Veris Residential Inc (VRE) 2015 Q1 法說會逐字稿

Good day everyone and welcome to the Mack-Cali Realty Corporation First Quarter 2015 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to the President and Chief Executive Officer, Mr. Mitchell Hersh, please go ahead, sir.

Thank you, operator. Good morning everyone. I want to thank you all for joining Mack-Cali's first quarter 2015 earnings conference call. With me today is Tony Krug, CFO and from our Roseland subsidiary, 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 quarter and generally what we're seeing in our markets. Then Tony will review our financial results and Gabe will talk to our Roseland and multi-family activities. FFO for the first quarter of 2015 was $0.43 per diluted share. During the quarter, we signed a total of 759,000 square feet of leased transactions. That included 277,000 square feet of new leases and of course the remainder being renewals, our tenant retention rate was almost 65% of outgoing space.

And we ended the quarter at 84.3% leased, which is up 10 basis points from last quarter's results. Rent on renewals however rolled down this quarter by 6.3% on a cash basis. Remaining lease rollovers for 2015 are 7.3% of base rent or approximately $36 million. Our leasing costs this quarter were $3.85 per square foot per year. During the quarter, we signed several significant office leases demonstrating our ability to attract and retain high quality tenants. We continue to remain focused on growing occupancy within our office portfolio as well as our continued commitment to capital reinvestment in our office properties. As well, of course, we continue to execute on our multi-family residential development program.

Now, I'll discuss some of our recent activities. We had some exciting announcements during the quarter on the multi-family front. Mack-Cali along with Roseland announced an agreement in principle with Parkway Corporation, the former joint venture partnership to develop a 300-unit luxury multi-family community, at 709 Chestnut Street in Philadelphia. This project is currently in the planning and permitting stages and we anticipate commencing construction by the end of the year. Site is located very close to our Curtis Center and are 100 Independence Mall West in the old city section.

Roseland announced that an additional program of significant capital improvements has begun at Crystal House with our partner UBS. Crystal House located in Arlington, Virginia. The multi-phase renovation includes further enhancements to the communities common areas, amenities as well as the lobby areas. The Roseland team is proud to have achieved LEED Silver Certification from the US Green Building Council for our RiverTrace at Port Imperial. This luxury community was recognized for its energy efficiency, sustainability, and environmentally friendly design.

And lastly, this coming Monday, we'll participate in the official grand opening of Station house a joint venture development with Fisher Brothers located at 701, 2nd Street Northeast in Washington DC. This is the up and coming lifestyle Mecca along the (inaudible) district. The building is, if I dare say, absolutely spectacular with its finishes, its common areas, its amenities, its sustainability and we're very proud of this accomplishment.

On the office front, last week at our Harborside complex in Jersey City, New Jersey, New Jersey City University officially broke ground on its over 68,000 square foot school of business and we're proud to have them as a tenant and partner, if you will, at Harborside. Because the addition of this school of business will be a key driver in attracting and retaining businesses to our properties along the waterfront and that of course includes 101 Hudson Street.

So when our URL Project, our 763 apartment signature waterfront living concept that's under construction now, when that's complete, this will help attract a whole new student base for the school of business as well attracting a millennial workforce to support all of the businesses that are rapidly expanding along the waterfront area.

I'm going to turn the call over to Tony who is going to discuss in detail our financial results. But before I do, there are just a few points I would like to make about the quarterly results that we announced today. First of all you now -- you weren't before aware of the fact that Prentice-Hall, which is a 475,000 square foot tenant representing about 1.7% of our same-store portfolio just moved out to their new facility also down along the waterfront in Hoboken. And certainly we benefited in the quarter's numbers from Prentice-Hall remaining a holdover tenant for the quarter.

We also reported today probably a nine point year-over-year increase and that is primarily due to a far lower utility costs as opposed to last year. We all remember even though this was a tough winter, a year ago was an incredibly tough winter.

