Veris Residential Inc (VRE) 2017 Q2 法說會逐字稿

Good day, everyone, and welcome to the Mack-Cali Realty Corporation Second Quarter 2017 Earnings Conference Call. Today's call is being recorded. At this time I would like to turn the call over to Michael J. DeMarco, President and Chief Executive Officer. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining the Mack-Cali's Second Quarter 2017 Earnings Call. This is Mike DeMarco, the CEO of Mack-Cali. It's a lovely day in the waterfront, sun's shining. I'm joined today by my partners Marshall Tycher, Chairman of Roseland, our multi-family operation; and Tony Krug, our CFO.

On a legal note, 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 assurances 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. Last night, we filed one slimmed down supplemental for Mack-Cali and Roseland this quarter. We will continue to work to refine this document to contain only the most relevant information and therefore welcome all comments that you may have as to what should be put into the doc. We'll also be referring to key pages in the supplemental during this call.

As we had done before, we're going to break the call into the following sections. I'm going to start. I will discuss the office leasing and results and our view the markets. I'll turn it over to Tony, who'll recap our operating results to the quarter. And then Marshall will provide an overview of our multi-family operations. I will then provide an overview of our capital market activities and comment on our views of our guidance of 2017 as well as provide an update on our strategic plan before we take your questions.

As disclosed last night, our results indicated that we had a very good quarter our 9th in a row, showing real positive results for 2017. Our strategy while we are addressing the market positions is generally exceeding our estimations in several key areas and only slightly lagging on few areas that we believe we can correct in our coming quarters, which is obviously the backfilling of the waterfront lease expirations for 2017. I'd like to make some comments on 3 areas of operations before I discuss leasing. Regarding operations, we had a solid quarter to date in transforming the company. We executed our own objectives for this quarter. Leasing was strong for office from a renewal point of view and we had a number of new tenants actively looking at space how it's apparent that their decisions are taking longer to make for new tenants as corporations are much more cautious in this environment. On the residential side, as Marshall will outline in his prepared remarks, our business continues to outperform. 2, strengthening our balance sheet is a core focus. We maintained our leverage ratio this quarter with an interest coverage ratio at 3.5x and fixed charge covers at 2.8x. Our line, as you may note, is no longer being drawn down the way it was in the preceding quarters. We have refinanced our balance sheet in the past and now we're at a point where we can focus on reducing debt levels.

The resizing of our platform is showing real results, increasing revenues for office and multi-family, creating the right operating margins and with the corresponding decrease in CapEx and leasing cost we have dramatically improved our net cash flow results. Those proceeds are approximately $465 million of which we have under contract for the year will be used to pay down our debt levels by year-end. This is the $250 million bond offering that's due in December and the mortgage on Plaza 5.Take note of the fact that we're producing increasing cash flow after dividend CapEx needs for the last 2 quarters and we're investing it in our assets at a number of new cafes, gyms and lobbies that we expect to help our leasing performance in the third and fourth quarter of this year.

Third and last, our portfolio has been defined now. We have a focus on the waterfront and other key transit-based locations. Our sales actively which we haven't great case done for most of the year should be substantially completed by early 2018. Based on our key rents in multi-family and office reconnectivity, the waterfront is becoming a clear choice for individuals to live and hopefully corporations to base their operations.

Let's turn to leasing. Our Core, Waterfront and Flex portfolio of commercial properties was 89.9% leased at June 30, down slightly from last quarter 90.4. We're currently having a very solid third quarter as July and August have significant lease activities at excellent GAAP in cash levels. We signed over 725,000 square feet of transaction during the quarter. But the year-to-date leasing activity is almost 1.1 million square feet. As we indicated last quarter giving our repositioned portfolio, we set up goal about 500,000 square feet per quarter and we have obviously skidded this quarter and should be in the same place for next quarter.

