Veris Residential Inc (VRE) 2016 Q4 法說會逐字稿

Good day and welcome to the Mack-Cali Realty Corporation fourth-quarter 2016 earnings conference call. Today's conference is being recorded. And now at this time, I would like to turn the conference over to Michael J. DeMarco, President and Chief Operating Officer. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining the Mack-Cali 2016 fourth-quarter earnings call. This is Mike DeMarco, the President of Mack-Cali. I'm joined today as always by my partners, Mitch Rudin, CEO; Marshall Tycher, Chairman of Roseland; and Tony Krug, CFO.

On a legal note, as always, I must remind everyone that certain information discussed in 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, annual and quarterly reports filed with the SEC for risk factors that could impact the Company. As always, we look forward to an open and spirited dialogue about our results and plans going forward.

We again filed expanded disclosure about our operations in two supplementals, one for Mack-Cali's office portfolio and one for Roseland. We will be referring to key pages in our supplementals during this call, and as always, we'll continue to provide the best disclosure of operation strategies and results that we can.

As we have done before, we're going to break the call into four following areas. Tony will recap our operating results for the quarter, Mitch will discuss our leasing results and our view of the markets, Marshall will provide an overview of our multi-family operations, I will then provide an overview of our capital markets activities and comment on our views of guidance for 2017, as well as provide an update on our strategic plan before we take your questions.

As disclosed last night, our results indicate that we had another excellent quarter, capping off an excellent year, showing real positive results for 2016. Our strategy as a new team while evolving to market conditions is coming along as planned, albeit at a faster pace than people expected.

As stated before, our strategy is highly focused on four primary areas to transforming the Company. Our operating plan is based on a number of real estate and capital markets activities, leasing, sales, acquisitions, equity raises and development.

We had our strongest quarter to date in transforming the Company. We executed on all our objectives for the quarter. We believe we are well on our way to completing our plan earlier than expected, with greater results.

Two, the strengthening of our balance sheet is a core focus. We've made great progress this quarter with our interest coverage ratio at 3.5 times and fixed charge coverage at 2.7 times. We accessed the market recently to get the lowest cost of capital on a number of transactions, while our balance sheet is advantageous on rates.

Tony will go over our great progress in detail. We do recognize that we need to deal with our net-debt-to-EBITDA ratio by the end of 2017, and we have a plan to do that.

Three, complexity of our story: As stated last quarter, we believe our story gets more transparent each day. We started a process last year to simplify the complexity of our operations to realize their potential value. We are well ahead of that schedule and we are increasing our pace.

The activities at Roseland were substantial in 2016, and in this quarter in particular, which Marshall will discuss. Additionally, our office dispositions and acquisitions to date are making our Company far more transparent and easy to understand. When we're substantially done with our dispositions by the end of 2017, we do believe that the market will recognize that we are a waterfront transit-based company owning class A assets of office and multi-family, and not just a suburban office company.

Four, and lastly, our relationship with New York in the current environment is changing each quarter. The waterfront has been established as its own market, and is rapidly changing in tenant demand and the quality of tenants we're able to attract, such as farmer and fashion, continuing to step into the mix. Our current results and leasing activity, as well as the general market activity, are likely exceeding on expectations, with our cash and GAAP renewal spreads showing improvement for the fifth quarter in a row. Furthermore, we strongly believe the upcoming quarters will produce similar positive results.

Mitch, my partner, will go over in detail how we have handled our lease declaration for 2017. We've outlined our progress in our supplementals. We'll go over in further details in our prepared remarks. I'd like to turn the call over to Tony who will go over our quarterly results.

Thanks, Mike. With respect to earnings, core FFO for the quarter was $56.1 million or $0.56 per share, as compared to $47.6 million or $0.47 per share for the quarter ended December 31, 2015. For the current quarter compared to last year, the 19.1% growth in core FFO per share resulted primarily from increased base rents.

We reported net income for the quarter of $15.2 million or $0.17 per share, as compared to a net loss of $31.7 million or $0.35 per share for the quarter ended December 31, 2015. Included in net income for the quarter was $41 million of net gains from property sales, and a charge of $23.7 million from the redemption of the balance of our August 2019 bonds. As shown on page 32, same-store NOI was up 11.3% on a GAAP basis and 11.2% on a cash basis for the quarter, with the full year coming in at 10.1% GAAP and 6.4% cash.

Total G&A for the quarter was $13 million, with $9.2 million for the office public company, and $3.8 million for our Roseland subsidiary. G&A included approximately $1.7 million in additional bonuses resulting from Company performance to date. Reducing G&A remains a focus for us, and we expect to achieve savings as we streamline our portfolio further.

Turning to our financial statistics, as indicated on page 35, our total indebtedness at year end was $2.3 billion, with a weighted average interest rate of 3.79%, down from 5.22% at year-end 2015. Debt-to-undepreciated-assets ratio was 41.6%, and net debt to EBITDA annualized was 7.5 times for the quarter. We had a fixed charge coverage ratio of 2.7 times for the quarter, and interest coverage of 3.5 times.

Our $600 million unsecured credit facility had $286 million drawn at year end, and $264 million drawn as of today, leaving meaningful availability to support our business initiatives. In December, we redeemed the remaining $135 million of our 7.75% notes due in August 2019. Also during the quarter we repaid mortgage debt aggregating $200 million that carried interest rates ranging from 6.3% to 11.3%.

In January 2017, we closed on a $100 million mortgage loan secured by Alterra at Overlook Ridge, our 722-unit multi-family community located in Revere, Massachusetts. The mortgage loan carries a fixed interest rate of 3.75% per annum, and is interest-only for its seven-year term.

Also in January, we closed on senior unsecured credit facilities totaling $925 million, comprised of a renewal and extension of our existing $600 million unsecured revolving facility, and a new $325 million unsecured delayed draw term loan. The credit facility carries an interest rate equal to LIBOR plus 120 basis points, a reduction of 10 basis points from the previous facility, and a facility fee of 25 basis points. It has a term of four years, with two six-month extension options.

The new delayed draw term loan can be drawn over time within 12 months of closing, and carries an interest rate equal to LIBOR plus 140 basis points. The term loan matures in three years, with two one-year extension options. I will now turn the call over to Mitch.

Thanks, Tony. The portfolio transformation we began in September 2015 yielded great results this past year, including a variety of improved leasing metrics. Our core, waterfront, and flex portfolio of commercial properties was 90.6% leased as of December 31, 150 basis points higher than year-end 2015, and our best result since the fourth quarter of 2007.

