Veris Residential Inc (VRE) 2014 Q2 法說會逐字稿

Ladies and gentlemen, please stand by. We're about to begin. Good day, everyone, and welcome to the Mack-Cali Realty Corporation Second Quarter 2014 Earnings Conference Call. Today's call is being recorded.

At this time I would like to turn the call over to President and CEO Mr. Mitchell Hersh. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Thank you for joining Mack-Cali's Second Quarter 2014 Earnings Conference Call. With me today is Tony Krug, CFO, and joining us from our Roseland subsidiary is Gabe Shiff, Roseland's Executive Vice-President of Finance.

On a legal note, I must remind everyone that certain information discussed on this call may constitute forward-looking statements within the meaning of the Federal Securities Law. Although we believe the estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. We refer you to our press release and annual and quarterly reports filed with the SEC, for risk factors that could impact the company.

First, I'd like to review some of our results and activities for the second quarter and generally what we're seeing in our markets. Then Tony will review our financial results for the second quarter.

FFO for the second quarter of 2014 was 50 cents per diluted share. During the quarter, we signed a total of 877,000 square feet of leased transactions, including approximately 354,000 square feet of new leases. Our tenant retention rate for the quarter was 61.6 percent of outgoing space. And we ended the quarter at 83.7 percent leased, at 10 percent - a 10 basis point increase from last quarter.

Rent on renewals rolled down in the quarter, by 6.3 percent on a cash basis, compared to last quarter's 3.9 percent cash roll down.

Remaining lease rollovers for 2014 are just 3.5 percent of base rents, or approximately $17.5 million. Our leasing costs for the quarter were $3.21 per square foot per year, up slightly from last quarter's $3.08 per square foot per year, a very cyclical, variable type number based on the type of transaction.

Despite the challenging office leasing environment, our portfolio continues to out-perform in most of the markets in which we operate. However, we are modeling in relatively flat occupancy for the remainder of the year, which is approximately 60 basis points lower than initially projected for 2014. Of course, this is due to weakness in general demand in the marketplace and, as such, we also anticipate that our same store NOI guidance remains at a level that is approximately four percent negative, due to these difficult market conditions.

In the quarter, we implemented a capital reinvestment plan in our office assets which, in total, exceeds $35 million. We remain very disciplined in continually assessing the most efficient and effective ways to improve our portfolio, including, for example, renovating lobbies, upgrading building systems, HVAC, elevators and the like, as well as enhancing the curb appeal with improved landscaping and signage, to appeal to the tenant mix.

At Harborside, in addition to the construction of our Harborside URL project, we have undertaken the upgrading of all common areas in Harborside Plazas 2 and 3 to include cutting edge finishes and lighting, and enhanced retail and dining options, all in keeping with the "new way of working", which particularly appeals to the TAMI tenants, which seems to be the largest segment of tenant demand in the marketplace.

And now I'll discuss some of our recent activity. In the quarter, we completed the sale of nine office properties, comprising approximately 1.7 million square feet, for an aggregate $235 million. We sold several properties to Keystone Property Group in a joint venture as follows: 30 Knightsbridge Road in Piscataway, which actually is four interconnected buildings; 370 Chestnut Ridge Road in Woodcliff Lake, and 530 Chestnut Ridge Road, also in Woodcliff Lake, New Jersey; and finally, 412 Mount Kemble Avenue in Morris Township, New Jersey. The purchase price for the above was approximately $117 million, including cash and subordinated interests.

The company has contracts with Keystone to acquire, again through a joint venture, an additional seven of our properties, one in New Jersey, in [Farawan], several in West Chester, and the remaining asset in Stamford, Connecticut, all for $104 million.

By selling to a joint venture partnership in which we remain a participant, Mack-Cali will participate in the value creation above certain hurdle rates. We will handle the leasing of the properties for market fees, as well as share in the management fees.

Also during the quarter, Mack-Cali sold the following properties. 22 Sylvan Way in Parsippany, New Jersey, for almost $97 million. The buyer, Griffin Capital, also assumed responsibility for future tenant improvement obligations and commission obligations, totaling approximately $7 million. We also sold 400 Rella Boulevard in Montebello, New York, our only asset in Rockland County, and that sold for approximately $28.3 million.

And so, at this juncture, the sales for 2014 will approximate $346 million. I might add that no other sales are currently contemplated. However, we will always be opportunistic and if a compelling transaction surfaces, of course we will look at it.

On the multi-family front, we announced one acquisition and began one new development project during the quarter. On the acquisition front, we acquired Andover Place, a 220-unit property in Andover, Massachusetts, for just under $38 million.

Roseland will manage, upgrade, and lease the properties to the traditional Roseland standards, and increase the rents as they're doing it. Roseland also, in partnership with the Glenco Group and Mirado Properties, broke ground in May on 108 luxury rental units located on Main Street in the Village of Tuckahoe, New York.

The project will, of course, feature many of the traditional Roseland amenities, a fitness facility, yoga studio, club room, outdoor terrace with gardens, among other amenities. And we believe the project is located in an absolute highest barrier to entry market.

Other than the Andover acquisition that I just alluded to, we do not anticipate acquiring any additional operating multi-family assets in 2014.

In a separate joint venture with Keystone, we acquired the magnificent 885,000 square foot historic Curtis Center office property, for $125 million. Curtis Center is strategically located overlooking Independence Hall and Washington Square Park, in the heart of Center City Philadelphia, virtually around the corner from our keystone Mack-Cali joint venture office building, at 100 Independence Mall West where, by the way, just as an anecdote, we opened at 18,000 square foot plaza level beer garden last week, that had in excess of 4,800 patrons over the weekend.

Curtis Center, a landmark building which is currently 85 percent leased, will be repositioned as a dynamic mixed-use environment which will include approximately 100 luxury rental apartments within the existing office space, facing directly over Washington Square Park, and naturally, our Roseland subsidiary will be responsible for the creation of that multi-family component.

The property will also feature an enhanced pedestrian experience along the surrounding street-scape, on Sansom and Walnut with many restaurants and cafe experiences. The total investment is anticipated to be approximately $180 million in this asset. Again, $125 million initial purchase price. And this sum is inclusive of the multi-family conversion, capital upgrades, tenant improvement obligations and allowances, and leasing commissions.

Anticipated stabilized yield on cost for this asset exceeds eight percent. And I might also add that debt has been arranged, and the term sheet has been signed for $150 million debt package on this property.

Just to comment on office leasing, we did increase occupancy in the quarter by 10 basis points, as I mentioned. Just yesterday we announced 116,000 square foot 20-year office lease in Paramus, New Jersey, with United Water. And so we continue to be very active and prolific on the leasing front, while maintaining the highest standards for our assets, and the highest standards for the quality of life for our tenants.