So we had fewer utility costs, significantly fewer, fewer snow removal costs and less of free rent affecting our cash income. For the remainder of the year, the remaining nine months of 2015, I do want to talk to what we anticipate in terms of NOI on the same-store portfolio. Regrettably, we are projecting about a 9% decline in NOI throughout the remainder of the year about a third of it is due to the Prentice-Hall move out and the remaining two-thirds is primarily due to fewer operating expense recoveries as our occupancy remains in this 82% plus or minus range throughout the year and the setting of new base years with respect to expenses.

But having said all of that, we anticipate closing the year with recapturing some occupancy from where we are today as a result of the, again primarily Prentice-Hall move out. And so we should be somewhere in that 82.5% to 83% zone is what we're projecting right now. We have some decent activity in a few of our assets and in fact, one signed lease in escrow that we know will help us achieve those results. And on a CAD basis, we expect to close the year after having spent over a hundred and some odd million dollars for capital improvements, the tenant improvements and commissions. We expect to finish the year about cash flow neutral, which is clearly a positive in terms of our liquidity.

So I just wanted to make those few clarifying points. And now, I'm happy to turn the call over to Tony Krug.

Thanks, Mitchell. Funds from operations for the first quarter 2015 were $0.43 per diluted share and net loss available to common shareholders was $0.03 per share. For the first quarter same-store net operating income increased 4.5% on a GAAP basis and 9.4% on a cash basis as Mitchell mentioned without the effect of last year's harsh winter expenses same-store NOI decreased 2.1% on a GAAP basis and increased 2.2% on a cash basis.

Our same-store portfolio for the first quarter consisted of 25.3 million square feet of commercial space. Our unencumbered portfolio at quarter end totaled 205 properties and represents 72.2% of our portfolio on an NOI basis. In the first quarter, the company had interest coverage of 2.6 times and fixed charge coverage of 2.2 times. We ended the quarter with approximately $2.1 billion of debt with a weighted average interest rate of 5.65%. Currently we have $64 million drawn on our $600 million unsecured revolving credit facility. We are maintaining our 2015 FFO guidance midpoint of $1.72 per diluted share in the range of $1.66 to $1.78 per share. At the midpoint, our 2015 guidance assumes percentage lease declining from the current 84.3% to about 81.5% by mid-year and up to near 83% by the end of the year. Leasing starts of 1.3 million square feet for the remaining nine months of '15 versus scheduled lease expirations of 1.6 million square feet for the remainder of the year. While first quarter same-store net operating increased, we project a 9% decrease in GAAP net operating income for the balance of '15.

We also assume $80 million to $85 million in sales expected sometime around mid-year and no operating acquisitions are assumed. Please note that under SEC Reg G concerning non-GAAP financial measures such as FFO, we're 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 www.mack-cali.com are our supplemental package and earnings release, which include the information required by Reg G as well as our 10-K.

Thank you very much Tony. Now I am going to turn the call over to Gabe Shiff of Roseland. So he can provide details around our repurposing activities, our repositioning progress and our new development progress.

Thank you, Mitch. On behalf of our Roseland subsidiary, we are pleased to highlight the evolution of our residential portfolio throughout the development cycle. We envision this ongoing transition would generate continuous cash flow and value creation growth for the company. As detailed in the multi-family rental section of the supplemental, this progress is reflected across all elements of Mack-Cali's Roseland platform. Specifically in the first quarter, we sustained strong occupancies and revenues across our approximately 5,000 apartment homes stabilized portfolio.

In the first quarter, we achieved success across four communities representing 922 apartment homes in active lease up. Including the product that Mitchell just mentioned the 377 home Station house in Washington DC, which commenced leasing operations towards the end of the first quarter. In the first quarter, construction progressed on 1,462 apartment homes across four communities and on the 786 space commuter parking garage at Port Imperial. Looking forward, in 2015, we forecast lease up commencement of 591 apartment homes across two communities. We target construction starts from our owned residential portfolio of approximately 1,300 apartment homes across five communities including comparable projections for 2016.

Additionally, we anticipate approval successes from our repurposing of Mack-Cali office holdings to residential use. On an operating basis, the first quarter reflected operating strength across Roseland's approximately 5,000 home portfolio, which includes 1,042 homes that achieved stabilization in the fourth quarter.