During 2016, we signed deals totaling 2.8 million square feet, with 320,000 square feet in this quarter, securing some of the highest average rental rates we have ever seen, particularly along the Jersey City waterfront. You may recall, we entered 2016 with lease expirations of 1.6 million square feet, so as we anticipated, [thusly] greatly exceeded that number. Our 2016 rent roll-up for core, waterfront, and flex properties was 10.9% cash and 20% on a GAAP basis.

As it relates to tenant improvement packages and concessions, our leasing teams continue efforts to reduce leasing costs. Our highest leasing velocity for the year was the Jersey City submarket, where we signed over 850,000 square feet of transactions, with, amongst others, Merrill Lynch, Deutsche Bank, media giant Omnicom, and Zurich American Insurance.

Outside of Jersey City, we had an active year in our Parsippany, Princeton, and Metro Park submarkets. Companies such as Mizuho and Travelers signed large deals at two of our Metro Park buildings. Ferrero USA, B&G Foods, and energy firm PBF Holding each signed for over 50,000 square feet in Parsippany.

The flex portfolio continued its solid performance in 2016, delivering over 650,000 square feet of transactions, largely in our Westchester and Connecticut properties, and finished the year at 93.1% leased. That rent rollup for this year's flex deals was 10.9%, and leasing costs were a moderate $2.86 per square foot, per year of lease term.

For 2017, progress on expirations is updated on page 6 of our supplemental. We've reduced the expirations to 2.1 million square feet, rolling in our core, waterfront, and flex properties, which will be reduced to 1.8 million square feet if we are successful in selling the assets we want in the first half of 2017. This will leave us well positioned to successfully manage the remainder throughout the year.

Looking at the broader markets, in spite of a slight fourth-quarter slowdown in leasing activity, New Jersey finished the year on a positive note. Employment grew, and importantly, the largest gains were seen in the business services sector.

Northern New Jersey's 1 million square feet of positive absorption dropped its vacancy rate by 130 basis points year over year, and asking rents are up. Central New Jersey saw positive absorption for the 7th straight quarter, and also improved its vacancy rate by 130 basis points. Predictions are unanimously for rent growths to continue.

Westchester County, New York, where our portfolio consists primarily of flex properties and White Plains CBD office properties, unemployment remains lower than the national average. The White Plains CBD submarket saw demand that dropped its vacancy rate by 100 basis points during the year.

Class A properties continue to outperform the market, and our investment and repositioning of our core portfolio has and will continue to pay off. The demand base is expanding when you look at the tenants that have committed, as well as those that are exploring the market now. I will now turn the call over to my partner, Marshall.

Thanks, Mitch. Roseland's fourth-quarter and recent achievements in 2017 materially advanced the strategic residential objectives and growth of the Company. Roseland's stabilized operating portfolio completed 2016 at a leased percentage of 96.3%. Rents in our largest two submarkets, Jersey City and Overlook Ridge, were up approximately 2% and 5%, respectively, year over year.

In the fourth quarter, we stabilized M2, a luxury tower in Jersey City, which absorbed approximately 50 apartments per month. More recently, we delivered three projects to the marketplace representing 1,163 units. These deliveries include Quarry Place, the majority owned, 108-unit apartment community in Tuckahoe in lower Westchester. The asset is currently over 25% leased, and doing well.

Chase II, a wholly owned 219-unit apartment asset representing the next phase of development in our master planned Overlook Ridge Community north of Boston, is currently over 30% leased. And Jersey City Urby, formerly known as URL, our 762-unit 69-floor tower on the Hudson Waterfront commenced leasing activities yesterday. We signed 11 leases day one at $58 per square foot.

Inclusive of Urby, at the year-end 2016, Roseland had 10 projects representing 2,700 apartments and 372 hotel keys in construction. As detailed on page 38 of the supplemental, the construction portfolio represents $1.1 billion of cost, $76 million of projected NOI, and average Roseland ownership of 94%.

Roseland's construction portfolio included two fourth-quarter starts, both from our successful repurposing program. The 200-unit apartment start in Short Hills adjacent to Mack-Cali's 150 JFK office building and the Mall at Short Hills, and a 206-unit apartment start in [Balliken Wood] outside of Philadelphia. Upon stabilization, we forecast our current lease-up and construction portfolio will generate an additional estimated $38 million of net cash flow after debt service to Roseland.

In 2017, as highlighted on page 40 of the supplemental, we forecast new construction starts from land already controlled by Roseland of approximately 1,600 additional apartments. Importantly, we are pleased to highlight recent strategic transactions. In February, we acquired our Partner's interest in Plaza 8/9 for $57.1 million, thereby converting this premiere Jersey City waterfront location from 50% to 100% ownership. The site is future residential development and is currently adjacent to Harborside.

In the first quarter, we went under contract to acquire all joint venture partner interest in the Monaco Towers, the 523-unit two-tower stabilized community located in one of the premiere submarkets of Jersey City. The transaction has a [growth] net asset valuation of $315 million, which is $602,000 a unit. The capitalization rate on a trailing 12-month NOI basis was 4.66%, though with the inclusion of our promoted interest, the effective capitalization rate of the acquisition was 4.81%. This acquisition will convert Roseland's non-cash-flowing 15% subordinated interest to 100% ownership, and producing year-one net cash flow after debt service of approximately $8 million. The acquisition is scheduled to close early in the second quarter.

In February, we disposed of our 7.5% subordinated interest in Estuary on the Weehawken waterfront. On closing of the Monaco acquisition in April, Roseland's subordinated interest portfolio will be reduced to two communities, [Marbella] in Jersey City and the Metropolitan in Morristown.

In the fourth quarter, Roseland's key capital market achievement was the approximate $80 million refinancing of RiverTrace at Port Imperial from an existing interest rate of 6% to a new 10-year interest-only mortgage at 3.21%. As a result of the RiverTrace financing, coupled with our recent heads-up ownership conversion, we project annual cash flow to Roseland in excess of $1.2 million. The refinancing of RiverTrace culminated the year of approximately $500 million of capital market activities.

As a result of the various activities described this morning, we calculate a current Roseland net asset value in excess of $1.3 billion, approximately $13 per outstanding Mack-Cali share. As detailed on pages 7 and 8 of the supplemental, this NAV is primarily an interest or in construction assets, predominantly wholly owned or heads-up joint venture interest, and geographically concentrated along the Hudson waterfront and key Boston submarkets.