I'm also proud to note that Mack-Cali's office property at 5 Wood Hollow in Parsippany, New Jersey, received Lead for Existing Buildings Gold Standard certification from the U.S. Green Building Council. And so, as well as congratulating our property management team on this great accomplishment, I think it's emblematic of the standards that we hold ourselves to at Mack-Cali in our core office portfolio.

And lastly, I want to address the separation agreements that have been executed with two of the Roseland co-presidents, and clarify any misunderstandings about that, as I've seen in some of the pre-call notes this morning.

Brad Klatt and Carl Goldberg, who are two of our three Roseland co-presidents, have agreed, in connection with our efforts to reduce our costs, reduce our G&A, and streamline our organization, to leave one year ahead of schedule. Based on their three year contract, they will be leaving at the end of two years. Each of them will receive payments of $750,000 and $500,000 respectively, which represented, or does represent, target bonuses for each of them. And they have agreed to stay, obviously, through the termination of their contracts.

And then Carl Goldberg and his daughter Deborah will continue on in the capacity of a consultant to the company, in the area of governmental affairs for a period of at least one year from October of 2014, and maintain the consistency that we've had with our relationships and so many of the particularly New Jersey communities that Carl has been active in.

I also want to say that I believe that just as we have at Mack-Cali, at Roseland we have a very, very talented deep bench of executive vice-presidents, and vice-presidents below them, that have been mentored by the co-presidents and are ready to take on additional responsibilities.

Naturally, Marshall Tycher, the original founder of Roseland, will remain with the company, and his son Jack who is currently one of our vice-presidents of development and acquisition. Marshall will remain at least through his contract term, and is extremely active in the business on a day-to-day basis.

And with that, now I'll turn the call over to Tony Krug who will review our financial results for the second quarter.

Thanks, Mitchell.

Funds from operation for the second quarter 2014 was 50 cents per share, as compared to 65 cents per share for the same quarter last year. For the second quarter 2014, net income available to common shareholders amounted to 58 cents per share, as compared to net income of 26 cents per share for the same quarter last year.

Same store net operating income decreased by 10.4 percent on a GAAP basis, and 8.8 percent on a cash basis for the second quarter. Our same-store portfolio at quarter end was 26.1 million square feet. Our unencumbered portfolio at quarter end totaled 215 properties, and represents 74.8 percent of our portfolio on an annualized basis.

At June 30th, Mack-Cali total unappreciated book assets equaled $5.7 billion and our debt-to-unappreciated assets ratio was 38.4 percent.

The company had interest coverage of 2.8 times, and fixed charge coverage of 2.4 times for the quarter. We ended the quarter with approximately $2.2 billion of debt, with a weighted average interest rate of 5.51 percent. Currently we have $31 million outstanding on our $600 million unsecured revolving credit facility.

Based on current plans and assumptions, we're updating our SFO guidance for 2014 to a range of $1.70 to $1.78 per share. At the mid-point, our guidance assumes occupancy remaining in the current area of 83.7 percent leased through year-end. Same store net operating income is expected to decrease by approximately four percent over the remainder of the year.

We have no asset sales beyond the $84 million expected to close in the third quarter. We have no multi-family operating acquisitions assumed, and development spending between $70 million and $80 million of company equity is expected by year end.

Please note that under SEC Reg. G concerning non-GAAP financial measures such as FFO, we are required to provide an explanation of why we believe such financial measures are relevant, and reconcile them to net income. Available on our website at mack-cali.com are our supplemental package and earnings release which include the information required by Reg. G, as well as our 10-Q.

Mitchell.

Thank you, Tony.

And now I'm going to turn the call over to Gabe Shiff, our executive vice-president of finance at Roseland. He'll provide details around our progress throughout the portfolio in connection with our multi-family assets. Gabe.

Thank you, Mitch.

Today, 21 months since Mack-Cali's acquisition of Roseland, we are reflecting continued cash flow and value growth of our residential platform. Like previous quarters, the second quarter represented progress along multiple growth areas. The continued build-out of our active construction program and development of our controlled pipeline, the acquisition of strategic operating and land assets, and the pursuit of approvals for the repurposing of select Mack-Cali holdings.

At quarter-end, we had approximately 2,400 apartment homes across eight communities in construction, representing approximately $895 million in total development activity. On average, this construction activity is projected to generate approximately $63 million of NOI, producing an unleveraged yield exceeding 6.5percent.

The company has approximately $192 million of capital commitments to these active developments, of which approximately $100 million has been invested to date. From this construction activity, we are expecting initial deliveries of two communities in 2014, comprised of 317 apartment homes. They are River Park in Harrison, New Jersey, and Portside at Pier 1 on the East Boston Waterfront. Further, we anticipate delivery of three additional communities, comprised of 884 apartment homes in early 2015.

In addition to those near-term deliveries, in the second quarter we continued our active lease-up of River Trace at Port Imperial, Estuary in Weehawken, and The Chase at Overlook Ridge. These three communities were on average 56 percent leased at quarter end, as compared to approximately 20 percent leased one quarter ago, representing 381 apartment homes of new leasing activity in the second quarter.

These strong absorption levels have been accomplished at our Port Imperial and Overlook Ridge master-planned communities where we are preparing or next round of construction starts. As detailed in section 5 of the supplemental, a new section dedicated to the company's multi-family rental portfolio, our construction and development activity is comprised of three ownership structures.

First, consolidated developments including the project Mitch just referenced in Tuckahoe, New York, where Mack-Cali has an approximate 76 percent controlling ownership interest.

Second, participating joint ventures, including Marbella South in Jersey City, whereby Mack-Cali invests capital, and has invested capital, on a proportional basis to its effective ownership interest, and lastly, subordinated joint ventures, including River Park at Port Imperial, whereby the Mack-Cali interest is subordinated to an equity partner's preferred return.

Importantly, we will not pursue any new subordinated joint ventures, and we will seek to amend legacy subordinated joint venture commitments to create opportunities to co-invest proportional capital and generate non-subordinated NOI.

In addition to the Andover Place and Curtis Center transactions referenced previously by Mitch, subsequent to quarter end, the company entered into an agreement to acquire our joint venture partners' equity interests at the Overlook Ridge master-planned communities in Malden and Revere, Massachusetts, for $16.6 million.

This transaction will increase the company's ownership from 50 percent to 100 percent, and will also eliminate our joint venture partners' priority land accounts on the proposed build-out of approximately 1,167 apartment homes. The transaction will also increase the company's ownership from 25 percent to 50 percent at The Chase at Overlook Ridge, which is currently in lease-own. In addition, we are under contract for two development sites, one in Massachusetts and one in Pennsylvania, both with targeted closings in 2015.