This operating portfolio had a leased percentage at quarter-end of 97.8%. On a same-store year-over-year basis a stabilized portfolio of approximately 37 homes, the revenues increased by 4.3%. In 2015, we envisioned growth of this portfolio with projected stabilization achievements of 544 homes across three communities including RiverParc in Harrison, New Jersey, Portside at Pier One on the East Boston waterfront, an Estuary phase two on the Weehawken waterfront. These three communities were 79% leased at quarter end as compared to 45% leased one quarter ago representing leasing achievements in the quarter of 183 homes.

At quarter end, Roseland's in construction portfolio included 1,462 homes across four communities and a commuter parking garage. This active construction portfolio is projected to generate $40 million of stabilized NOI on $630 million in total development activity producing an unlevered yield of approximately 6.3%. The company's average ownership of this portfolio is approximately 60% with the remaining capital funding obligation to this subset of portfolio of approximately $82 million.

From this construction activity, the company commenced leasing operations of the 280 home RiverParc at Port Imperial at the end of the first quarter and anticipate leasing commencements of the 311 home Marbella South and Jersey City in the fourth quarter. For the remainder of the year Roseland forecasts six construction starts from its residential land inventory comprising approximately 1,300 homes across five communities and in 364 key hotel in the heart of Port Imperial.

This 2015 start activity is projected to generate approximately $38 million of NOI at an average unlevered yield of approximately 7.9% inclusive of the hotel. A 6.4% unlevered yield without the hotel.

The start activity includes a development acquisition in downtown Worcester, Massachusetts which closed subsequent to quarter-end for $3.1 million with an additional $1.2 million paid subject to certain conditions. We project the construction start for this 370 home community in the third quarter. The Company is actively capitalizing these 2015 construction starts, which have an estimated total development costs of approximately $480 million utilizing a combination of wholly owned and heads up participatory joint venture structures, we currently estimate the Company's net capital obligation with these six starts to be approximately $46 million or $22 million in 2015.

Company projects average ownership of our 2015 target starts to be approximately 40%, so as heads up joint ventures will likely contain promoted interests to our benefit, average ownership potential can exceed 50%. In addition to the store activity from our in-place residential portfolio, we have made significant progress on repurposing select Mack-Cali holdings for residential development.

It's synergistic component of Roseland -- of the Roseland Mack-Cali combination. We anticipate initial successes and achievements in the near future from this portfolio. As in recent quarters and a trend we hope to continue into the future, we have highlighted the continuous progression of the Company's residential portfolio, it's more valuable asset classifications through the placement of new communities into construction, the commencement of leasing activities from our in construction portfolio and the stabilization of our lease up communities. And also the strategic addition of acquired and repurpose communities into the residential portfolio.

Through these ongoing activities, the Roseland full service platform continues to generate fee income from its approximately 10,000 home residential management portfolio and its construction and development service businesses. In closing, we're hopeful for continued success across Roseland's multiple growth and value creation initiatives for the Company. Thank you.

Thank you very, Gabe. Appreciate that insight into the multi-family side of our business. And so, as you are all aware, following the company's Annual Meeting on May 11, which is just a few weeks away, I will be stepping down from my positions as President, Chief Executive Officer and a Director of Mack-Cali Realty Corporation. I'm confident that the Board will identify the right leader to continue building on our momentum. You've heard a lot about that momentum here today. And with respect to a CEO, we look forward to providing an update when there is news to report. Until that time, we would very much appreciate your understanding and cooperation recognizing that the focus of our call today is our financial and operational performance. And I would ask that you limit your questions to those particular topics. So in that regard, we can now open up the call for questions. Operator?

(Operator Instructions). Ross Nussbaum, UBS.

Mitch, I appreciate you wanting to keep this focused on Q1 earnings. But I think folks are a little nervous that there hasn't been a communication as to whether or not there will be a CEO by the time you depart or whether there's going to be an interim CEO. Is there anything you can say on the timing on how that's going to work?