In 2016, we embarked on the capital raise activities to fuel the continued growth of Roseland. As announced Monday, we signed an equity investment transaction with the Rockpoint Group to facilitate Roseland's ongoing and future development, acquisition and repurposing activities. The transaction validates Roseland's NAV. I will turn the call over to Mike for a further review of the Rockpoint transaction and for closing remarks.

Thanks, Marshall. As disclosed, we finished 2016 on a strong note in all objectives. We are reaffirming our provided FFO guidance for 2017 in the range of $2.25 to $2.40 per share.

Beginning on page 27 of the supplemental, we provide a commentary on some of the updates to our 2017 assumptions, including: We expect our leasing percentage to range between 90% to 92%, however, the achievement and timing could take longer as we have multiple expirations in the fourth quarter of 2017. However, our leasing activity is strong with the waterfront at 94.6% currently, as Mitch just mentioned, Metro Park at 94.5%. We also achieved 90.6% on our combined waterfront, core, and flex portfolio for the fourth quarter.

Two, we continue to drive rents in our reshaped portfolio, and expect same-store NOI on our post-sale portfolio to be between 6% to 8% in GAAP, and 3% to 5% on cash. Third, non-core asset sales are expected to be in the range of $700 million to $800 million in 2017. We're advancing our sales process as we go along during the course of the year. We have on the market are probably half that amount; they're readying other assets for additional sales. The approach in 2017 is to sell the next layer of the bottom of the portfolio, thereby completing our portfolio transformation by the end of the year.

Fourth, acquisitions: We have announced several acquisitions this quarter. We believe each of them will add to our portfolio, increasing our strength and allow us to produce excellent results in the coming quarters. In particular, we believe that the Short Hills acquisition with the creation of value at 150 JFK with the luxury apartments and new hotel will give us an irreplaceable combination of assets in the Short Hills market. Additionally, the 100% acquisition of Monaco will add substantially to our waterfront asset base.

Five, the Roseland equity raise: As disclosed, we've agreed to terms with Rockpoint for $300 million in equity contribution. This will allow us to complete our 2017 and 2018 starts, and therefore, de-stress Mack-Cali's balance sheet going forward. The Roseland platform will require additional equity over time, and we believe very strongly that we have multiple options to fund those needs.

Six, each quarter we expand our focus in operations. For 2017, you can expect us to be focusing on AFFO. We believe we can now produce the correct AFFO for our Business, as we have trimmed our portfolio to only high-margin properties combined with reduced cost of retainment.

Seven, our overall strategy is to have fewer buildings with a lower turnover, as we have augmented our lease turn greatly over the last year, and greatly reduced the number of tenants. This, combined with improvements we're making, as Mitch has gone over, to our buildings, will allow us to execute on our rental strategy.

Eight and last, the Roseland delivery of class A assets started this past quarter will continue for the next two years with the in-place construction starts. These assets quarter by quarter will add to the overall portfolio value and allow us to have increasing cash flow. You should also take note on the sources and uses for 2017 presented on page 30.

I would say on my last closing comments, this has been a positive review of our results, as we have accomplished a great deal in 2016. I will briefly say on behalf of my partners in senior Management, as a team, we are not very satisfied in our results to date. We believe our best days are ahead of us and we really look forward to that journey.

Mack-Cali is a totally different company today than it was 21 months ago when Mitch, Marshall, and I formed our Partnership. At the end of 2017 it will be totally transformed. We've never discussed this and I'm doing this comment extemporaneously with the Board, but a name change at that time might be the right thing to do. With that overview, I'd like to turn it over for questions. Operator, first question?

(Operator Instructions)

John Guinee with Stifel.

Thank you. Roseland finally gave birth. I'm looking at your summary page, your NAV [1.35%]Rockport said [1.23%], there is a $122 million difference. Where did Rockpoint differ from Mack-Cali in terms of both the gross and the net asset value?

John, I think they took in overall discount across the board for that number. I would say that they probably took a more jaundiced view of some of the landholdings, because obviously land is a commodity that we mark at a price. And they looked at it and said okay, do I really want to own it at that level?

And I think they felt very comfortable on our existing operating assets because they have produced quarter after quarter. They obviously were attuned to the fact that we were buying Monaco this quarter, understood that, that would be part of the use of proceeds for them coming in. I also think that we marked up our construction book a little bit, and they discount that number.

And lastly, John, I think they just did not want to pay retail. They think that all REITs sell at a slight discount to NAV, and applied something that the market does so some of the best companies in which they chose around a 9% level.

Okay. Then Plaza 89 acquisition, $57 million. Did you buy out your Partner for $57 million which gives an implied valuation for that dirt of $114 million, or what is the math on that?

You are absolutely correct. So the site sits literally next to Harborside. It has a direct water view. It is a three-acre site with a one-acre park adjacent to it, so it's got actually some of the best real estate you could find.

We had five partners in that deal. The joke was that if we put an orange in the middle of a table and asked them what color it was, we would never get a consensus between the five parties. They had owned the land for 25 years, and had never moved forward because they never could agree.

We came to them with a solution. We gave two of the partners units. The units were described in a press release we gave out earlier, they're 3.5% preferred units pay rate.

They are up 25% on price. They convert at $35. They want to be in the money. They have the right to basically put it back to us if they are deceased or [death put] per se.

So that value in the $57 million, I do not think the street would value that at par. That's a security that would be done for tax reasons that would sell it at a discount. The rest of the money was cash, and you are right the valuation is about $114 million.

Marshall has already started looking at what we can do with that site. We have some zoning on -- there's three ways to do it. We have some zoning on our existing Harborside site that we can use ex-bonus owning, that we could move over.

We could upzone the site by basically merging it into the existing lot that we have now, and you can buy zoning from the city at an advantageous rate as we have done in the past to basically round out the project. When completed, it will be a superb project, and it's literally one of the last great pieces of real estate right on the water in Jersey City.

Okay. Just asking a follow-up question to that. If the $114 million translates to $38 million an acre or assuming 275 units it translates to $414,000 a unit, --.

You are off on the unit count, John. You probably can build 1,200 to 1,400 units as of right. So do it that way and then divide it and you get a much lower number.

Okay, because the supplemental says 275 units.