A truly synergistic component of the Roseland-Mack-Cali business combination is the repurposing of select Mack-Cali properties. To that end, in the second quarter we made material progress on advancing approvals at two municipalities in New Jersey and one town in the Greater Philadelphia region, and are hopeful these activities will lead to construction starts in 2015 as well. Concurrently we are evaluating and pursing additional repurposing candidates.

Looking forward, we anticipate continued program across a platform referenced Strategic Growth Initiatives. Specifically, over the next four quarters, we forecast nine projected construction starts representing approximately 2,000 apartment homes and a parking garage, at an approximate cost of $630 million.

The company's capital commitments to these projects will be approximately $120 million. The average projected yield for these future developments is approximately 6.6 percent. During that same four quarter period, we will deliver approximately 1,200 apartment homes to the marketplace, with the balance of our construction activity to deliver apartment homes shortly thereafter.

Importantly, as the company accelerates its residential transformation, the residential platform continues to generate fee income from its construction, development, and management businesses.

In closing, we will also seek to improve our ownership positions throughout the portfolio, in this connection, and similar to achievements at the East Chester and Marbella South projects, and now Overlook Ridge as well, we will continue to pursue additional partnership restructuring. Over the last quarter, we made significant progress towards this important objective, and are hopeful for more announcements shortly.

Thank you.

Thank you very much, Gabe. I think that was very insightful and was a comprehensive review of our strategy and vision for what's happening over at Roseland, and certainly for the remainder of 2014.

And of course in addition to all of the activity at Roseland that Gabe just alluded to, I want to reinforce the fact that Mack-Cali remains committed to being the preferred provider of office space in our markets. We have a portfolio that's still close to 30 million square feet and, through our creative repositioning, we're working with our partners, our stakeholders, to identify and realize additional value opportunities in our office portfolio, either through adding a residential component to an office asset, or creating mixed-use environments.

As I indicated before, we are reinvesting significant capital into our office assets, to enhance their efficiency and appeal in today's workplace. At the same time, we're successfully executing on our multi-family growth strategy. And so we continue to enhance value for our shareholders by creating exceptional mixed-use communities throughout the Northeast. And by the way, we're doing all of this while maintaining comfortable financial flexibility.

And so I'm pleased with the progress that we're making, and the value that we're unlocking in both the office and multi-family sectors. And with that, we will now take your questions. Operator.

Yes, sir. Thank you.

(Operator instructions.) And we'll pause for just a moment to allow everyone the opportunity to signal for questions.

And we will take our first question from Jamie Feldman with Bank of America Merrill Lynch.

Great. Thank you. Good morning.

So I guess, just starting out, Mitch, can you talk a little bit more about the roles that Brad Klatt and Carl Goldberg were playing at the firm, and how that's going to get picked up going forward.

Sure. Carl, as I mentioned on the remarks - his principal responsibility is liaison with governmental entities in New Jersey. Particularly, he has been very engaged in Weehawken and West New York at Port Imperial, [Morristown] and other places with the local officials. And he will continue in that role for at least a year from October, along with his daughter Deborah who's currently a Roseland, or a Mack-Cali-Roseland employee, working alongside of Carl.

As you also know, Jamie, I have had a long career in this business, centered in the New Jersey marketplace. And so Carl and I share many, many relationships in government, at state agencies, at the - in the legislature, and we have worked quite well together as a team since the combination of Roseland with Mack-Cali. So I frankly see a complete continuity and consistency with respect to what Carl has been doing. Carl's been extremely active in our repurposing. Again, that's working as a liaison with governing bodies and the planners for the communities, to properly explain what we're trying to accomplish, and then reduce that to ordinances where necessary for rezoning.

With respect to Brad Klatt, Brad, I guess, has spent most of his time since the acquisition of Roseland mentoring the finance team, including Gabe, and Eric [Ronfeld] and others. And it has - Gabe has taken on the principal role in the finance area, has expanded his role significantly in the banking relationship area, right alongside Tony Krug, [John] DeBari, and Bill Fitzpatrick, at the Mack-Cali finance group, so that we're sharing all the relationships, and we're taking advantage of the economies of scale, if you will, that we enjoy now as an even larger company in the financial markets.

So Gabe - rather, Brad has been terrific. And - you know, but we think that Gabe has clearly proven, along with other members of his team, that the mantle and the baton can now be passed to him.

And again, I want to point out that Marshall Tycher founded the company when he - you know, from his Lincoln Property days. He is the senior principal of the company. And he's fully engaged. He works with the entire team. He and I worked together on a day-to-day basis, talking about opportunities and getting engaged early in things like Curtis Center, so that we know comfortably what we think we can accomplish there. And Marshall's not going anywhere.

So, we're pretty comfortable with what we're doing here. We anticipate saving maybe $4 million or $5 million a year in these transitions which, of course, is important to the company and, frankly, something that our investors have asked us to take a hard look at, in reducing our G&A. And so we're doing that.

And are you concerned at all about - it looks like there's a change in their contracts, related to the non-compete. Do you have a sense of what their plans are going forward?

Carl's plan is to, as I said, devote his principal time to the ongoing efforts of what we're doing at Roseland. He does - for the benefit of his daughter Deborah, has indicated to me that, you know, he'd like to have this small consulting company where, because of his role in state government in New Jersey, formerly as the Sports Authority Commissioner and so forth, where he can be helpful as a consultant to venues that might want to come in, for example, and build a casino in Jersey City, and have other aspects to that casino, like entertainment and so forth, where because of his long relationship with the government officials and the planning department, he can do things like that.

So I see no - first of all, no conflicting issues with what Carl is going to do. And with respect to both Brad and Carl, they, I think, are - they characterize integrity. And I don't think that they would do anything to compromise the success of what they all helped create with Marshall Tycher, and then subsequently with the team they developed there, and now with Mack-Cali, by doing anything that conflicts with us.

OK. Thank you.

And then I guess a quick question for Tony. Can you just walk us through the changes to the guidance? And if I remember correctly, I think you took - did you take your occupancy guidance down through year-end, or did I get that wrong.

I had said that the occupancy would remain about where it is now. I don't know if you're referring to last quarter. We thought we would have a little bit of an uptick, but it wasn't that much of a different, and didn't have much of an impact.

But the primary change, to answer your question, for the guidance was the fact that we didn't sell some assets that we were planning to sell, or that we thought we were going to sell last quarter. Those are the two assets in DC, primarily. We'll have a little bit of a G&A savings that Mitchell spoke about. Those are the primary drivers. And obviously, you know, the - we did a little better in the second quarter. So the primary driver is the assets that we didn't sell, some G&A savings.

OK. All right. Thank you.

You're welcome.

And we'll move to our next question. Michael [Villerman] with Citi.

Yes, good morning.

