CLI
#We're doing it as quickly as we think practical.
If you came today and we invite you to come and see it, we have transformed the atrium.
When we first took over, there wasn't one piece of furniture in the entire building, 1.7 million square foot, not one chair.
Right now, if you go downstairs, there are several 100 people, I mean, in the 200 to 300 people everyday sitting, having lunch, collaborating with their portable devices plugged in, as we provide WiFi and power where we can.
We have added almost 10 different pop-up tenants, providing things from Asian Street food to empanadas to barbecue to gelato.
As you know, you live in Hamilton Park.
We have really done a good job of making this a place to be.
We think when we add the ferry service, we will get 4,000 to 5,000 people commuting to here because we're attached to the light rail.
We also have a number of parking facilities nearby that people could use.
Harborside 1 and Plaza 1 is a tenanted been in place for 35 years.
We want to take their space and we're going to gut it, new bathrooms, new Wi-Fi, the density that people want today require better A/C units, larger facilities, definitely some elevators.
We'll make all those improvements.
That should get done relatively quickly and obviously before 24 months lease expired.
We will then re-skin that building, right.
We may add some square footage to the top of it.
At the same time, we will be doing a base retail of Harborside, which will be in conjunction.
We hope to get both projects done within a 24-month period.
But some of it may lag if we can't find the right tenant, but it will be transformational each and every quarter as we go through it.
As you came over to now, you would say, this place looks totally different than it did two months ago.
The bad news is Whole Foods is not going to the site they want to go to because the developers are not building the building.
Because we've got our ear to the ground and the bad news is Whole Foods won't come to us because they want to go into an existing facility because they [have meals].
The good news is the site next to us Plaza 8/9 is a great site for Whole Foods to go to because it's a three acre site, as you know, and ---+ Second Street and Hudson Street are perfect blocks where people can actually access the area.
We will probably do a number of different retailers, looking at some concept restaurants, some other day spas, some other high-end retailing to go in those sites.
We have had a number of conversations.
We have tours with chef almost every week and we are picking a list now to the one we want.
We have three that we have identified currently and we're going up to about eight or nine when we're done.
Same-store NOI growth is up just a little bit.
No.
Concessions haven't changed.
Normal concessions on lease-up of new properties but stabilized properties concessions have not changed at all.
As you saw, our occupancy is within a few points of last quarter and frankly, it's actually a little bit higher than last year's same quarter.
So the market has been very stable with slight growth and we are up a couple of points in Jersey City, and up almost 5 points at Overland.
They will be transferred as the Rockpoint transaction.
Whatever we want to do will be transferred in because we want to set the stage with smooth sailing with them.
Next quarter, we will have a supplement to show what exactly we transferred in.
Thank you, <UNK>.
It's been a learning process and let's look at the beginning of what we wanted to do.
We wanted to set Roseland on a course so we funded out from Mack-Cali balance sheet, which is the right balance sheet, which we felt was appropriate to get it started.
Now Roseland is well on its way; <UNK> and his team have done a superb job of producing stocks that will produce revenue, which we laid out in the supplemental quarter by quarter.
We're now at a demarcation point, right.
We have to look at what we can and cannot fund and we felt that $500 million would do everything we could possibly ever need.
I think the $500 million plus the land that we currently have, we could do well over $2 billion of additional construction.
Of the $500 million, we were willing to put in $200 million.
We wanted someone else to put in the first $300 million.
The $300 million became a size requirement for us that got us essentially all the way through the plan as much as we really needed to do that we could plan to do.
Now you look at $300 million.
We had at least a half-dozen to one dozen people who wanted to give $1 billion, right.
They wanted to own control.
We thought this was a great deal.
It was superb and we looked at what we had, of course, we had it.
And I can't tell you how many people came and said I will give you half the money, I'll give you all the money but I get to run the place, right.
You become the 20 and I become the 80; we go back to being a subordinate developer.
You weed out those participants.
Then you look and say strike out all the hedge funds.
Strike out all the opportunity funds.
Look for somebody who has a core mentality who basically thinks of the business the way you are.
I happened to know Rockpoint, from the previous life of a NATO.
They had a sterling reputation and they are the easy in, easy out guys; effectively, they don't look for the last dollar per se.
They look for basically having the fiduciary responsibility of executing on a strategy.
So they came to us and said we love you guys.
We will do the $300 million, so I said great.
Our big thing was control and we don't want to actually have a more cumbersome system.