1,300. But we will check on that, John. If it was an error from us, we apologize. But it should be 1,300.

Okay. So --.

About $80,000 a unit, give or take, about $80,000, John.

Okay, that makes sense.

Which by the way, that is the number today. If we think we can get it down to more like $60,000 by the time we either move the zoning, get some little upzoning or buy some zoning from the city at a more advantageous rate. And at $60,000, for given what Urby announced today in rents, it's a great buy for us.

It is not like we stole it. We've obviously paid retail. The guys we dealt with were very knowledgeable. They've been in the land forever, but it will be a great project for us when we complete it.

Okay. Then I think you said you had a plan to get down, you're at about 7.5 net debt to EBITDA now. Is that only Mack-Cali, or is that Mack-Cali plus Roseland? And then how do you -- how -- what is the plan to get to where you want to be by when?

There's three things you can do, obviously. We can grow our way out of it, we can cut expenses a little bit, and we can pay down debt with some asset sales. The last is the most difficult because you have to pay a lot or pay it down a lot.

We think we're about $350 million more in debt. If we were at $2 billion today versus the number we have, I think we would be perfectly fine. We'd be sub-7, give or take.

That number takes us about the way we look at it is for every $1 million, you get a $16 million hit on the net debt to EBITDA. So that $300 million and some odd, we need about $20 million of revenue, John, right? That can come from interest savings, which we will see what we can do. There's some debt that we can actually pay.

There's some cost reduction that we still get because we're trimming the portfolio and we do -- and each we do that, and there's revenue growth. And I would comment just solely the 1,000 units that Marshall has of the rent that is occurring. If you look at the net contribution after debt service, we get about $20 million on that. Maybe about -- I'm sorry, maybe about $20 million gross but after interest expense, we end up about $12 million.

So out of $20 million I need, I can get some from Roseland, I can get some are Mack-Cali rollout. I can get some from cost reductions and I can get some from interest reduction and last but not least, I can sell some assets and apply those proceeds to pay down debt. One of the benefits of the Roseland -- the Rockpoint transaction is we no longer have to fund Mack-Cali growth -- sorry, Roseland's growth which was allowing us to increase our debt each quarter.

Great. Thank you.

Manny Korchman with Citi.

Hello. Good morning everyone. Mike, if we look at your NAV disclosure, a lot of moving pieces and hard to track things on a sequential basis but we're going to do our best here. So two things that stand out to me, New Jersey Waterfront cap rates are now back to sort of levels that you first presented in September of 2015 and down 75 basis points sequentially.

Maybe you can help us figure out why you think those assets are all of a sudden worth 75 basis points better than they were four months ago or three months ago?

No problem. We really visited it yearly, so we look at it -- so Ricardo Cardoso, our Chief Investment Officer, goes through, talks to all the brokers. We have a very detailed review -- the big shift about NAV because the end of the year is when we really focus on it, as we make our Board presentations and talk about our corporate strategy.

One of things we tried to do, Manny, and we did change things around and we apologize for the many buckets, but we are an evolving business and importantly, change produces change. Two things we did. We moved some assets from office business into the flex parks because they are part of those parks, and we intend to sell those parks.

So we're trying to give you disclosure as to what that flex business is going to be worth to us and the goal of seeking to it. We gave you expanded disclosure on the dispositions because now we have a new view about what we want to sell and we gave that out.

We then did the third thing, which is we said, listen, in the office business, it's really bifurcated. They are all the supercharged markets that we get in Metro Park, Short Hills. When we get rents similar to Waterfront and margins are about the same, obviously, expenses is a little bit less than in the suburbs. So that's going to be a growing part of our business and we wanted to highlight that at the beginning of 2017 as we will produce bigger and bigger numbers in that business.

So lastly, to answer your question more directly, the Waterfront. We had rent growth since the time Mitch, Marshall and I have been together that when we took over, rents were in the low to mid-30s, and now they are in their mid to high-40s, right?

We keep on looking and saying today, what are the assets worth? So when we travel to the brokers in December and January, they came back and said, you're never going to -- you're going to sell your buildings if you did sell them at $4.50 a square foot, to $5.00 or $4.25.

The way we have in-place rents because of past leasing practices, we needed to basically adjust the cap rate to decide what the markets would trade on a per square foot basis and what they would trade on an IRR basis because of the embedded rent growth. So we looked over the last and said instead of doing a quarter to quarter, at the end of the year, we sat down and looked at all our leases and said okay, what is expiring? Where are the real rents? What is the competition doing?

It came down to if you want to buy in Jersey City today, you are going to be spending $4.50 to $5.00 per square foot; that's just the market. There are several buildings that we know maybe available or not and we look at our buildings and the changes we made. But they will work accordingly; the cap rate there becomes the product of that analysis.

Maybe if I can ask you a follow-up on Waterfront. Your projected 2017 NOI came down by roughly 2%. Is there anything specific that's driving that?

No, just the timing. We are looking at where we are renting and I think the Trump effect and I hate to use the President in that effect but it did slow down leasing activity a little bit, as people weren't sure what they were doing. The tours that we're having and we had one yesterday, we had several in the last few weeks. The breadth of tenants that are looking at the market range much, much better than when we took over 21 months.

We are seeing leading fashion companies. We have seen several pharmaceuticals, medical devices, right, financial service companies not banks but asset managers who are looking at the city and saying, we want to move 400,000 square feet, 200,000 square feet. We are also building a block of tenants in the 50,000 square foot to 75,000 square foot range. We just haven't achieved -- it's a timing thing, we haven't achieved the number that we want today but we think in the next couple of quarters, we will get it back on track.

Mike, maybe switching gears a little bit, your 2017 expirations didn't really change all that much aside from the assets you were going to sell from 3Q. But it looks like the vacancy rate in the Jersey City market overall increased in 4Q. How do you weigh those two things and do you still have the same confidence you had when you last spoke about the taking care of those maturities?

As we do this quarter to quarter, we have been giving now basically 21 months, or seven quarters -- it's like our eighth call since we picked the first thing. I would tell you we are much better attuned today on every square foot that's leased. And when we took over the information we were getting from our field people was, let's say, average. I would say today, it is excellent.

We actually have agency agreements with six different brokerage firms so we get market data. We track every square foot coming on the market today, and know where tenants are going. I will tell you my biggest competitor was LeFrak, which is pretty much full, right. And there's three building in Jersey City that have lots of space that can be competitive with us.