I think that the focus on the new disclosure, which is helpful in terms of the multi-family, the schedule 5. And I was looking to reconcile it a little bit with Gabe's comments. Gabe, I think you talked about starting nine projects, a total capital commitment of about $630 million gross. And I think you mentioned Mack-Cali of $120 million. I wasn't sure if that was equity, or your total share of equity and debt.

And how does that $630 million compare to the $900 million of gross costs that are listed on page 52?

Sure. I'm happy to. I'll help clarifying that.

So, page 52 represents the projects that are currently in construction. From the beginning of the remarks, I mentioned approximately 2,400 units at about $895 million of costs. Those were the metrics referenced on page 52.

Page 53 includes our pipeline, which is almost all entirely owned and controlled. And as you can see, almost entirely untitled as well. From that, if you see the starts over the next four quarters, 4Q, 1Q, and 2Q, there are nine projects there. So the costs that I referenced were with respect to those nine project, the Mack-Cali capital contribution to those, the estimate was with respect to those nine projects.

And the $120 million is just your equity into the project, or is that your gross - so what would your gross share be of the $630 million, because when I think about capital, whether you're putting equity in, or your share of the debt, it's total leverage. And so I just want to make sure that I understand what your capital commitment is of the $630 million in gross terms.

Sure. So the gross costs are $630 million. Our projected capital share of that, and some of them will have equity partners, will be $120 million, approximately.

Plus 50 percent.

For approximately 50 percent ownership.

Right. So you'll pick up $315 million of gross dollars, so $200 million will be financed with debt, $120 million with equity. Is that correct?

Yes, yes. Well, Michael, we have had - contemplated 60 percent debt on all of these assets. So the total project, we'll call is $600 million. Sixty percent of that's debt.

Right. And then [year-ending], plus your 100. So there's - I mean, with the current pipeline today, you know, your share of that pipeline, on page 52, you know, is about $460 million gross, of which you've spent about $116 million, including your pick-up of debt.

That's about $350 million left to fund, you know, plus the next round in terms of debt and equity, is well over $300 million, plus some of the repurposing, plus, I think, Mitch, you talked about significant capex dollars going to [near] office assets.

I guess when you start adding it up, it is a big number in terms of just total capital, again, debt and equity. How are you going to fund all that, in addition to, kind of, keep the balance sheet at good levels. And I think Gabe also talked about buying [at] joint venture partners, and simplifying the ownership, and increasing the Overlook. All that requires capital. So I'm just trying to get a better perspective of where the capital is coming from.

Yes, I guess the - this is Tony. The $630 million that Gabe referenced is all, you know, (inaudible) - I don't want to say speculative, but projections. And clearly the funding will come from a number of sources. We'll have, you know, some partnerships, joint venture contributions. We'll have some debt. Mitchell has - we have no definite asset sales, but there could be asset sales. And I think it's going to be a combination of those things.

But again, none of this is committed yet, in full.

Yes, I think it's important to understand, Michael, that we have secured a tremendous amount of optionality at Roseland, where we have the ability to proceed, to have entitlements on, you know, 2,000 apartments, plus a queue behind that that in part consists of repurposing one particular one where we think we're just about to the approval stage, from the town's perspective.

We don't - if we don't feel comfortable with the availability of capital to the company, with our access to capital, we will not proceed with the projects. But it's our optionality to do so. We control the land, and in the instances where we have partners presently, but only a handful of those assets, we are the - we have the management control to determine whether we proceed or not.

So naturally, as has been the history of this company, we will not do anything to stress the balance sheet. I maintained - or I mentioned before, balance sheet flexibility, and that's important to the management team, and it's very important to the board. So as we move forward with these opportunities, we will determine what our access to capital is, whether we need to bring in additional institutional partners, which is likely, to help fund this queue.

Part of the - what I would say, almost the final stage of negotiations with one of our largest institutional partners, is giving up the right but not the obligation to invest 35 percent of the capital in going-forward projects, and I would say that at least 60 percent of this queue of nine projects, are of great interest to them, that they want to participate in, with promoted structures to bring us to over 50 percent ownership, based on hurdle-rates.

So there's a lot of flexibility that we're building into our capital plan in the company. I (inaudible) kind of answer?

Yes, a little bit. That's helpful.

What I would say - I had a question just on Brad and Carl. In terms of your comment about saving $4 million to $5 million a year, I think you said, in G&A, I was just trying to better understand that. Because I guess you're paying them out about $2.5 million total.

Yes. The . . . .

When I look at the proxy, none of them show up in the comp table (inaudible) executives.

OK. They're not NEOs of the company, and so that's why they don't show up in the proxy. They're co-presidents of a subsidiary.

Oh.

But the $500,000 for each of them represented the [bulk] - their - half of their bonus for the first year with a contract that was where they met their target. The other half was based on a variety of different metrics in the company where they didn't meet their target. So they're entitled to the $500,000, but they weren't going to get paid any of their bonus dollars until the expiration of the third year of their contract. So that's the $500,000.

The $750 is their target bonus, again, half of what they could have achieved for year two, they could have each achieved $1.5 million bonus for year two. They're getting half of it, and that's the $1.250 million total for each of them.

And so, embedded in G&A for - currently, the run rate for them on a quarter basis, right now, is about $1 million, $1.25 million? So that's what we should think about backing out once they leave?

Yes, well, first - the third year of the contract, they were entitled to $2 million bonuses, half target and half, you know, certain metrics, plus their base salaries were $400,000, plus all the other expenses of load for an employee. You know, medical and so forth. So, you know, it - that's the number. The $2.4 million, potentially, for year three, plus the employee load. That will be eliminated from G&A.

Except Carl, just to be clear, is staying on as a consultant for that third year, for $400,000 plus health insurance, plus some ancillary office support.

OK. Thank you.

You're welcome.

And next we move to Craig Melman with KeyBanc Capital Markets.

Hi, Mitch. It's Jordan Sadler.

Hey, Jordan.

I had a question regarding - I guess I'm struggling a little bit to understand the piece in terms of sources of capital as you were walking through it with Michael. It sounds like you - there's not going to be additional acquisitions of operating multi-family properties. You are going to continue to be a developer of the multi-family properties that you have in the pipeline here, and some additional ones that may come into the fray.

But there's no additional sales contemplated, per se. And at the same time, we've talked about consolidating ownership interests, and we've talked about that over the last several calls, and even on this call. And then, I guess, in the follow-up to our answer to that last question, there was some discussion regarding bringing in additional institutional capital from partners in these assets or in this pipeline.

And so, I guess I'm just a little bit confused. Are we trying to consolidate ownership of the multi-family portfolio and development pipeline? Or are we just trying to fund that, again. I guess I'm confused.

I'm happy to kind of walk through it.

First of all, let's just talk about what our current obligations are. Our remaining obligation in 2014, to fund the Roseland development operations, including not only Roseland but our URL project, which actually is the largest component of the number, and a few other things that are what I will call Mack-Cali projects. The - some of the things we're doing with Keystone, is $72 million. So that's what remains in 2014.