They said just give us one Board seat and monitoring capability and the major decisions that we would need to make are all within our control and we do not have their consent on anything unless it was a really, really, really huge transaction.
Now you don't have to worry about control.
Reporting wise was relatively simple and it comes down to the give-and-take on the numbers, as you pointed out.
They wanted to get, because of the fund requirements, a dividend, right.
We don't really need one so we gave them something upfront.
At the back-end, we gathered those monies back in the form of an accurate ---+ on a promote, we get a little bit more than they do.
At the end of the day, we look at it as a hedged transaction, as long as we don't drift below what our current NAV is, there is no [call] back.
So if we make a 9%, they get a 9%.
If we get a 7%, they get a 7%.
We make a 3%, they get a 6% on their numbers but we don't think we're going to make it 3%.
All things being equal, it's the best of both worlds.
The other alternative as we all know was to issue equity with numbers we didn't think were applicable to our capital structure.
So as always, this took a little longer and this was one of the things we were a little later than we wanted to, but everything else, as a Company, as a team, was actually delivered earlier.
This was ---+ believe me, this was the ---+ we feel very comfortable with the people we're working with and I don't think there is a fit that we could have found that was better.
Of all the things that we looked at and the way they interacted with us and how they deal with us has been superb today.
So we're actually very happy with where we are now.
It should be very slight because given the size of the deal and the size of the Company.
It is an excellent question.
We will giving further disclosure on something, as we fund the deal, we will lay out the math.
But initially, it is a relatively small equity.
It's a $150 million in a company that has $3 billion.
We pay them essentially 6% on the initial $150 million ; it's $9 million.
The earnings for that division actually should be about that, a little less.
So we will probably have a little leakage.
I don't think its meaningful, I think we catch up, <UNK> thinks that next year, actually, passover in which there is no issue on [under reporting].
So you are astute, as always, obviously you had a goodnight's sleep last night.
There is a little bit of a loss on the numbers but it's very minor.
It's immaterial, in my opinion, and it really goes away after the 12 to 18 months as earnings pick up.
I think they are no different in their approach than two dozen of my current investors.
So to use names like Fidelity or Blackstone or Wellington or anyone who is on my list today who looks and says at a certain price, I'm a seller, and I would buy more at a different price.
My good friend, <UNK> ---+ Ted Bigman at Morgan Stanley, who said never take it personally when I'm out of your stock because its just business, right.
They are not looking at this as something they want to own for 30 years.
They have a 10-year fund, 10 to 12 years, on the outside date, they put a minimum hold period for us.
We both felt that five years was a good point of view of holding.
After that, I think it would be totally, totally commercial.
It is in the best interest of the entity and I think we're near to their benefit.
Their reputation is stellar on this subject and not someone who ever bothered someone ---+ or someone other than commercial aspect.
They don't look at things and say, well, this is what we need to do, we want to own this because it's part of why we want to own it.
Just consolidated, <UNK>.
No change.
(multiple speakers) It will be simple.
We will keep it as ---+ we strive to make ourselves easier to understand, not more difficult.
If we had done this another way that was totally transparent and totally ---+ not one hiccup, we would have done it, but this is the best we could do.
And we think we did a good job on it.
It will probably be above a 7%, maybe as close to an 8%.
What ---+ it's an interesting deal, <UNK>.
We've bought it ---+ it's a restructuring product.
To be very candid, people will notice.
So the holdings is owned by RXR and Teacher's Insurance.
They were overlevered, when we came in.
We made a bid and it was agreed by the servicer; another asset gets spun out.
We get to basically buy those assets.
We think we did it at an advantageous number.
The interesting thing about that, I have never had the experience, <UNK> and I find it somewhat comical but we did the tenant interviews and you go meet the guy and see what is wrong with the building.
He gives you all the complaints.
Normally you go in, the tenant sometimes have a bravado about I'm going to leave the building, right.
I'm going to go because they want you to make sure they have leverage.
Every single tenant we interviewed in that market says, I am not leaving.
You can't get me out of my space.
I have got renewal options and every space has four or five different people looking for the same renewal option and if someone does not pass, I get a second option.
And if I don't have a second, I got a third, fourth, primarily because of drive time, well, it's mostly CEOs.
They operate in 20,000 and 40,000 square foot blocks and they're not moving.
It was actually, in some respects, its refreshing if the owned space that people actually really want to be in and would rather die than leave.