And we think our space is some of the finest. So our confidence level is high. We still need companies to make decisions. They make it on their schedule and they are big deal. They are 200,000 square feet or more. There is going to be eight or nine of them in the marketplace today looking for it. I would think that with where the rents are today, the incentive program, the way -- I'm also -- we actually haven't announced this, but we might as well do it now.

But we have an agreement, Manny, with a ferry provider, New York Waterways, to add a service at Harborside. The service would apply for the DEP permit now, both directly from our entrance way on the water to the World Trade Center and to 39th Street which is effective at Hudson Yards.

We look at the Hudson Yards activity, we look at Downtown's activity and we look at what we're doing to our complex here. And we think that added thing -- added benefit of transportation and some of the improvements we're making to the base retail is going to bode well for us in the upcoming quarters

Great. Thanks, Mike.

Jed Reagan with Green Street Advisors.

Just following up on that. Can you -- are there any -- can you give an update on back-filled prospects, specifically for some of the bulkier move-outs that are coming up in the near term?

And I think I heard you say that the 90% to 92% occupancy goal might be tough to reach by year-end. Did I hear that correctly and so should we think about something maybe closer to the low end of guidance as being more realistic?

Jed, it is a moving target and we'll be -- I think we would be better positioned to answer that question in the first quarter because this is the time when we get the tours going, so we have a better view. One of our tenants was a -- I can't disclose it, extended into 2018, so we're not going capture that space back. The other block of space, we have to take it out of service, which is the Deutsche Bank space.

That Deutsche Bank space is going to be basically totally re-done by us. We have hired a contractor, a leading company that helped us redo that building and we are looking at tenants to take over that space and the plans to do that are superb.

The remaining spaces, as you -- as we know, are going to come in and we should be able to hit those targets. It may be a quarter late. You might be more apt to do one on the low end of that range. We will give you, as always, the clearest view when we know it, and it's like to be at the end of the first quarter call, we're going to do it. Mitch, do you have any further comments?

Hi, Jed. The rhythm in this market performed a little differently than what you saw when you talk to the people in Manhattan. We had a surge of interest in November; we had a lot of tours. A lot of people out there. They then went home for the holidays. The deals weren't at the point like in New York, where they searched into the year-end and it just picked up again in January. That has resumed in the last three weeks and as Mike has indicated, so we're very busy with tours, into the variety --

Mitch, and I also think our message is better, don't you think.

The messaging is much better and the breath of tenants that we're seeing is vastly different.

Trying to make this building hip, Jed, it's a tough job but we're doing it.

I appreciate that. Okay, thanks. It looks like you lowered your 2017 guidance for base building CapEx and leasing costs. Can you just talk a little bit more about what drove those changes?

We are selling more assets, Jed, that actually had 17 expirations and we don't fund them. The new buyer does. We do a net deal. We don't put money and get $0.60 on a $1; it's not a good business model. So the buildings that we sold and we advanced at the end of the year come off of the total. So we gave guidance initially in November.

We had those built-in so we reduced those numbers. We then reduced it for what we are about to sell in the first quarter. That gives you a net exploration of about a $1.7 million, right, and on those $1.7 million, we kind of a good view now about who is going to renew so those numbers come down because renewals are bought cheaper. And then we built in what we think we are going to spend on the new deals in this year.

Now we have to balance that act with some tenants that are still accruing charges from last year and some of the expenses that we might contract for this year might be spent next year but today is the best estimate. And my comment about AFFO was always something the Company had suffered from. I would be very candid, as always, to say the day we took over, I think our AFFO was zero.

If you looked at what we actually spent -- think about this. Two years ago, Mack-Cali did almost 4 million square feet in lease expirations, right? That's enormous for a Company of our size and capitalization and far more than our colleagues will say that's what Green does, right? We're actually with a 2.8. Okay, that's great. Now we're doing $1.7 million. If we can do a $1.7 million or $1.5 million, which I think we'll average, spend far less money, stay at 91% occupied, I might actually smile more days.

Was there any CapEx, especially on the base rolling site that you're basically pushing out to 2018 or 2019?

No. We're advancing but we're doing fewer buildings. We started off with 270 buildings, now we are around 200 buildings. I think when we get down to the end of 2017, we may only be 70 buildings, right? 70 valuable buildings, we put a page in there about how certain markets equal 80% of what we own; that's the strategy.

We don't want to be bigger. We want to be better, right? We always -- we used to lead with a tag line, we are the biggest REIT in the Northeast. We're one of the largest companies in square footage. I can make $4 a share, guys, and we can have 50 buildings, count me in.

Okay. That is helpful and then just last one for me. It looks like you slowed down growth trajectory that you were planning for Roseland a bit. I think it's a 1000 fewer units by the end of 2018. To what extent is that reflect a slowing pace of plan starts versus maybe higher disposition targets?

I think we're at the stage now at Roseland where we've done a great job and I couldn't be more happy than as Mitch said with sentiment of Marshall and his team's activities, right? We took a company that people divided the first time they have ever worked together and turned it into a superb company, maybe a little bit of juggernaut.

But we're rational. We know that every start basically comes out of our capitalization. So we are very careful of every dollar we spend. Some deals just take a little longer on planning; some deals are just pushing out based on where we want to spend our money. But we look at what we put on the table now and we'll [harvesting] in the next several years; that's a great deal.

And then we manage our book to say how much money do we want in the construction bucket quarter to quarter, as you should pragmatically in this business. To answer the question, it's a combination of us getting a little smarter about the business, a little more reactive to the market and also the realization that we have done a lot on acquisitions to fill out where our capital needs to be.

Makes sense. Thanks very much.

Rob Simone with Evercore ISI.

Mike, you touched on this at the end a bit but just in terms of asset sales, you guys are guiding the $700 million and $800 million. I think you mentioned that the portfolio transformation would be substantially complete. But is there any potential for some of that to leak into 2018 and are there additional properties you would consider selling beyond 2017?

We'd hope to get it down now. My Irish grandmother, who has been long passed, had a quote that I particularly liked that said you should be in heaven a half hour before the devil knows you're dead, right? So we view the market today as saying rates are low, capital activities are actually quite good. We've been successful in assessing the market.

