development and tenant-related services for itsGeneral 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 theOperating Partnership and its subsidiaries. As ofMarch 31, 2022 , the Company owns or has interests in 35 properties (collectively, the "Properties"), consisting of 22 multifamily rental properties containing 6,691 apartment units as well as non-core assets comprised six office properties, four parking/retail properties, three hotels and developable land. The Properties are located in three states in the Northeast, plus theDistrict of Columbia . 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 theOperating 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.
These financial statements should be read in conjunction with the Company's
audited Annual Report on Form 10-K for the year ended
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Results From Operations
The following comparisons for the three months ended March 31, 2022 ("2022"), as
compared to the three months ended March 31, 2021 ("2021"), make reference to
the following:
(i)"Same-Store Properties ," which represent all in-service properties owned by
the Company at December 31, 2020 excluding properties sold, disposed of, removed
from service, or being redeveloped or repositioned from January 1, 2021 through
March 31, 2022 ;
(ii)"Acquired and Developed Properties ," which represent all properties acquired
by the Company or commencing initial operations from January 1, 2021 through
March 31, 2022 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, 2021 through March 31, 2022 .
Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
Three Months Ended
March 31, Dollar Percent
(dollars in thousands) 2022 2021 Change Change
Revenue from rental operations and
other:
Revenue from leases $ 65,808 $ 65,771 $ 37 0.1 %
Parking income 4,177 3,086 1,091 35.4
Hotel income 1,417 1,053 364 34.6
Other income 26,787 3,656 23,131 632.7Total revenues from rental operations 98,189 73,566 24,623
33.5
Property expenses:
Real estate taxes 12,694 11,831 863 7.3
Utilities 3,933 4,092 (159) (3.9)
Operating services 18,531 15,450 3,081 19.9
Total property expenses 35,158 31,373 3,785 12.1
Non-property revenues:
Real estate services 910 2,527 (1,617) (64.0)
Total non-property revenues 910 2,527 (1,617) (64.0)
Non-property expenses:
Real estate services expenses 2,363 3,318 (955) (28.8)
General and administrative 19,475 13,989 5,486 39.2
Depreciation and amortization 26,514 28,173 (1,659) (5.9)
Land and other impairments, net 2,932 413 2,519 609.9
Total non-property expenses 51,284 45,893 5,391 11.7 Operating income (loss) 12,657 (1,173) 13,830 1,179.0 Other (expense) income: Interest expense (15,025) (17,610) 2,585 14.7 Interest and other investment income (loss) 158 17 141
829.4
Equity in earnings (loss) of unconsolidated joint ventures (487) (1,456) 969
66.6
Realized gains (losses) and unrealized losses on disposition of rental property, net 1,836 - 1,836
-
Gain on disposition of developable land 2,623 - 2,623
-
Gain (loss) from extinguishment of debt, net (6,289) - (6,289) - Total other (expense) income (17,184) (19,049) 1,865 9.8 Income (loss) from continuing operations (4,527) (20,222) 15,695 77.6 Discontinued operations: Income from discontinued operations - 10,962 (10,962)
(100.0)
Realized gains (losses) and unrealized gains (losses) on disposition of rental property and impairments, net - 22,781 (22,781)
(100.0)
Total discontinued operations - 33,743 (33,743) (100.0) Net income (loss)$ (4,527) $ 13,521 $ (18,048) (133.5) % ? 44
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The following is a summary of the changes in revenue from rental operations and other, and property expenses in 2022, as compared to 2021, divided intoSame-Store Properties ,Acquired and Developed Properties and Properties Sold in 2021 and 2022 (excluding properties classified as discontinued operations): Acquired and Total Same-Store Developed Properties Company Properties Properties Sold in 2021 and 2022 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$ 37 0.1 %$ 441 0.7 %$ 4,661 7.1 %$ (5,065) (7.7) % Parking income 1,091 35.4 893 28.9 270 8.7 (72) (2.3) Hotel income 364 34.6 364 34.6 - - - - Other income 23,131 632.7 22,903 626.4 115 3.1 113 3.1 Total$ 24,623 33.5 %$ 24,601 33.4 %$ 5,046 6.9 %$ (5,024) (6.8) % Property expenses: Real estate taxes$ 863 7.3 %$ 662 5.6 % $ 712 6.0 %$ (511) (4.3) % Utilities (159) (3.9) (245) (6.0) 238 5.8 (152) (3.7)
Operating
services 3,081 19.9 3,408 22.1 1,010 6.5 (1,337) (8.7) Total$ 3,785 12.1 %$ 3,825 12.2 %$ 1,960 6.2 %$ (2,000) (6.4) % OTHER DATA: Number of Consolidated Properties 26 24 2 19 Commercial Square feet (in
thousands) 4,350 4,350 - 3,596 Multifamily portfolio (number of units) 4,545 4,039 506 - Revenue from leases. Revenue from leases for theSame-Store Properties increased$0.4 million , or 0.7 percent, for 2022 as compared to 2021, due primarily to an increase in lease-up of the multifamily rental properties, partially offset by a reduction in occupancy of the office properties in 2022 as compared to 2021.