It's unfunded cash.

Unfunded cash. And 2015, unfunded cash which - the majority of which is URL, in Jersey City, is $63 million. So those two numbers are, you know, $130 million, $135 million are obligations that we have to fund. That's not a very big number for a company that has virtually an untapped $600 million credit facility, and has pretty health operating income.

The $120 million in 2015 that Gabe alluded to, which would be our share, our anticipated share for 50 percent ownership of nine new projects, is optional.

OK. And that's also the unfunded . . . .

And (inaudible) some of them, we can do all of them. And - so that - so we've teed up this queue of opportunity. Then we have another queue behind that, that would have another potential $70 million of Mack-Cali equity, that's completely our option. One happens to be a repurposing asset that - so we're going to want to do that. But that's under $15 million of Mack-Cali equity required. And we own the land, obviously, free and clear.

So what we said about the restructuring and reformulating of our partnerships is that we have an institutional partner in Prudential - I'll be very open about it - who we have a great relationship with, and they would like to do a lot more with us. And they understand that we can no longer go forward with these legacy joint ventures where we're sitting behind a [press].

So we - one project that we started a couple of months ago, Marbella II, in Jersey City, was a legacy partnership. They allowed us as a, sort of, model for the new joint venture going forward, to invest 25 percent of the equity. Again, not a big number, because you're talking 60 percent debt financing on most of this stuff, on a parity pursue basis with them.

So now the team at Roseland, which includes Gabe, Andy Marshall, who is a very senior level development, but also finance, professional - I've worked with Marshall, and Ivan Baron, to work through a litany of details with [crew], and we're just about to the finish line, where, on a go-forward basis, they want to participate in as many projects as we can feed them. They have a lot of money that they want to put to use, especially when you can develop, you know, six-plus percent free and clear unleveraged yields in multi-family in the best locations in, you know, certainly the Northeast.

And they will give us the option of investing up to 35 percent of the equity in these projects, and then getting a promoted return above that based on certain hurdle rates, as well as paying the fees that cover the C&A in Roseland.

So it's kind of a multiple-pronged approach that we have taken here. And under - I want to just emphasize to the investors and analysts listening to this call. We're very disciplined and we're pretty sophisticated. And, you know, I've been sitting in this chair almost 18 years. And Tony has - and others of the team, but Tony's been, you know, kind of at - alongside me every step of the way.

We're not going to get over our skis. We're not going to get ahead of our skis. But we have all of this great opportunity set, and we - we're going to work really hard, as we have been, to find mechanisms at least to look at and understand, where we can do as many of these projects as possible, to add value to our shareholders.

OK. The other piece of that, just to make it abundantly clear, so you get the $135 million of unfunded cash for the next, you know, two years or 18 months.

Right.

And then the optional additional $120 million. What is the - so you were also assuming some incremental portion of debt. And if we assume 60 percent leverage on this funding, that would mean that the total capital deployed on the $135 million would be more like $300 or $330, or . . .

But - well, first of all, a lot of these structures are unconsolidated joint ventures. And - so that's number one. And that's a facts and circumstance analysis that the accountants do.

So just, you know, whether rating agencies and others look through that, that's a different issue.

OK.

So, you have unconsolidated debt. And what we've seen take place, at least with us is, when we started, when we initially acquired Roseland and were doing some construction financing, the construction lenders had traditionally looked for, call it between - up to 20 percent guarantees on what was non-recourse debt, construction financing, because Roseland was placing the guarantee of completion on the projects.

We - as soon as we acquired the company, told the banks, you know, "Now the big boys are here, in terms of financial capabilities. And we're not providing 20 percent guarantees, even though we're - you know, our subsidiary is guaranteeing completion."

And so, we've seen that number throttle down by 50 percent. So when you think about $300 million of debt, more or less you might see a 10 percent of that as a - what I would call a "recourse guarantee" to the company, only to complete construction. And remember now, the financing is there because these have institutional partners for the equity, at least in part. And all you've got to do is build the building, and you're off the recourse.

So I think that's kind of how you have to look at it, Jordan.

OK.

Mitch, hey, it's Craig Melman here.

I just wanted to touch on your comments about the TAMI, kind of, requirements kicking around Jersey City, and maybe put a number on how much you're seeing and, kind of, what that could portend for your ability to back-fill the Morgan Stanley space?

You know, right now we have - I don't want to be mutually exclusive. It so happens that we have a number of financial firms that we're actually engaged in discussions with. I - clearly, we're not seeing the mega deals like, you know, some of the deals done in downtown and, you know, a couple of the - or the RBF deal done at Goldman's building.

But we have a reasonably good pipeline of activity that includes your traditional financial firm, and - but of course, the Harborside 2 and 3, which is - call it 400,000 square feet, plus or minus, or vacancy, because the Morgan Stanley and Credit Suisse offers us a phenomenal opportunity to transform that space and reimagine it to be hip, cool, and edgy. And that fits in perfectly with our URL project which is at Harborside.

So you have this - I know it's - at this point, it's a cliche to say "Live, work, and play", because everybody's saying it. But you really have a little city there. And with what we're doing at Plazas 2 and 3, including - well, let's just, you know, and I want to be somewhat gentle. More retail enhancement, the look and feel of tech and coolness in terms of how we're designing the space, how it's been designed, potentially a beer garden, which we already have and we're going to enhance it similar to what we did in Philadelphia.

We think that we can compete extremely well with the availability for that kind of space in downtown, particularly also the fact that New Jersey, under its economic opportunity act, and it's as of right - provisos and incentives for adding employees, give us great ability to compete for those TAMI tenants.

And Jersey City, by the way, is just getting better all the time. I mean, it's got museums now and - sure, it's got issues like any other urban area, city area. But it's really becoming a very well-amenitized community. So we have a reasonable queue, but I will tell you the TAMI tenants that we're seeing are smaller. You know, they're not huge tenants. They're - you know, we've got one that's 35,000 feet that we're responding to. That's sort of the order of magnitude of what we're seeing.

Great. Thank you.

You're welcome.

And we'll move to our next question. We have [a] Russ Nussbaum with UBS.

Hey, Russ.

Hi, thanks. Mitch, can you just quality or clear up what the asset sales in the second half of the year are forecasted to be?

Yes. I talked about that before. We have three assets in Elmsford, on Taxter Road, one building in [Farawan], New Jersey, two buildings in Tarrytown, and one in Stamford, Connecticut. They total 916,000 square feet, and I talked about the numbers before. Our total sales in 2014 will be approximately $346 million.

OK. So another - what is it? About another $100-ish to go . . . .

Well, you have $104 million remaining on the assets I just identified.

OK. And the timing of that? Is that more Q4 or is it more Q3?