We've gotten so much knowledge about where deals are done and so many buyers, we're attuned to, really, if you don't love the asset and it's not long-term, why wait? I mean, why hold onto something? Every deal we sell is dilutive to our earnings capacity because we're effectively not getting the optimal price,

It is hard to sell accretively, right, but we know when we transform the Company, when we use the suburban label, when people say this is a waterfront transitive company, heavy multifamily, heavy office on the Waterfront, our multiple will get better.

So it behooves us to basically move as quickly as possible to that objective. And if we can do it faster, we will do that. But we process a certain number of deals. I've been running that effort. Ricardo, who reports directly to me, he has done a superb job. I think anyone looks at what we've sold and how much we've sold, the number we put up, we think is achievable.

Some of it may trip over into 2018. And that is because of asset management and we will not leave money on the table. On the other hand, we are not going to look -- we are not going to wake up tomorrow morning and say, oh, I think the market will be better six months from now; let's wait. That's not a good model actually.

Right. Could you, one more time, just comment on the markets in New Jersey that you're 100% absolutely looking to exit?

No, I never do that because then my tenants could get upset and my brokers call my tenants and said they are leaving. But I would tell you we look at growth files and now we've become more attuned to leasing activity. I will tell you the markets that we really love, right. We really love the Waterfront, rents are rolled up. We're making significant improvements to the base assets. Short Hills, you can't get better rents. Short Hills is west of Jersey City; the next time you get the rents at Short Hills in [Joys] you're in San Francisco or LA.

I mean they get high 40%s to low 50%s in some of the deals. You don't get those rents in Chicago. You don't get them in Detroit. You don't get them in Dallas. You don't get them in Houston. You don't get them in Phoenix or Las Vegas, not until you get to the West Coast, you get those rents and quality tenants, Metro Park, Monmouth is a work in progress for us. So is Parsippany, after that, as we -- like I say, we call back out to the farm; we don't name our animals for a reason.

Got it. Thanks, Mike.

We will hear from Tom Catherwood with BTIG.

Going over to Harborside, if we look at page 5, the strategic plan 24 months objective includes renovating Plaza 1. So Deutsche Bank coming out in 2017 during that renovation, is this going to be a phased renovation where you would do Harborside 1 and then move over to Harborside 2 and Harborside 3 or would it be -- is this a multi-year project that could be done in 2021 or 2022? Or are you thinking of accelerating this project? I want to get a sense of timing.

We're doing it as quickly as we think practical. If you came today and we invite you to come and see it, we have transformed the atrium. When we first took over, there wasn't one piece of furniture in the entire building, 1.7 million square foot, not one chair. Right now, if you go downstairs, there are several 100 people, I mean, in the 200 to 300 people everyday sitting, having lunch, collaborating with their portable devices plugged in, as we provide WiFi and power where we can.

We have added almost 10 different pop-up tenants, providing things from Asian Street food to empanadas to barbecue to gelato. As you know, you live in Hamilton Park. We have really done a good job of making this a place to be. We think when we add the ferry service, we will get 4,000 to 5,000 people commuting to here because we're attached to the light rail.

We also have a number of parking facilities nearby that people could use. Harborside 1 and Plaza 1 is a tenanted been in place for 35 years. We want to take their space and we're going to gut it, new bathrooms, new Wi-Fi, the density that people want today require better A/C units, larger facilities, definitely some elevators. We'll make all those improvements.

That should get done relatively quickly and obviously before 24 months lease expired. We will then re-skin that building, right. We may add some square footage to the top of it. At the same time, we will be doing a base retail of Harborside, which will be in conjunction.

We hope to get both projects done within a 24-month period. But some of it may lag if we can't find the right tenant, but it will be transformational each and every quarter as we go through it. As you came over to now, you would say, this place looks totally different than it did two months ago.

I actually walked in a week ago and I completely agree with you. It looks like you made progress and you're changing over some of the retailers, changing over the -- corporate food layout and it looks completely different.

The initial plans when you guys first laid out the vision for Harborside a while ago included potentially a gourmet grocer for the north corner of the building with Whole Foods allegedly moving in 2020 half a mile away from your property. Is the plan still to do a grocery anchor there or are you open to a variety of different tenants, maybe chopping that space up?

The bad news is Whole Foods is not going to the site they want to go to because the developers are not building the building. Because we've got our ear to the ground and the bad news is Whole Foods won't come to us because they want to go into an existing facility because they [have meals].

The good news is the site next to us Plaza 8/9 is a great site for Whole Foods to go to because it's a three acre site, as you know, and -- Second Street and Hudson Street are perfect blocks where people can actually access the area.

We will probably do a number of different retailers, looking at some concept restaurants, some other day spas, some other high-end retailing to go in those sites. We have had a number of conversations. We have tours with chef almost every week and we are picking a list now to the one we want. We have three that we have identified currently and we're going up to about eight or nine when we're done.

Got it. I appreciate that. Then switching over to Roseland real quick, one comment on page 20 of the supplement was very helpful. Thank you for that addition. As far as same-store NOI growth this quarter, what were the results for Roseland?

Same-store NOI growth is up just a little bit.

Okay. As far as concessions, any changes in the market or anything that's impacted your -- and obviously lease is going well, but anything that impacted the economics?

No. Concessions haven't changed. Normal concessions on lease-up of new properties but stabilized properties concessions have not changed at all. As you saw, our occupancy is within a few points of last quarter and frankly, it's actually a little bit higher than last year's same quarter. So the market has been very stable with slight growth and we are up a couple of points in Jersey City, and up almost 5 points at Overland.

Got it. Just one more quick one on Roseland. On page 42, there are eight office assets that you've identified as potentially repositioning. How many of those office assets are currently held by Roseland and how many are part of the Mack-Cali Office portfolio?

They will be transferred as the Rockpoint transaction. Whatever we want to do will be transferred in because we want to set the stage with smooth sailing with them. Next quarter, we will have a supplement to show what exactly we transferred in.

Got it. Thanks, guys.

We will now hear a follow-up from Manny Korchman with Citi.

Hi. It's Michael Bilerman, here with Manny. Michael, I want to ask about the Roseland deal in terms of the structure of the transaction and you think about the variety of different joint ventures. Clearly, one option was just to go head to head and share economics on an economic basis. Whether it was a 50/50, 75/25 or 80/20.

You structured your deal to allow Rockpoint to get an effectively preferred return upfront and then that would come back upon a realization or monetization down the road where they net back down to a percent of IRR. I am curious how you thought about the complexity of structuring the transaction? How much additional proceeds you got by structuring the higher return upfront and when there is any clawback on the back-end should the monetization event not be positive and result in a better return?