Across our Core, Waterfront, Flex properties, our rents on second quarter deals rolled up 6.6% on a cash basis, and 17.7% on a GAAP basis. Year-to-date rents have rolled up 4.5% cash and 15.2% GAAP. A strategy we took over 2 years ago was to reverse the roll downs that had played the company since 2007. This is our ninth consecutive quarter of GAAP roll up and we now need to focus on improving our cash numbers which we believe we can do in the upcoming quarters. We continue to hold the line on leasing costs. For this quarter transactions, we committed with $2.11 per square foot of lease term, and our year-to-date average is $2.30 well below where we have been in the recent years. Our Flex portfolio continues the outperformance with several renewals in excess of 50,000 square feet in Westchester County and Central New Jersey.

Additionally, we signed a new 66,000 square foot long-term lease in Stanford. During the quarter, we renewed or re-rented almost half a million square feet of 2017 and 2018 expirations, remaining 2017 roll over in Core, Waterfront, and Flex is 1.1 million square feet, most of which doesn't expire until the fourth quarter. That's within the quarter end, and we signed a long-term renewal with Montefiore Medical Center for 300,000 square feet across several of our portfolios in Westchester County, of that total 115,000 square feet represented 2017 and 2018 rollover.

Looking at the broader markets, economic news continues to trend well in New Jersey, the unemployment rate is down to 4.1%, down 100 basis points this time last year, and it stakes the lowest average since 2001. Leasing activity in both Northern and Central New Jersey has been healthy through the second quarter.

Year-over-year, direct Class A vacancy has dropped from 19.6% to 17.8% in Northern New Jersey and from 15.4% to 13.2% in Central New Jersey, while rents continue to increase across most of the sub markets we're operating in. Back to the Waterfront, touring activity in our portfolio remains healthy, especially over the last several weeks. Average rents are up over 17.4% from last year and at a historical high for Class A properties. Cushman and Wakefield who defines our submarket with the most accuracy have Class A rents in the submarkets at $45.67 this past quarter.

In Westchester County, where our portfolio consists mostly of Flex and properties in White Plains CBD, demand has been particularly strong, year-to-date is at least -- it is an activity the highest recorded in over decade and the asking rents are expected to rise. We look forward to a positive second half in the year. I’ll now turn over to Tony.

Thanks Mike. Funds from operation for the quarter ended June 30, 2017, amounted to $60.5 million or $0.60 per share as compared to $64.1 million or $0.64 per share for the quarter ended June 30, 2016. For the 6 months ended June 30, 2017, FFO equal to $116.3 million or $1.16 per share as compared to $112.3 million or $1.12 per share for the same period last year.

Core FFO for the quarter was $60.5 million or $0.60 a share as compared to $55 million or $0.55 per share for the quarter ended June 30, 2016. For the current quarter compared to last year, the 9.1% growth in Core FFO per share resulted primarily from increased base rents in 2017 and interest expense savings from refinancing of high rate debt. Net income available to common shareholders for the quarter ended June 30th was a loss of $37.3 million or $0.44 per share as compared to net income of $48.4 million or $0.54 per share for the quarter ended in June 30, 2016. For the 6 months ended June 30, 2017, net income available to common shareholders was a loss of $17.5 million dollars or $0.33 per share as compared to income of $110.6 million or a $1.23 per share for the same period last year. Included in net income for the quarter was a loss of $39.0 million and loss of $33.4 million for the 6 months ended June 30 from property transactions.

As shown on Page 28, same store NOI was up 0.5% on a GAAP basis and 4.8% on a cash basis for the quarter with the first 6 months at an increase of 3.1% for GAAP and 5.4% for cash.

Total company G&A for the quarter was $12.5 million with $9.5 million for the office public company and $3 million for our Roseland subsidiary. Reducing G&A expense remains a focus for us, and as we've said before expect to achieve additional savings as we further streamline our portfolio.

Turning to our financial statistics as indicated on Page 8 in the supplemental, our total indebtedness at yearend was $2.95 billion with a weighted average interest rate of 3.87%. And on Page 10 and Page 11 of the supplemental, debt to un-depreciated assets ratio was 47.5% and net debt to EBITDA annualized was 8.3x for the quarter. We have fixed charge coverage ratio of 2.8x for the quarter and interest coverage of 3.5x. Our $600 million unsecured credit facility had $99 million drawn at quarter end, meeting meaningful availability to support our business initiatives. I will now turn the call over to Marshall.

