Veris continues to advance its three-pronged approach to optimization with the continued strong performance of our portfolio and the recently announced facilities representing another step forward. As we round out another strong quarter, Veris represents an extremely compelling value proposition; the highest quality and newest Class A multifamily properties located in established markets in the Northeast, commanding the highest average rent and growth rate among peers, with limited near-term supply and high barriers to entry managed by our vertically integrated best-in-class operating platform. With that, operator, please open the line for questions.
Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Steve Sakwa with Evercore ISI. Please proceed with your questions.
Steve Sakwa: Yeah. Thanks. Good morning. Maybe, Mahbod, just starting on kind of the guidance…
Mahbod Nia: Hey, Steve.
Steve Sakwa: Hey. I understand it’s sort of early in the year, and you want to maybe let spring leasing season play out a bit. But it seems like the top-line has grown exceptionally well here in the first quarter, realizing that 8%, 9% growth might not be sustainable. But if I recall, your guidance for the year is much lower than that. And so obviously, you are either being very conservative in that forecast on top-line or maybe there’s some tougher comps. Maybe can you just speak to the top-line component first?
Mahbod Nia: Sure. Morning, Steve. No, look, we’ve obviously started to see blended net rental growth rates come in a bit at 4.6%, and we are now starting to the lap a tougher period relative given that we have had now a sustained period of strong rent increases. So, there’s an element of that, there’s an element of obviously just macroeconomic uncertainty as well ahead. And so that’s factored in. But we are also entering what is typically a stronger leasing season in the spring. We are seeing for the next couple of months on a blended basis, blended net rental growth rates that are right in that sort of mid-single-digit area. And so, when you look at our overall guidance for the year, it actually still fits. I wouldn’t say it’s conservative, I’d say it’s very reflective of where we see revenues for the full year landing up and also where we see expenses landing up where we are in the first quarter.
There’s also just an element of distortion overall in this first quarter from a number of things which — and they will be going forward. Haus25 being added, for example, to the same-store pool, which drags up both the revenue side of it pretty significantly, given that wasn’t fully occupied in the first quarter of last year. And then, on the NOI side, some seasonality factors, the tax appeals, the fact that non-controllable expenses don’t come in until the second half of the year. So, looking into a single quarter, particularly with it being the first one, you might look at that and say, well, it looks — the guidance looks conservative, but it’s early, and there is some volatility through just some of these factors like Haus being added to the equation, the tax appeals.
But when you look at it on a full year basis, smoothing all that out, we are still very much confident in the guidance range that we’ve given.
Steve Sakwa: Okay. Thanks. And then just second question, I just wanted to go back to the balance sheet and the financing strategy. Normally, companies are looking to somewhat minimize floating rate debt exposure. And I realize we are kind of at the peak of the — maybe the Fed’s tightening cycle, so taking on floating rate debt probably poses less risk today than it did 12 to 25 months ago. But I guess I’m just trying to get a better handle on sort of the strategy here and whether this just preserves more optionality for you to the extent that a monetization event does become available, is having the debt floating and on a line of credit/term loan just the most advantageous thing for the company versus going in and putting on secured mortgages? Is that kind of the thought process?
Mahbod Nia: Well, it definitely is a more flexible financing strategy that allows us to be able to delever over time should we choose to focus on that. It also allows us to extend we do that to have a path to accessing not only more flexible, but cheaper cost of capital when you consider that probably the next stage for a company like ours would be tapping unsecured. And for that, we are now at around 12 times net debt to EBITDA. We’d need to get to probably sub-10 times. But there’s a path between growth in the portfolio and what I described as idle equity that’s still tied up in the company. We’ve got $200 million of land, for example, that could be freed up. That’s worth 2 turns of debt if it was unlocked and used to repay debt.
But there’s a path to getting there. So, I think it’s the fact that it affords us a lot more flexibility going forward and the potential to access cheaper debt. In terms of managing interest rate exposure, it’s floating, but the intention is to hedge it. And so, we’ll be hedging — now that hedging strategy isn’t in place today, and we haven’t announced it today because we are not looking to speculate on where rates go, this is not a drawn facility. But as and when we come to draw it down, we’ll be taking steps to hedge, certainly, the term loan and likely a good portion of the revolving credit facility as well to mitigate any exposure most likely with caps.
Steve Sakwa: Great. That’s it for me. Thanks.
Mahbod Nia: Thank you, Steve.
Operator: Thank you. Our next questions come from the line of Eric Wolfe with Citibank. Please proceed with your questions.