Thank you, Michael. It's been a learning process and let's look at the beginning of what we wanted to do. We wanted to set Roseland on a course so we funded out from Mack-Cali balance sheet, which is the right balance sheet, which we felt was appropriate to get it started.

Now Roseland is well on its way; Marshall and his team have done a superb job of producing stocks that will produce revenue, which we laid out in the supplemental quarter by quarter. We're now at a demarcation point, right? We have to look at what we can and cannot fund and we felt that $500 million would do everything we could possibly ever need.

I think the $500 million plus the land that we currently have, we could do well over $2 billion of additional construction. Of the $500 million, we were willing to put in $200 million. We wanted someone else to put in the first $300 million. The $300 million became a size requirement for us that got us essentially all the way through the plan as much as we really needed to do that we could plan to do.

Now you look at $300 million. We had at least a half-dozen to one dozen people who wanted to give $1 billion, right? They wanted to own control. We thought this was a great deal. It was superb and we looked at what we had, of course, we had it. And I can't tell you how many people came and said I will give you half the money, I'll give you all the money but I get to run the place, right?

You become the 20 and I become the 80; we go back to being a subordinate developer. You weed out those participants. Then you look and say strike out all the hedge funds. Strike out all the opportunity funds. Look for somebody who has a core mentality who basically thinks of the business the way you are. I happened to know Rockpoint, from the previous life of a NATO.

They had a sterling reputation and they are the easy in, easy out guys; effectively, they don't look for the last dollar per se. They look for basically having the fiduciary responsibility of executing on a strategy. So they came to us and said we love you guys. We will do the $300 million, so I said great.

Our big thing was control and we don't want to actually have a more cumbersome system. They said just give us one Board seat and monitoring capability and the major decisions that we would need to make are all within our control and we do not have their consent on anything unless it was a really, really, really huge transaction.

Now you don't have to worry about control. Reporting wise was relatively simple and it comes down to the give-and-take on the numbers, as you pointed out. They wanted to get, because of the fund requirements, a dividend, right? We don't really need one so we gave them something upfront. At the back-end, we gathered those monies back in the form of an accurate -- on a promote, we get a little bit more than they do.

At the end of the day, we look at it as a hedged transaction, as long as we don't drift below what our current NAV is, there is no [call] back. So if we make a 9%, they get a 9%. If we get a 7%, they get a 7%. We make a 3%, they get a 6% on their numbers but we don't think we're going to make it 3%. All things being equal, it's the best of both worlds.

The other alternative as we all know was to issue equity with numbers we didn't think were applicable to our capital structure. So as always, this took a little longer and this was one of the things we were a little later than we wanted to, but everything else, as a Company, as a team, was actually delivered earlier. This was -- believe me, this was the -- we feel very comfortable with the people we're working with and I don't think there is a fit that we could have found that was better.

Of all the things that we looked at and the way they interacted with us and how they deal with us has been superb today. So we're actually very happy with where we are now.

How do we think about your cash flow distribution, your recognition versus your economic interest in the period before any future monetization event if Rockpoint is going to be getting a higher return on their committed capital upfront? So is there going to be a mismatch -- if you go back to AFFO, is there going to be a mismatch between (inaudible) reported earnings but distributable cash flow to Mack-Cali shareholders?

It should be very slight because given the size of the deal and the size of the Company. It is an excellent question. We will giving further disclosure on something, as we fund the deal, we will lay out the math. But initially, it is a relatively small equity.

It's a $150 million in a company that has $3 billion. We pay them essentially 6% on the initial $150 million ; it's $9 million. The earnings for that division actually should be about that, a little less. So we will probably have a little leakage. I don't think its meaningful, I think we catch up, Marshall thinks that next year, actually, passover in which there is no issue on [under reporting].

So you are astute, as always, obviously you had a goodnight's sleep last night. There is a little bit of a loss on the numbers but it's very minor. It's immaterial, in my opinion, and it really goes away after the 12 to 18 months as earnings pick up.

And then last on Roseland, how do you -- how does your partner think about a future monetization event? Clearly, you could spin this business to shareholders. You could IPO and raise additional capital or you can essentially sell it?

How do they think about ultimately how -- do they just want to get their money back or do they view this as a long-term holding that they would want to have? How should we think about when that monetization event happens and the characteristics of what it would be?

I think they are no different in their approach than two dozen of my current investors. So to use names like Fidelity or Blackstone or Wellington or anyone who is on my list today who looks and says at a certain price, I'm a seller, and I would buy more at a different price. My good friend, Tom -- Ted Bigman at Morgan Stanley, who said never take it personally when I'm out of your stock because its just business, right?

They are not looking at this as something they want to own for 30 years. They have a 10-year fund, 10 to 12 years, on the outside date, they put a minimum hold period for us. We both felt that five years was a good point of view of holding. After that, I think it would be totally, totally commercial. It is in the best interest of the entity and I think we're near to their benefit.

Their reputation is stellar on this subject and not someone who ever bothered someone -- or someone other than commercial aspect. They don't look at things and say, well, this is what we need to do, we want to own this because it's part of why we want to own it.

Thanks, Mike.

We have a follow up from John Guinee with Stifel.

Great. I get the simplicity premium thought process. By the way, is Roseland going to be consolidated, unconsolidated? How are you going to bifurcate those financial statements?

Just consolidated, John. No change. (multiple speakers) It will be simple. We will keep it as -- we strive to make ourselves easier to understand, not more difficult. If we had done this another way that was totally transparent and totally -- not one hiccup, we would have done it, but this is the best we could do. And we think we did a good job on it.

You bought about 1.1 million square feet in Short Hills. I think you paid about $360 a foot, what is the cash and GAAP cap rate on that?

It will probably be above a 7%, maybe as close to an 8%. What -- it's an interesting deal, John. We've bought it -- it's a restructuring product. To be very candid, people will notice.

So the holdings is owned by RXR and Teacher's Insurance. They were overlevered, when we came in. We made a bid and it was agreed by the servicer; another asset gets spun out. We get to basically buy those assets. We think we did it at an advantageous number.

The interesting thing about that, I have never had the experience, John and I find it somewhat comical but we did the tenant interviews and you go meet the guy and see what is wrong with the building. He gives you all the complaints. Normally you go in, the tenant sometimes have a bravado about I'm going to leave the building, right? I'm going to go because they want you to make sure they have leverage.