Parking income. Parking income for the
Hotel income. Hotel income for the
Other income. Other income for the
Real estate taxes. Real estate taxes for theSame-Store Properties increased$0.7 million , or 5.6 percent, for 2022 as compared to 2021, due primarily to the expiration in early 2022 of the PILOT agreements on two multifamily properties located inJersey City, New Jersey . Utilities. Utilities for theSame-Store Properties decreased$0.2 million , or 6.0 percent, for 2022 as compared to 2021, due primarily to true-up billings in 2022 of actual meter readings at the residential properties. Operating services. Operating services for theSame-Store Properties increased$3.4 million , or 22.1 percent, for 2022 as compared to 2021, due primarily to an increase in property maintenance and insurance expenses of$2.0 million in 2022 as compared to 2021.
Real estate services revenue. Real estate services revenue (primarily
reimbursement of property personnel costs) decreased
Real estate services expense. Real estate services expense decreased
General and administrative. General and administrative expenses increased$5.5 million , or 39.2 percent, for 2022 as compared to 2021. This increase was due primarily to a$7.2 million increase in executive management changes and related costs for 2022 as compared to 2021. This was partially offset by CEO and related management change costs of$2.1 million in 2021. 45
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Depreciation and amortization. Depreciation and amortization decreased$1.7 million , or 5.9 percent, for 2022 over 2021. This decrease was primarily due to a decrease of$2.3 million for properties sold or removed from service and lower depreciation of fully amortized assets of$1.3 million forSame-Store Properties for 2022 as compared to 2021. These were partially offset by an increase of approximately$1.9 million for 2022 as compared to 2021 in theAcquired Properties . Land and other impairments, net. In 2022, the Company recorded net$2.9 million of impairments on developable land parcels. In 2021, the Company recorded$0.4 million of impairments on developable land parcels. See Note 11: Disclosure of Fair Value of Assets and Liabilities.
Interest expense. Interest expense decreased
Interest and other investment income (loss). Interest and other investment
income (loss) increased
Equity in earnings (loss) of unconsolidated joint ventures. Equity in earnings of unconsolidated joint ventures increased$1.0 million , or 66.6 percent for 2022 as compared to 2021, due primarily to an increase of$0.7 million for 2022 as compared to 2021 from the Urby at Harborside venture, resulting from lower concessions and discounts to tenants in 2022 as compared to 2021. Realized gains (losses) and unrealized gains (losses) on disposition of rental property, net. The Company had realized gains (unrealized losses) on disposition of rental property of a net gain of$1.8 million in 2022 on the disposition of an office property located inHoboken, New Jersey . Gain on disposition of developable land. In 2022, the Company recognized a gain of$2.6 million on the sale of developable land located inWest Windsor, New Jersey . Gain (loss) from extinguishment of debt, net. In 2022, the Company recognized a loss of$6.3 million on extinguishment of debt in connection with the sale of an office property located inHoboken, New Jersey . 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 Company recognized income from discontinued operations of$11.0 million in 2021, due to total revenues of$21.6 million , operating and other expenses of$8.7 million , depreciation and amortization of$0.6 million and interest expense of$1.3 million . The Company recognized realized gains (losses) and unrealized losses on disposition of rental property and impairments, net, of a gain of$22.8 million on these properties in 2021. See Note 7: Discontinued Operations to the Financial Statements.
Net Income (loss). Net income (loss) decreased to a loss of
LIQUIDITY AND CAPITAL RESOURCES
LiquidityOverview
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 theU.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 46
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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 ChristopherColumbus , also known as Haus 25, inJersey 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$438.6 million has been incurred throughMarch 31, 2022 , was partially ready for occupancy inApril 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$269.1 million was drawn as ofMarch 31, 2022 ).
REIT Restrictions
To maintain its qualification as a REIT under theIRS 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. OnSeptember 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 ofSeptember 2020 it had satisfied its dividend 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 theJersey City waterfront. OnMarch 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 in 2022 while it seeks to conclude its transition into a pureplay multifamily REIT.
Property Lock-Ups
Certain Company properties acquired by contribution from unrelated common unitholders of theOperating 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 theMack Group (which includesWilliam L. Mack , a former director andDavid S. Mack , a former director). As ofMarch 31, 2022 , 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.
As of
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Cash Flows
Cash, cash equivalents and restricted cash decreased by
(1)
(2)
consisting primarily of the following:
$236.9 million received from proceeds from the sales
of
(a) rental property; plus
$2.2 million received from distributions in excess of cumulative earnings
(b) from unconsolidated joint ventures; minus
$8.2 million used for additions to rental property,
(c) improvements and other costs; minus
$33.6 million used for the development of rental property, other
(d) related costs and deposits; minus
$5 million used for rental property acquisitions and related
(e) intangibles.