It's like any - you know, within weeks.

OK. All my other questions have been answered.

OK, thanks, Russ.

And we'll move to our next question. We have Steve Sakwa with ISI Group.

Thanks. Good morning, Mitch.

Hi, Steve.

Hi. I was just wondering if you could talk a little bit about your office leasing and maybe the prospects for some of the larger tenants in 2015 and '16. I know that's been a bit of a source of problems, some large tenant move-outs. And as you kind of look through the portfolio, the next maybe 24 to 30 months, you know, what have you identified, you know, as potential move-outs and kind of prospects for [back-towing] (inaudible).

Yes. Sure. The - with respect to '14, and - I would - the largest tenant is a tenant in Morris Plains. It's a 75,000 foot tenant, a financial company. We simply could not accommodate. They needed more space, believe it or not. And needed to re-stack.

That building is being repurposed. We are in what I would call the 8th inning, if not beyond, with respect to the rezoning of that property, which will become close to 200 luxury multi-family apartments, apartment homes.

And so for 2014, that's the largest piece that we have. We have a couple of 25s. And we actually have one 40,000-footer in Roseland, at 105 Eisenhower. But everything else is somewhat smaller. So we - you know, again, not wanting to get our ahead of our skis, seeing that there's still, you know, lackluster demand and - you know, frank - I'll be very candid with you, just in general, Steve.

What we're seeing a lot of are tenants that are coming to market two to two and a half years in advance of lease expirations. Some are tenants and some are not our tenants. And the brokerage community, you know, has kind of influenced them and convinced them that they should be looking early, because of the specter that some of the better building and the better space is not going to be available. And that as a result of potentially some absorption, they might get a better deal today, looking two, two and a half years out, than they would get if they waited.

So, to some extent that's what we're seeing in the marketplace. And naturally there are all kinds of complications with those deals, particularly if they're not our tenants, because then they're looking for you to take over their rent somewhere else, you know, as part of the concession package. So that's part of the marketplace.

And other than that, you know, it's kind of tepid demand. Once in a while you get a little bit lucky through a variety of circumstances, and you get a bigger requirement, like we did in Paramus.

In 2015, our largest, obviously, tenant is Prentiss Hall. And we're - you know, we're actively working to repurpose that site to a mixed-use site. We've been working with a couple of institutional-type potential tenants that could utilize a portion of the office space. And then we would hope to finally gain the communities partnering with us to create a great mixed-use opportunity there.

And then most everything else in the Jersey marketplace is, you know, medium-sized. We have a large tenant in a mortgaged asset that was securitized mortgage. That is a problem. It's a 98,000 foot tenant that wants to cut itself in half, and we have a mortgage - that mortgagee or servicer that doesn't want to see that. But it's a non-recourse loan with no corporate guarantees whatsoever. So, you know, the impact to us could be, you know, the obvious, which is not a big impact to us.

So that's kind of what we're seeing. The largest thing - the largest tenant that we're seeing in what I would call our Mid-Atlantic market is a second-quarter '15 expiration of a tenant in Lanham, of about 73,000 square feet. We know that they're leaving, and so we'll have, you know, some challenges back-filling that property. But it's 4200 Parliament Place. It is really a very exceptional asset that really is an A-plus type asset. So to the extent there's activity in the marketplace, we will be the beneficiary.

So there's nothing outside of - you know, there's no real huge grenade other than Prentiss Hall which we've been talking about for two years on these calls.

OK. Thanks very much.

You're welcome.

And we will take our next question from Vincent Chao with Deutsche Bank.

Hey, good morning, everyone. I know you just gave quite a bit of detail on specific leases, but just maybe take me a step back on the occupancy, and sort of the outlook change. It sounds like demand is relatively modest here. Is that - is it more of the demand side that has fell off relative to prior expectations, or were there some additional move-outs that you were notified about, that caused you to change that outlook?

No. I would say that there are no additional move-outs whatsoever. You know, we were anticipating or hopeful that the - you know, we'd see some of the trajectory of the economic improvement that, at least, Washington, or parts of Washington, are talking about - would start, you know, a better trajectory or velocity, I should say, of job growth, which would result in some increased demand in the marketplace, even though lots of tenants today, being under pressure to reduce their own occupancy and employment costs, are densifying their installations.

But, you know, in some ways, we look at that as an opportunity for us because lots of our suburban assets sit on campus developments with ample parking, and so tenants that are coming along that want to densify their space, to six or seven people per thousand square feet, generally we can accommodate them a lot better than a one-off owner who's got, you know, four per thousand parking. We have the ability to use our parks.

So I would say that, you know, we've obviously been disappointed in the fact that we haven't seen a good jobs growth trajectory. Even New York City is a lot of - as you look at the deals, you're seeing a lot of musical chairs, a lot of lateral movement to new or better buildings, in some instances, that could accommodate the higher densities by restacking, and so forth.

So, yes, it's been - the demand side, we were more optimistic at the beginning of the year. And that reflected in a 60 - roughly 60 basis point reversion of what we had projected in January.

OK. I think that's really helpful. And just based on that, would it be safe to assume that, you know, cutting - the rent spread, cutting the rents a little bit more wouldn't necessarily spur additional volume, it doesn't sound like.

You know, we're - we meet the market.

Right.

I mean, you can't - there's no way you cannot meet the market. We're aggressive. We're putting - as I said, a lot of money into our assets or, you know, for systems because, you know, obviously if you - if the average tenant now is going to be five to seven people per thousand, you need the air-conditioning, the sanitary facilities, and the elevator systems to be able to accommodate that. And we're in a financially flexible and liquid position where we can do that comfortably and really keep our assets at the top of their game.

And, you know, most of everything we've sold off, other than, like, a Wyndham, which is obviously a fixed-income play, or a Sanofi-Aventis, which is a fixed-income play, what we've sold represents the, what I would say, the lower end of our portfolio. So we've maintained the highest end of our asset base, and we're putting money back into it to attract tenants.

And we've kind of come out - I don't know if you've seen it, but we've come out with a new branding campaign to the brokerage community, in particular, indicating, hey, you know, we're a major, major player in the office business. We're here to stay. And we can provide you the best quality of life for the most competitive occupancy costs and rents, and the brokers, notwithstanding some of the anecdotes I hear, they love us, because we pay them faithfully and fully. And usually, you know, a lot of money up front. Not all the commission, but a lot of it - part of it up front.

So, you know, we're in the game big time. And we need to see the cooperation of the business environment help us along. And I would say also, New Jersey, you know, for all the sort of negative press it gets, for all the variety of issues, they've been very, very helpful and aggressive down in Trenton, through the EDA and the governor's office.

And even the legislature, through changing, or trying to be helpful and amending thing like [COLO], which is affordable housing fees, to help New Jersey really regain its traction as an intellectual epicenter for the Northeastern part of the United States.