Every single tenant we interviewed in that market says, I am not leaving. You can't get me out of my space. I have got renewal options and every space has four or five different people looking for the same renewal option and if someone does not pass, I get a second option.

And if I don't have a second, I got a third, fourth, primarily because of drive time, well, it's mostly CEOs. They operate in 20,000 and 40,000 square foot blocks and they're not moving. It was actually, in some respects, its refreshing if the owned space that people actually really want to be in and would rather die than leave.

Okay. I think your introductory remarks was you want to lose the suburban office label and generate a waterfront Jersey City label. It looks like you spent $400 million on suburban asset. Can you help me understand or help investors understand why you're going to lose your suburban label by just buying 1.4 million square feet for $395 million in the suburbs?

Yes, John, I think the -- we have a transit-base -- we have a Waterfront transit-based strategy. So we bought assets like we did with Monaco on the water and we bought Hoboken last year. We bought two buildings in Metro Park; now, we are buying buildings in Short Hills. These are markets that we think enjoy the same margin as the rest.

The suburban label I'm losing -- I want to lose is that, oh, you can't make money in New Jersey. But I want people to focus on it's a five consecutive quarters, we produced GAAP and cash roll-ups in the top quartile of all of our competitors. There's a market to be made in this state and providing high-end office space to tenants who are willing to pay the price for it.

Pharmaceuticals, investment advisors, lawyers, accountants; there's certain submarkets that work. There are many that don't. We're going to exit the ones who don't. We want to make money on the ones that do.

We looked at the opportunity and we looked at the asset in Short Hills and looked at the investment that Marshall was making in the office -- sorry, the hotel and apartments. We looked at the three buildings across the way which is the majority -- for the value that we bought and said, you know what? This is a one-time chance to basically owned one of the best markets in the country. And for that, we will suffer the suburban label.

John, it's Mitch. Just one additional point on that. Unlike New York, we have already paid a lot of attention to that, when we drive rents here, you do not see a commensurate driving of concession packages. When you get to the actual NERs, neither do the concessions go up nor do the expenses and tenants to the buildings go up because they don't reassess based on income and expense like they do in New York. So we're driving here as we move those rents and that's pure bottomline.

Okay. Got you. Thanks.

We have a follow-up from John Reagan (sic) from Green Street Advisors.

It's actually Jed Reagan. I guess just following up on that, I just want to confirm, the price for the Short Hills and Madison is $395 million total and then can you mention just -- mention how much of that was allocated to the Madison piece?

I do not have the number in front of me. I'm going to give it to you and we will do it -- that's going to close shortly, it will be in the press release. The stuff at Short Hills is probably -- actually I have to get it. I don't want to do a [back] (inaudible) on the call. I will call you a little later. Madison, just the information is the next market due West and it is in that high wealth corridor.

It's a park in which Allergen is just moving to and taking over 0.5 million square feet. We think that park is going to get reinvigorated but I will give you the breakout for the assets on the other ones. I apologize I don't have the numbers in front of me.

But the $395 million all-in sounds directionally about right?

Yes I think it sounds directionally about correct.

Okay. That is helpful. Where do you expect to finish the year on debt to EBITDA and just looking ahead, where do you think you can get that metric by the end of 2018?

There is a tale of two companies, actually. If you look at what Mack-Cali is doing because our earnings continue to go up and net EBITDA goes down for office business, right? It goes down in the 6% by the end of 2017 and continues to go down in 2018 and 2019 as we project out. Roseland, because of its business model, is much higher than that. The two combined equal to the number you project out for us.

We need to see where Roseland is going to be. While Roseland continues to produce relative excellent cash flow growth. The key is in a base. As I said earlier, we need to have an epiphany about where I can get revenue at the end of the year, what expenses reduced, and as far as interest savings and the way they basically alleviate the total number of dollars we are having in debt.

We have a plan. I don't think I want to lay out much more than that right now, but I tell you it's the number one thing we think about and I believe it's the one way we can unlock further value. And I don't want to sacrifice that as we have talked about it at an event, with the other growth aspects of the business. It is a balancing act and we are definitely attuned to it.

Okay and just -- how any latest thoughts on the flex portfolio and how that might factor into things?

Well, one of the things we're doing is we're highlighting obviously what we think the flex business is. It's in an entity so we moved some office assets back into the parks, in which they are self-contained, as we intend to basically sell them as a park so you could expect us to start to think about exiting that business or letting those assets for sale on the upcoming months.

It's one way to basically lose the suburban label and another way to transform the Company and basically getting rid of a large number of buildings. They do have excellent margin; it's one of the last things we want to sell, but 's something we look at as things we might sell in 2017.

I think, Morristown is in this year's number; is there anything else in that portfolio kind of in the 2017 guidance?

No, there's nothing else in that portfolio. Just Morristown and Bergen County what we gave you for 2017 so far.

Great. I appreciate it. Thank you.

We will now take our final question and that will be a follow-up from Manny Korchman with Citi.

This is Manny. Tony, a question for you on guidance. It looks like you increased disposition guidance and also increased interest expense guidance but you haven't changed the range, and I am wondering what the offsets are -- I could not find them in the release.

I am sorry, Manny. We increased -- clearly, we increased interest expense guidance specifically for the acquisition -- increased acquisitions for the multifamily. So that went up fairly dramatically.

As Mike said earlier, the timing of the additional sales is going to impact greatly the amount of interest expense we will have in the year. So I'm not sure if that answers your question, but it is within the range obviously and the timing of the sales will have all to do with where we end up in the range.

Okay. Then just a point of clarification on the 2017 expirations, in the release you guys had pointed to 2.1 million square feet net of sales. I think Mitch said 1.8 million square feet earlier. Were we talking about the same numbers or was there some caveat there?

We already have some other sales if you include -- I guess Bergen County, which is not in their numbers, you drop down again. So we got down to 2.1 after some of the sales that are already being completed. That is how we got to 2.1 million square feet and the ones that I've contemplated in the first six months gets you to 1.8 million square feet, 1.7 million square feet.

Thanks, Mike.

Ladies and gentlemen, that does conclude your question-and-answer session. I will turn the call back to your host for closing remarks.

Wish everyone a great day. Have a nice time and we'll talk to you in three months. Bye-bye.

With that, ladies and gentlemen, this does conclude your conference for today. We do thank you for your participation. You may now disconnect.