(3) $228.7 million used in financing activities, consisting primarily of the
following:
$88 million used for repayments of revolving credit
(a) facility and term loan; plus
$150.1 million used for repayments of mortgages, loans payable
(b) and other obligations; plus
$6.5 million used for distribution to redeemable
(c) noncontrolling interests; plus
$12 million used for distribution to redeemable
(d) noncontrolling interests; plus
$1.4 million used for redemption of
(e) common units; plus
$5.1 million used for payment of early debtextinguishment
(f) costs, minus
$18 million from borrowings under the revolving credit facility;
(g) minus
$16.5 million from proceeds received from mortgages and
(h) loans payable.
Debt Financing
Summary of Debt
The following is a breakdown of the Company's debt between fixed and
variable-rate financing as of
Balance Weighted Average Weighted Average
($000 's) % of Total Interest Rate (a) Maturity in Years
Fixed Rate Secured $ 1,532,540 69.77 % 3.70 % 4.76
Variable Rate Secured Debt 664,107 30.23 % 3.51 % 2.52
Totals/Weighted Average: $ 2,196,647 100.00 % 3.64 % (b) 4.09
Unamortized deferred
financing costs (9,704)
Total Debt, Net $ 2,186,943 (a)The actual weighted average LIBOR rate for the Company's outstanding variable
rate debt was 0.31 percent as of
(b)Excludes amortized deferred financing costs primarily pertaining to the
Company's revolving credit facility which amounted to
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Debt Maturities
Scheduled principal payments and related weighted average annual effective
interest rates for the Company's debt as of
Scheduled Principal Weighted Avg.
Effective Interest
Amortization Maturities Total Rate of
Future Repayments
Period ($000 's) ($000 's) ($000 's) (a)
2022 $ 428 $ 90,024 $ 90,452 2.37 %
2023 2,047 147,998 150,045 3.70 %
2024 (b) 3,403 655,083 658,486 3.93 %
2025 3,300 - 3,300 3.98 %
2026 3,407 733,000 736,407 3.48 %
Thereafter 9,415 548,542 557,957 3.69 %
Sub-total 22,000 2,174,647 2,196,647 3.64 %
Unamortized deferred financing costs (9,704) - (9,704) -
Totals/Weighted Average $ 12,296 $ 2,174,647 $ 2,186,943 3.64 % (c)
(a)The actual weighted average LIBOR rate for the Company's outstanding variable
rate debt was 0.31 percent as of
(b)Excludes amortized deferred financing costs primarily pertaining to the
Company's revolving credit facility which amounted to
(c)Includes outstanding borrowings of the Company's revolving credit facility of
Revolving Credit Facility and Term Loans
OnMay 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 effectiveMay 13, 2021 . The terms of the 2021 Credit Facility include: (1) a three-year term ending inMay 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 inNovember 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) theWall 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 untilMay 6, 2022 , 1.20 times fromMay 7, 2022 throughMay 6, 2023 , and 1.40 times thereafter), and the minimum tangible net worth ratio (80% of tangible net worth as ofDecember 31, 2020 plus 80% of net cash proceeds of equity issuances by the General Partner or theOperating 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 sinceJune 2000 , are triggered if, among other 49
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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 theIRS Code . OnMay 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. InJune 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. OnJuly 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.
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 ofMay 2, 2022 , the Company had outstanding borrowings of$103 million under its revolving credit facility. The Company is reviewing various financing and refinancing options, including the issuance of additional, or exchange of current, unsecured debt of theOperating Partnership or common and preferred stock of the General Partner, and/or obtaining additional mortgage debt of theOperating 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
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 May 2, 2022 .
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The General Partner and theOperating Partnership also have an effective shelf registration statement on Form S-3 filed with theSEC 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 theOperating Partnership , under which no securities have been sold as ofMay 2, 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 ofMarch 31, 2022 , the outstanding balance of such debt, subject to guarantees, totaled$190.5 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
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 three months ended March 31, 2022 and 2021
(in thousands):
Three Months Ended
March 31,
2022 2021
Net income (loss) available to common shareholders
7,623
Add (deduct): Noncontrolling interests in
(898) (2,305)
Noncontrolling interests in discontinued operations -
3,067
Real estate-related depreciation and amortization on continuing operations (a)
28,859 30,122
Real estate-related depreciation and amortization on discontinued operations -
659
Continuing operations: Realized (gains) losses and unrealized (gains) losses on disposition of rental property, net
(1,836) -
Discontinued operations: Realized (gains) losses and unrealized (gains) losses on disposition of rental property, net
- (22,781)
Funds from operations available to common stock and Operating Partnership unitholders (b)$ 17,033 $
16,385
(a)Includes the Company's share from unconsolidated joint ventures, and
adjustments for noncontrolling interests, of
(b)Net income available to common shareholders for the three months endedMarch 31, 2022 and 2021 included$2,932 and$413 , respectively, of land impairment charges and$2,623 and zero, respectively, gains on disposition of developable land, which are included in the calculation to arrive at funds from operations as such gains relate to non-depreciable assets. 51
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Disclosure Regarding Forward-Looking Statements
We consider portions of this information, 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 Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year endedDecember 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 in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 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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