OK. Thanks a lot for that. And just one last clarifying question, just on the $750 per, you know, the $1.5 million total of severance that was going to be paid out roughly soon, that is included in guidance, right?

Yes.

OK. Thank you.

You're welcome.

And next we move to Tom Catherwood with Cowen & Company.

Yes, thank you. Good morning, guys.

Good morning.

Just a few small clean-up items here. Looking at the JV performance this quarter, it looks like you got a strong performance from Crystal House. I was hoping you could provide a little bit of update on the progress you're making there and, kind of, any impact you may be seeing from the oversupply in D.C.

Yes. We had - I'm going to let Gabe comment a little bit on this, but we had a slow start there because of a variety of factors. We had - we have a great partner who actually brought us into this deal, you know, a major capital provider. But we had a slow start on agreeing to what the renovations plans would be, the upgrading of the units. Once we came to grips with that, what we found was - and remember now, this - you know, Washington's painted with a very broad brush.

Arlington, where we are, is - I mean, we're right on the Metro line. We're on - literally on a street that is extremely well amenitized, with lodging, hotels, restaurants. You can literally walk, if you want, to the airport. It's less than a 15-minute walk. And like I said, we're right on the Metro line.

So we had to get - coalesce with our partner to understand what the capital plan was. We did that months ago. And now our hit rate - so, then the next little issue that I would comment on is, there's a software system that this particular - you know, a leasing software system that this institutional partner generally uses. And what we found was that it wasn't real-time enough, dealing with the real on-the-ground metrics that we needed to address in order to have a higher lease-up rate.

And so now, of course, every Sunday night I get a report, as does all of this management at Roseland, and one of our best performers now is Crystal House, in the number of leases that are accomplished every single week.

So we were a little slow out of the gate. And we admit that, and we're not - we've slowed down building. You know, we can build another couple hundred - 300, actually, apartments on the site. And we kind of put that on the complete back burner, because we don't want to compete with ourselves. So that's the Washington situation.

The other Washington situation, for us, is we're going to start lease-up on our site on 701 Second Street, which is next to the train station. And that's the NoMa district, probably the hippest part of Washington, D.C. That's our partnership with the Fisher Brothers in New York City. And so we're extremely excited about that.

And we're looking at some additional opportunities in Washington that are part of our quote-unquote optional list, but we'll be very careful because of what you say about the office market. But I'll tell you one thing that every analyst report that I've read from your peers, indicates that the Washington market - I think I just saw one the other day from Steve Sakwa, talked about a year to maybe 18 months of, sort of, still kind of careful - you know, cautionary tone to what's happening in Washington.

But I also want to point out to you that we have opportunities both in what we can do at Crystal House, and what we can potentially do, additionally, with Fisher Brothers, that would put new product in the market in two to three years. And hopefully by that point in time we'll once again see a very vibrant market. But we're studying it very carefully in Washington.

So, the problems were twofold on Crystal House. Coalescing on a capital improvement plan to upgrade the assets with our partner, done. And now overriding the software system, which was a legacy system that our partner had preferred to utilize, and we've now - we override it with our management down there, and we've been doing great on leasing

You know, if I may just follow up on what Mitch just mentioned, speaking about the traction in the marketplace and what we're seeing at Crystal House, now that we're finally getting some steam behind us, the numbers we report in the supplemental represents average occupancy over the quarter.

Just wanted to share with you the June 30th occupancy number for Crystal House is 89.7 percent, and the leased percentage as of June 30 was 93.1 percent. And that's significantly higher than, obviously, what you've seen in the supplemental. So we are trending, as Mitchell just mentioned, in the right direction at that asset.

Great. Great. Thank you for that.

The last item on the JVs, there's this other line item that contributed about a penny this quarter. What does that consist of?

Yes, we have a joint venture with a development entity that, from time to time, you know, we get some - I'll call it significant development fees. So that's primarily our share of those development fees, from third parties.

Got you. Thanks.

And we will take a follow-up from Michael Bilerman with Citi.

Yes, I just [found], on the Curtis asset acquisition, can you talk about - I think you provided [tiny bay] financing to Keystone. How is that going to be repaid, and can it be extended, and, sort of, what were the drivers of doing that?

It cannot be extended. We worked very carefully on a complex structure to create ground leases and so forth, that would accommodate tax efficiencies at the acquisition of that asset. And that's why that was done. It was not a liquidity issue by any means, from Keystone's perspective.

The loans, if you will, are secured by the asset and by the parent company, the fund, you know, the original principals who created the Keystone fund. They're not extendable and we're not at all concerned.

And so they'll raise - they'll just go out and raise equity capital to repay you? Is that the way . . . .

They were prepared to fund their equity at the closing, so they don't need to raise equity, per se. They have the capital to repay it. It was done for specific tax efficiencies.

And so should we expect, from a balance sheet perspective, that will be repaid by September 30, just from the capital (inaudible) from a Mack-Cali perspective?

Yes. We'll - right. We'll get that money repaid to us, and we'll have like nothing drawn on our line.

All right. And can we just - I just want to make sure that I'm completely clear on the uses of capital, just to circle back on a lot of the numbers that have gone out. I think Gabe talked about this $135 million of unfunded. Which numbers is that totaling up from the [south bay]? If I look on page 50, I see the company share of budget . . . .

I'm going to explain it to you exactly, Michael.

OK. All right.

In the second half of 2014, we just acquired our partners' interest, it's Rode, r-o-d-e, which is in Massachusetts. So, what that - for $17 million, plus or minus, what we were able to acquire is there, half interest - we have a development project called The Chase, which is in lease-up right now, as we continue to build out the remainder of it.

And they were an equal partner to us in that. We bought out their interest. We still have a 50 percent partner in that, which is UBS. We bought Rode's interest in the future land which can accommodate over 1,000 apartments and actually is zoned to accommodate two hotels, as well, about 200 keys each. And also a certain management fees that they had participated in with a Lennar project that we don't own. They didn't own, but we managed and leased. It's adjacent to [al pare], it's all part of our mixed-use development in Malden/Revere, Massachusetts.

So we thought that it made a lot of sense. They needed some liquidity. We bought them out, and that's what that it.

We have - we are about to start a garage down in Weehawken, what we call the 1/3 Garage. It's an obligation that we have to the Port Imperial Development and to the town, to provide for this garage parking for the water ferry, New York Waterway. And so that's $8 million of equities.

In East Chester, I talked about the deal - I called it Tuckahoe, which is actually the municipal corporation that it sits in. That's a $4 million second-half commitment.

In Marbella II, I also mentioned - that was a legacy partnership that we restructured with Prudential so that we could sit pari-passu to their prep. That's $3 million. We have $4 million budgeted for Wegmans, which is the Hanover property that we have in Mack-Cali, in Hanover, New Jersey.