As I mentioned, Ross and I'm not trying to be evasive, we'll update the market on our leadership transition plan once we have news to report, which I would expect will be in the near-term. And so, I would say that we should be in a position of talking to the market before the annual meeting.

That's helpful, thanks. On the office side, it looks like the GSA has about 150,000 foot expiration coming up. Have they given notice or are they staying?

GSA is out with RFPs for about 110,000 square feet of the 140,000 square feet, which is third quarter 2015 expiration. We are hopeful that we can recapture that 110-ish, but they are out in the marketplace.

Can you remind me, which building are they in?

1400 L Street.

Okay. The final question I've got is on the multi-family side. Of the $480 million spend for the six starts that you're planning on doing this year, I think I heard 40% ownership and that your capital obligation would be $46 million. If my math is right, so that's assuming about 75% debt funding, so the $46 million is your equity funding requirement for this project, is that right?

Aside from the hotel, which is a one-off, on our residential portfolio, our core portfolio, we're targeting leverage in the 60% to 65% range on a non-recourse basis. And we're looking to partner the balance of the capital. So that 35% to 40% equity gap that we're referring to will be filled through a combination of wholly owned and joint venture equity structures.

Got it. And is that a shift in any regards to strategy because I thought you guys had previously talked about wanting a wholly owned more the stuff?

Well the more what we build we can own, that's what we want to accomplish for us. But there are some capital constraints right now and we have been working with several of our legacy joint venture partners, institutional joint venture partners as well as a few new ones who recognize the value creation of the Roseland platform. And during this transitional period where we have some limitations on our capital, we are not looking to stress the company. So we are considering these joint ventures that provide promoted interest for us for the value creation and don't subordinate our interest because we are side-by-side pari passu investors.

Jamie Feldman, Bank of America Merrill Lynch.

I guess just tying up the different, the changes in the core operating metrics in guidance. So it sounds like you're at least 50 basis points to 100 basis points ahead on your year-end occupancy outlook. And your same-store NOI, I think you said it's 9% average for the next three quarters, but you are close to plus 9% in the first quarter. So I would think your total same-store average goes up, but you maintained your FFO guidance. Can you just help connect all those dots?

Yeah. We're slightly ahead on the projections with respect to least percentages. We have had a couple of wins, obviously they are expensive transactions. And so, from a GAAP perspective they're more beneficial because of the free rent components and the fact that they don't commence for some period of time in a few of the cases. But yeah, we're doing a little better than year-end projection on leased rate percentages. But in pure metrics, financial metrics, we still because of the anomaly created by Prentice-Hall in particular. And the anomaly created by some of the utility expenses and other expenses year-over-year are still projecting about an 8.5% to 9% same-store NOI decline for the remainder of the year.

Okay. And then you had mentioned $80 million to $85 million of dispositions can you just talk a little bit about what you're seeing in the disposition market in terms of capital interest in both of the assets?

Well, the answer is that --

...for the assets. You see that maybe talk about both the Hudson waterfront and even more suburban New Jersey, well, any changes in demand?

No. Well, with regard to the suburban assets, we're seeing pretty good demand for the long-term net lease fixed income type investment pool. And so, we are out in the market with our second phase of Wyndham and we anticipate doing well with that sale on a similar basis to what we did with phase one, phase two slightly smaller than phase one and that's in our view a near-term event.

So you're looking at low 6% cap rates, but per square foot numbers that are somewhere in the $390 to $400 square foot range. With respect to your more commodity type suburban assets, it really depends, there's not been a lot of transactional activity.