Yes, <UNK>, I think the ---+ we have a transit-base ---+ we have a Waterfront transit-based strategy.
So we bought assets like we did with Monaco on the water and we bought Hoboken last year.
We bought two buildings in Metro Park; now, we are buying buildings in Short Hills.
These are markets that we think enjoy the same margin as the rest.
The suburban label I'm losing ---+ I want to lose is that, oh, you can't make money in New Jersey.
But I want people to focus on it's a five consecutive quarters, we produced GAAP and cash roll-ups in the top quartile of all of our competitors.
There's a market to be made in this state and providing high-end office space to tenants who are willing to pay the price for it.
Pharmaceuticals, investment advisors, lawyers, accountants; there's certain submarkets that work.
There are many that don't.
We're going to exit the ones who don't.
We want to make money on the ones that do.
We looked at the opportunity and we looked at the asset in Short Hills and looked at the investment that <UNK> was making in the office ---+ sorry, the hotel and apartments.
We looked at the three buildings across the way which is the majority ---+ for the value that we bought and said, you know what.
This is a one-time chance to basically owned one of the best markets in the country.
And for that, we will suffer the suburban label.
<UNK>, it's <UNK>.
Just one additional point on that.
Unlike New York, we have already paid a lot of attention to that, when we drive rents here, you do not see a commensurate driving of concession packages.
When you get to the actual NERs, neither do the concessions go up nor do the expenses and tenants to the buildings go up because they don't reassess based on income and expense like they do in New York.
So we're driving here as we move those rents and that's pure bottomline.
I do not have the number in front of me.
I'm going to give it to you and we will do it ---+ that's going to close shortly, it will be in the press release.
The stuff at Short Hills is probably ---+ actually I have to get it.
I don't want to do a [back] (inaudible) on the call.
I will call you a little later.
Madison, just the information is the next market due West and it is in that high wealth corridor.
It's a park in which Allergen is just moving to and taking over 0.5 million square feet.
We think that park is going to get reinvigorated but I will give you the breakout for the assets on the other ones.
I apologize I don't have the numbers in front of me.
Yes I think it sounds directionally about correct.
There is a tale of two companies, actually.
If you look at what Mack-Cali is doing because our earnings continue to go up and net EBITDA goes down for office business, right.
It goes down in the 6% by the end of 2017 and continues to go down in 2018 and 2019 as we project out.
Roseland, because of its business model, is much higher than that.
The two combined equal to the number you project out for us.
We need to see where Roseland is going to be.
While Roseland continues to produce relative excellent cash flow growth.
The key is in a base.
As I said earlier, we need to have an epiphany about where I can get revenue at the end of the year, what expenses reduced, and as far as interest savings and the way they basically alleviate the total number of dollars we are having in debt.
We have a plan.
I don't think I want to lay out much more than that right now, but I tell you it's the number one thing we think about and I believe it's the one way we can unlock further value.
And I don't want to sacrifice that as we have talked about it at an event, with the other growth aspects of the business.
It is a balancing act and we are definitely attuned to it.
Well, one of the things we're doing is we're highlighting obviously what we think the flex business is.
It's in an entity so we moved some office assets back into the parks, in which they are self-contained, as we intend to basically sell them as a park so you could expect us to start to think about exiting that business or letting those assets for sale on the upcoming months.
It's one way to basically lose the suburban label and another way to transform the Company and basically getting rid of a large number of buildings.
They do have excellent margin; it's one of the last things we want to sell, but 's something we look at as things we might sell in 2017.
No, there's nothing else in that portfolio.
Just Morristown and Bergen County what we gave you for 2017 so far.
I am sorry, <UNK>.
We increased ---+ clearly, we increased interest expense guidance specifically for the acquisition ---+ increased acquisitions for the multifamily.
So that went up fairly dramatically.
As Mike said earlier, the timing of the additional sales is going to impact greatly the amount of interest expense we will have in the year.
So I'm not sure if that answers your question, but it is within the range obviously and the timing of the sales will have all to do with where we end up in the range.
We already have some other sales if you include ---+ I guess Bergen County, which is not in their numbers, you drop down again.
So we got down to 2.1 after some of the sales that are already being completed.
That is how we got to 2.1 million square feet and the ones that I've contemplated in the first six months gets you to 1.8 million square feet, 1.7 million square feet.
Wish everyone a great day.
Have a nice time and we'll talk to you in three months.
Bye-bye.