And part of the joint venture investment that we're doing with Keystone in West Chester is - and in Stamford, but this applies mostly to West Chester - is a $7 million pari-passu investment. So we each get 15 percent return on our money in those assets, kind of reinvesting in those [Homesford] and Tarrytown assets.

And the last piece of that second-half of '14 is our continued equity funding of URL, of $29 million. You recall that URL is roughly a $300 million project. We have $192 million of financing with - we have a term sheet, we're signing loan documents with [Pac Life] next week.

And we also got a $33 million tax grant under the Urban Transit Hub Tax Credit from the state of New Jersey that we sold for 92 cents on the dollar to a health-care provider who could use the tax credits in New Jersey. I signed those papers about a week ago, so we got, like, approximately $3 million a year for ten years. It falls to the bottom line of that URL project.

So that's $72 million of committed funds for Mack-Cali in the second half of '14.

And what was the $135 million that was referenced?

So - so now, with - that included in '15. And in '15, you've got a few de minimis pieces of capital that - to fund some of the projects I just described. And the remaining funding obligation on URL, for Mack-Cali, is $43 million in '15. So that total, '15, $43 million, plus some other small pieces, $63 million.

So it was '15 of $63 million, and '14 of $72 million.

And then, the [subjects] that now in this nice new section, the multi-family rental portfolio, section five. This has the capital commitments for the repositioning on page 50. It has the lease-up communities on page 51 in the capital. And then on page 52 it has all the stuff that's under development currently.

I assume that there's going to be funding post-'14 and '15, for these projects? Is that fair to assume, or will all of the capital that you just talked about . . .

I'm sorry. I don't - I, I - yes, all the capital will be expended. These are immediate repositionings. So I don't expect that.

The only difference to what you're looking at is that we have one project which is a repositioning project, a repurposing project. It's currently - and I talked about it on the call. A 75,000 foot building that we're going to demolish, and we're, like 99 percent along with the way with the town, and then writing an ordinance of rezoning.

And we're going to build, you know, 188 market units, and then a few not-market units, of luxury apartments. And it's - you know, we believe - it's a $70 million project, of which we can take a partner in. We don't have to take a partner in. And we can build it, you know, at our leisure, although it's in a great location so we'll probably want to build it.

That's the only number that's not in the table you just referenced.

That's helpful. And then I just wanted to get your view about how you look at corporate leverage, because you talked about a lot of these projects being unconsolidated joint ventures. Do you look at on a see-through basis in terms of, you know, because arguably if you're funding some of these projects at 60 percent, it lowers your equity commitment for the projects, but arguably increases the total enterprise leverage for the company.

And so I'm just curious how you think about when you look at the balance sheet, and your leverage. Do you look at it on a fully-see-through basis, or are you just thinking about it from a consolidated basis?

The answer to that, Michael, is that we look at it sort of as a composite. We are investment-grade rated, obviously the leverage limitations and coverage exist. We are about, I guess, 55 percent, on a debt-to-market [gap], for whatever that means, but there are all kinds of tests.

You know, on a debt-to-book basis, we're 39 percent. Our coverage ratios are very strong. So we look at it all. I'm not trying to avoid your question or be vague, but we look at it - at all.

And when you're going to finance - if you're going to finance an asset, especially in the most favored sector of the real estate community, which I believe is multi-family, you don't want to under-leverage it either. You want to take advantage of efficient, local leverage that exists in today's market.

So I know that's a little bit of a blurred line in the response, but that's what we look at.

And last one is just - and I apologize if I missed something. On page 17 in the deck, you talk about the Wells Fargo CMBS. You've begun discussions to extend the maturity or modify the loans. What is the - I guess it's about $80 million of debt. What's the - happening there.

[Inaudible.] Yes. We're - look. We've been trying to engage the mortgagees, servicers. A couple of them have been assigned to special servicers. These are non-recourse assets. They're all grouped in, you know, one, sort of, neighborhood in Roseland, New Jersey, and the Becker Farm area.

And, you know, sometimes, Michael, there are complete dis-alignments of interests between the constituents. We have potential opportunities to restructure some of these leases that exist in these assets, on a long-term basis and, we think, create long-term value. The mortgagees look at short-term maturity at pretty high numbers per square foot. The special servicers are getting fees to continue to monitor these bond pools that they have.

So what I would say to you is that we're trying to engage them to everybody's mutual benefit. I don't know how we'll end up here. And that's (inaudible).

OK, so it's $100 - it's [$116] million of total debt in the - is it all the Wells Fargo CMBS?

Yes. It's primarily. Primarily. Yes, whatever the number is. $96 million. Yes, it's all Wells Fargo.

OK. All right. Thank you.

OK. You're welcome.

And next we move to John Bejjani with Green Street Advisors.

Good morning, guys. Most of my questions have been asked, but I just had one quick one on the New Jersey tax incentive plan.

Yes.

So, anecdotally, I've been seeing a few deals here and there where tenants are moving to, say, Jersey City get $30.00 a foot a year of tax incentives.

Yes.

I get that that's probably at the high-ish end. But looking at the deal you guys did in Paramus, a couple days ago, it looks like the retention tax incentive plan was about $2.50 a foot a year. Is that - would you say that $2.50 a foot a year is reflective of what tenants get for staying in Jersey? Or is that a bit on the low side? Or - what's the right way to think of that?

Well, you know, that was - first of all, we were not involved in any way with the process that United Water undertook with EDA. So I couldn't even comment to you accurately in any way as to, you know, what their discussions were, how they evaluated the matrix of jobs retained, and I guess they're principally retained out of, you know, their current headquarters on the reservoir in northern Bergen County.

So it's very difficult for me to respond to that question. What I can tell you is that, for sure, the - you know, for example, we have Marathon Data in Neptune, New Jersey, who got a rather significant - I don't have the numbers at my fingertips, but I think if you look back on the press release for Marathon, at 3600 Route 66 in Neptune, you'll see they got a much more significant benefit from EDA. And they were a New Jersey company relocating, with slight job expansion.

So, you know, I just don't want to give you mis - or information that's not accurate on United Water on that program. As - I think you can generalize it. Say that new jobs in a target area, in the cities, the urban areas, are clearly target areas, like Jersey City. Good result in $100,000 of jobs over a ten-year period.

OK. OK, thanks. That's helpful.

You're welcome.

And, ladies and gentlemen, that does conclude today's question and answer session. I would like to turn the conference back to our speakers for any closing remarks.

Well, thank you all for joining us on today's call. I hope that we were able to clarify any questions that you had, and I think it was a very full and comprehensive call. And we look forward to reporting to you against next quarter.

I hope you all have a good day. Thank you.

And that does conclude today's conference. We do thank you for your participation. You may now disconnect. Have a great rest of your day.