But what has traded are under leased assets where you're paying very, very little for the bones as it were and then have to invest considerable amount of money. But the unfortunate part is that the market still remained quite challenged from a demand side equation, there has been very limited incremental demand. Some of the exciting successful transactions that we reported this quarter, our result of tenants looking to re-stack to consolidate their own infrastructure, take a little less space than they previously had and in some cases move down the street and were to the beneficiary. So we're very happy about that, but there's been very little incremental demand. With respect to the waterfront, again the trend towards urbanization is very real. And so, the waterfront in my view is just a matter of time sort of not an if, but a when we'll have much greater successes on leasing up our vacancies down along the waterfront. We're investing significant capital in the common area renovations in Harborside Plazas 1, 2 and 3. We're well into the construction. It's actually on a video cam that you can access to see the status of our construction on URL phase one, which is very exciting dynamic multi-family rental home project that is really going to be state-of-the-art and highly amenitized and we believe very attractive to particularly in this case the millennial workforce, which can support all these businesses, New Jersey still maintains its [as of right grow] New Jersey benefits to try to attract employment. And so, we think that the waterfront has all the makings and ingredients of the mixed uses that represent the new way companies are doing business. And so, does that sort of answer it, Jamie?

Yeah, that's helpful.

Thank you.

Vincent Chao, Deutsche Bank.

Just want to follow-up, I know you said there was not really much incremental demand that you're seeing, but some consolidation and you're sort of benefiting from that. And you previously talked about sort of meeting the market. But just curious have you guys done anything different in your sort of leasing strategy to try to attract some of that moving shares if you will?

Yes, we have in some cases broadened the use of our buildings to include what I would say, non-traditional office uses, but done it in a very high caliber way to include medical uses. And I would say that the, there has been more growth in healthcare, insurance, because of some of the changing landscape in particularly health insurance and benefits. And so, we've adapted both our marketing and our bricks and mortar in some cases to include those uses, in some instances that requires overlay zoning in communities because yesteryear and that specific zones for office and research and zones for medical. And so, but as these communities recognize throughout particularly the suburban landscape, that times are a changing and tax spaces will erode and have eroded as a result of the real fee change that's occurred in, when lots of these towns had corporate headquarters not unlike Prentice-Hall or not unlike Mercedes-Benz in Montvale who's moved now to Atlanta, Georgia, they understand that, to be competitive and to have a fertile tax base to support their standard of living, quality of life and school systems, they need to be flexible. So we've seen more and more of these communities do that. In some instances or embrace that thought process, in some instances we are repurposing our land

where we believe that the asset that we have on a particular site and we have several of these, but I'm not going to be specific about which communities or municipalities because it's in our interest and our shareholder's interest to get our approvals to the point where they're non-appealable and we don't have to deal with, people coming out of the woodwork trying to (inaudible) process because of competitive issues. But we are taking several of our assets that can be much more valuable as both multi-family and in a few cases with a mixed-use component to include some office and include some small segment of retail. And demolish those buildings and build beautiful new residential communities.

So I would say, yeah, we are at the forefront of transition and adapting our portfolio to be able to be more responsive and create greater value for our shareholders and we're laser focused on that.

And is the incremental cost to make these changes, is this showing up sort of in a [TI line] or --

No, that's a capital line on new construction, if you will.

Got it. Okay, thanks. And then just maybe one other question.

Sure.

Just on the CMBS, the Wells Fargo, CMBS one. Any update on that?

No, we are still working on that.

[John Bajani], Green Street Advisors.

Mitchell, I just want to clarify real quickly, 8.5% to 9% same-store NOI decline you mentioned for the rest of '15, is that a GAAP or a cash number?

GAAP number.

GAAP. Can you share with that, is on a cash basis?

It's not going to vary that much.

Okay. I guess related to that, any, are there any outstanding risks or concerns that you'd highlight that led you not to increase FFO guidance despite the better-than-expected start to the year, you've had on the leasing front?

John, we've studied the numbers very carefully and we're talking about a couple of pennies. And I'd rather have more visibility and we still have nine months to go in the year. And if we feel that there should be any adjustment, let's say, after next quarter, we'll revisit it. But at the moment we're pretty comfortable with our mid-point and at the most, we're talking a penny or two.

Okay, that's fair. There seems to be an improvement in the investment sales environment even in tertiary and fundamentally challenged markets in recent months, are you observing the same in your markets and could that influence your thoughts regarding disposition plans beyond the Wyndham property?

