Veris rejects Kushner takeover bid

Jessica Perry//November 3, 2022

Veris rejects Kushner takeover bid

Jessica Perry//November 3, 2022

Jersey City-based Veris Residential Inc. said Nov. 3 its board of directors voted unanimously to reject a bid from Kushner Cos. to either acquire or externally manage the sustainable and socially conscious real estate investment trust.

Under the proposal, unveiled in October, Kushner would acquire the REIT with a primary focus on multifamily properties for $16 per share — at the time representing a 30% premium.

Veris closed at $15.30 per share on Nov. 2.

The REIT said its board evaluated the Kushner offer with its financial advisors, Goldman Sachs & Co. LLC and J.P. Morgan, and legal team, Cadwalader, Wickersham & Taft LLP, determining that neither proposal was in its shareholders’ best interests.

“The Board believes this proposal grossly undervalues the Company in its current form and denies Veris Residential shareholders the substantial value expected to be unlocked from the pending completion of the Company’s strategic transformation,” the board wrote in a Nov. 3 letter to Kushner Cos.’ Charles Kushner.

Additionally, the letter suggests that Kushner Cos. is not fiscally prepared for such a purchase.

“As part of this process, our financial advisors spoke with the equity partners to whom you referred us (in connection with your Harborside offer) and were unable to confirm the readiness of any of them to provide you with financing in connection with a potential transaction with Veris Residential. We reiterate that this inability to substantiate your capital casts serious doubt on Kushner Cos.’ ability to complete any meaningful transaction with the Company.”

But the board did not rule out the possibility of a deal.

Rendering for Haus25, a 56-story tower located at 25 Christopher Columbus Drive in Paulus Hook Jersey City.
According to Veris Residential, when its $420 million sale of Harborside 1/2/3 in Jersey City closes and upon the stabilization of Haus25 multifamily (shown) will represent approximately 98% of net operating income, up from 39% about a year-and-a-half ago. – VERIS RESIDENTIAL

“[T]he Board is committed to evaluating any proposal to realize the substantial value that has been created at Veris Residential. However, any such proposal must fully compensate shareholders for the intrinsic value of their shares and be accompanied by explicitly committed equity and debt financing,” the correspondence continues. “Given Veris Residential’s prior experience with Kushner Cos. – during which Kushner Cos. was unable to substantiate its equity or debt financing sources – we reiterate the Board’s expectation that any proposal pertaining to the Company must include confirmation of the specific sources for requisite debt and equity capital (including details of expected commitments and anticipated due diligence) to be considered.”

As for external management, the board wrote that that sort of arrangement “would be deleterious to the Company’s intrinsic value and severely limit its strategic flexibility at a critical inflection point in its nearly complete transformation.”

Should such an arrangement be considered in the future, the Veris board indicated it likely won’t be with Kushner Cos.

“[I]t would be fundamental to the fulfillment of our fiduciary responsibilities to run a thorough process and prioritize partners with ‘best-in-class’ property management, relevant third-party expertise, outstanding reputations and strong track records. Kushner Cos. lacks third-party management expertise, has a well-documented history of questionable management practices, and is in direct competition with Veris Residential, creating inherent conflicts of interest. It is therefore highly unlikely that we would consider Kushner Cos. as an appropriate partner.”

The letter takes issue with Kushner Cos.’ analysis of the company’s performance, saying that on top of ignoring the company’s history, it “appears to be rooted in sub-institutional market practices and lacks familiarity with public-company structures.” And it calls out the company for claims that Veris has “ignored” the New York-based would-be acquiror, saying the past months have included open engagement across in-person meetings and telephone conversations, in addition to detailed responses to each proposal, writing:

Your October 20th proposal was preceded by:

  1. An abruptly withdrawn bid for the Company’s Harborside assets (bid placed on April 4th and subsequently withdrawn on April 19th);
  2. A proposal for an external management contract between Kushner Cos. and Veris Residential (September 20th); and
  3. A quid-pro-quo demanding two Board seats for Kushner Cos.’ employees and a ‘consulting contract’ for Kushner Cos. (October 4th).

The public dismissal came just a day after Veris released its Third Quarter financial results, which outlined how the former Mack-Cali Realty Corp. has nearly completed its pivot toward a pure-play multifamily REIT. According to the company, when its $420 million sale of Harborside 1/2/3 in Jersey City closes and upon the stabilization of Haus25 multifamily will represent approximately 98% of net operating income, up from 39% about a year-and-a-half ago.

The Q3 results also highlighted the sale of 101 Hudson St. in Jersey City, which was completed Oct. 7. Veris said that $346 million sale released approximately $90 million of net proceeds used to pay down the revolving debt facility.

“We have confidence that the Company’s intrinsic value will be realized in the coming months as we continue to streamline our business and operations, and near the completion of our transformation,” the Veris board wrote.