Well, I would say that the, first of all, in the suburban markets unfortunately that we're operating in, it's kind of a food fight for tenants. There seems to be a lot of liquidity both you have the investors who purchased buildings for call it $30 to $50 a square foot in some instances, empty buildings and are able to secure financing with institutions that give them capital to attract tenants at very low numbers. And so, all is not what it seems, there is very little incremental job growth in the suburban markets. It's quite the contrary if you read about all the consolidation that's occurring in the industries that have historically been the lifeline and the engine of the growth of the suburban markets that being telecommunications, that being pharmaceuticals they are eating each other up as we speak. And so, that's really what's occurring in the suburban markets. Certainly, I'm sure that the Board will continue to revisit and look at strategic options and alternatives with the new leadership team that will come into place in the near future. And see if they think differently or have altered their thought process regarding this subject.

Understood, thanks. Just one last one. On the succession front, is there a contingency plan if your successor is not named in time to the annual meeting?

Yes.

Is that anything you could discuss?

Let's put it this way, that the contingency plan is that the company will not go leaderless as of the annual meeting.

Michael Bilerman, Citi.

I was just curious as I think about the asset sales and 125 [brought] down in the financial district, whether that would be anything that potentially you could dispose of given values in New York and potentially using that as capital as to buyback the stock or do something to fund development with?

We have talked about that asset at the Board and the determination of the Board is at the present time that we are not a seller of that particular asset that notwithstanding remaining lease term, the downtown area it gets better every day as a lifestyle or live work play environment. And you've obviously -- you're there and I know you follow these trends very, very carefully. And this recently as yesterday discussion of New York City has moved south and west. And so, it's a determination at the present time by the Board that we want to be part of that marketplace.

But I guess it's a single condo interest in downtown New York. Your stock clearly is not getting the value for, if you were to strip that out, the discount would go even wider, so I'm curious why wouldn't the Board want to try to accelerate and harvest more value creation at this point?

What I -- at the risk of redundancy, I have raised the concept at the Board, the Board so far has deliberated and made the determination, I'm sure that we will revisit the discussion from time to time.

Can you give us an update on the two Keystone JVs, occupancies are still around 81% each for the two portfolios. What the plans are in terms of capital the Keystone is putting in place, what's the prognosis for leasing in there, and therefore your 45 million of outstanding preferred note in terms of the eventual -- in terms of potentially getting that or refinancing that based on the success that they have in repositioning and leasing up those assets?

Well, okay. I'd be happy to talk about that, as a matter of fact, just day before yesterday, Bill Glazer who heads up Keystone was here in Edison and met with some of the leasing executives and teams. So with regard to Philadelphia, let me say that, specifically 100 Independence Mall West we have out for financing at the present time.

Now that the asset is completely stabilized, the GSA is under construction and the Beer Garden is operating fulfilled and it's a magnificent project. So we're out for a refinancing package that essentially will be sufficient in our view to take out our equity, which is not a lot in that particular asset. And we are also well underway with our completing design documents or construction documents to begin the renovation, the residential component of the residential of Curtis. So that's all going on right now. With respect to the TriState portfolio, which is the two assets in New Jersey, in Central New Jersey, the couple up in Bergen County, (inaudible) and Woodcliff Lake and then Westchester and the one asset in Stamford, the teams -- and its the Mack-Cali leasing teams who are working very hard on capturing occupancy in New Jersey. We have made progress with up in Bergen County with KPMG. And those are relatively small asset (inaudible). We have a, fortunately tenant who is a healthcare insurer, who was just acquired by one of the four or five largest healthcare insurers who has no presence in the state. And so, we're looking, we just signed an expansion with them on behalf of Keystone and we're looking at a very significant further expansion in that asset. And so, I would say that the teams have been extremely active in what has been a very challenged market and we're comfortable with -- at some point recapturing more of our capital certainly where we've invested pari passu we're very confident of that. And in some of what I'll call the residual interest more of the promoted interest, we expect it may take a little longer than originally projected because of the continued headwinds in some of these markets. But we are making progress and Keystone is utilizing our services for leasing property -- construction services as well. So it is generating some income for us from that perspective.

And then second question, just in terms of the top tenants, as tenants think about getting ahead of their expiration [both] New Jersey City and the competing amount of space that's around both downtown in New York (inaudible) competing space in New Jersey. If you look at your top tenants here, Deutsche Bank, Forest Research, ICAP, Merrill Lynch, Vonage all expiring in 2017. Can you give us a little bit of sense in terms of the discussions, probability of the tenants staying, contracting, expanding?

Yeah, right. If only I could. I've have lots of discussions with most of the majors and if not directly with them, some of them are represented in several cases by brokers from the big shops that are -- that reside literally in the offices that their domiciled in our buildings. I could say that for example, since you raised Deutsche Bank we've had some very fertile discussions, we have an exceptional relationship with them, they have a lot of infrastructure in Harborside. And -- but because of extraneous events that are affecting their thinking on a global basis, they're just not ready to make a final decision. But I'm very optimistic about the discussions that I've had with them to date.

Forest, as you know is part of an acquisition, they and it's hard to keep track of these companies because it seems like they do multiple consolidations and acquisitions on a monthly basis, but I think they're Actavis right now and that's the name of the company. And they actually moved people from Long Island and New York City into Harborside. So I can only tell you that's a very good sign. And yes, we're engaged in discussion with them. ICAP retained -- did a very broad search and retained a representative from JLL whom we've done a lot of work with over the years. ICAP has a very massive infrastructure installed in Harborside Plaza 5 that because of the quality of Plaza 5 and actually the infrastructure, affecting Jersey City in of itself never was out of service during Hurricane Sandy. And so, I think that, we're going to see some positive momentum. I can't tell you that they'll keep every square foot that they have, because they like so many other firms are looking at doing more with less.

But I'm pretty encouraged by that. Vonage, I have actually a meeting with the CFO and their representatives next Wednesday to talk about their requirement. Their requirement is shrinking. So we might have to consider some other situations for the building in terms of multi-tenant. And so it's a little bit early in the process although we've been talking to them on and off since September.

But I think they're finally prepared to talk about it seriously now. I could go down the list and give you more, but that's generally what we're seeing in the markets.

That's helpful. And it sounds like, just on the CEO transition that, we are going to get announcement near-term, there may be a transition period, are you I guess, I just want to, it is your last call, if it is, I wanted to wish you best of luck. It's been a pleasure getting to work with you over the number of years. But if you're going to be on the next call, then I can do it then.

Yeah, no. Thank you very much, Michael. And it's very gracious of you to say. As far as I can tell you this will be my last earnings call.

Scott Frost, Bank of America Merrill Lynch Fixed Research.

From the credit side you had previously said that you would as usual enter into discussions with NRSROs in April-May. Have you done so in light of your outlook for the coming year in the context of rating reviews? If not, when is that scheduled, if you can speak about that. If so, how would you characterize those discussions?

You saw that a couple months ago S&P took some action and they -- we did not have a review with them. We have been a little bit slow to set up the reviews in anticipation of the leadership transition within the Company and thought it would be more productive whether or not (inaudible) was in attendance to have the new CEO attend as well. So we really have not had much discussion with the agencies and I think they're comfortable waiting.

Okay. And just, this probably answers the follow-up question I have, but it looks like the coverage ratio improvement is due to G&A expenses returning to I guess a more normal level due to the non-recurrence of severance costs, is it your sense that agencies would look at the lower level of G&A as a run-rate and determining your forecasted --

Yes, you're exactly right as a matter of fact. Then I think the run-rate now at about 44 million is a good number.

It appears there are no further questions at this time. Mr. Hersh, I'd like to turn the conference back to you for any additional or closing remarks.

Thank you. Well, I want to thank all of you for joining us on today's call. I thought it was a good call. And the company and all of the great people that make up Mack-Cali and Roseland about 650 of those people, they are a great team. And they look forward to working with the executive management team so that Tony and Gabe and others will report to you again next quarter.

On a personal note, it has been a pleasure working with so many of you over the past 18 years that I can kind of visualize a lot of you when you get on the call with the Q&A. And so, I want to wish all of you good luck in the future and it's been a pleasure. So thank you.

This does conclude today's conference. We thank you for your participation. You may now disconnect.