Thanks Tony. Roseland had an excellent second quarter led by strong leasing and core acquisitions. At quarter's end Roseland's stabilized operating portfolio had a lease percentage of 97.9% as compared to 97.5% last quarter. Rents in Jersey City and Overlook Ridge our largest 2 submarkets where we delivered M2, Urby and Chase II over the last year were up 1.5% and 5% year-over-year respectively.

Our existing Jersey City operating portfolio of [Marbella] and Monaco maintained an average lease percentage in excess of 97% during its adjacent lease-up activities. Roseland recently delivered 1,162 apartments, continue their strong leasing performance in the second quarter. On stabilization, we anticipate in 2017 these 3 communities to deliver approximately $16 million as stabilized net cash flow.

Lease-up highlights include Jersey City Urby, our 762-unit 69-floor tower at Harborside, commenced leasing activities on March 1. And 5 months since opening we have leased 600 apartments at an average price per square foot of $56. Based on this extraordinary absorption of nearly a 120 apartments per month, the community is currently 79% leased.

Chase II is a wholly owned 292 apartment project, representing the next phase of development of our master plan over the bridge community north of Boston. The asset is absorbed quickly and is currently 91% leased and Quarry Place a 108-apartment community in Tuckahoe in lower Westchester is currently 58% leased.

In addition to the lease-up portfolio, Roseland has 9 projects, representing 1,928 apartments and 372 hotel keys in construction. Construction portfolio represents $775 million of cost with $55 million in projected NOI generating a blended yield including the hotel of 7%.Average Roseland ownership in this portfolio is 96%. Roseland's initial delivery from this active construction portfolio will be the fourth quarter opening of the 197-unit Signature Place in North Plains. We're also forecasting deliveries in early 2018 building 830 units in 3 communities. River House 11 and Port Imperial, Portside and the East Boston waterfront and the residences at city square Phase I at downtown Worcester. In total, this in-construction portfolio is forecasted to produce a stabilized cash flow of $30 million.

As detailed on Page 34 of the company's supplemental, upon stabilization, we forecast our combined lease-up and construction portfolio will generate approximately $46 million of new stabilized cash flow (inaudible). In the second quarter Roseland closed on 2 acquisitions in its core geographies. In April, we acquired 100% of our joint venture partner's interest in Monaco towers, the 523-unit, 2-tower stabilized community located in one of the premier submarkets of Jersey City. The transaction had a gross asset valuation of $315 million.

The capitalization rate on trailing 12-month NOI was 4.66%. However with the inclusion of our promoted interest, the effective capitalization rate was 4.81%. The acquisition converted Roseland's non-cash flowing 15%, subordinate interest to 100% ownership producing year-one net cash flow after debt service of approximately $8 million. In June we closed an (inaudible) joint venture partner's interest in Quarry Place for $4.8 million thereby converting the asset to 100% ownership. Subsequent to the acquisition at quarter end we secured a $41 million 10-year interest only financing on this asset.

Looking ahead in the third and fourth quarter, we forecast additional construction starts in Port Imperial and at Overlook Ridge. In the first quarter we closed on $300 million equity commitment with Rockpoint Group which at quarter end had a $150 million of capital outstanding. The Rock Point transaction validated Roseland NAV of approximately $1.25 billion at closing. As detailed in the supplemental, we calculated current Roseland NAV of approximately $1.57 billion. After counting for Rock Point's participation, Mack-Cali's share of Roseland NAV will be approximately $1.41 billion or $14.10 per outstanding Mack-Cali share. Importantly, this value is primarily an operating or in-construction assets geographically concentrated along the Hudson waterfront and key Boston submarkets.

I'll now turn the call over to Mike for closing remarks.

Thanks, Marshall. Before we take questions, as I stated earlier, we finished the quarter in our opinion on a strong note in all objectives obviously other than the lease-up of the upcoming explorations in the Waterfront for 2017. It's literally 2 years and 2 months since we took over as a team and I think we have accomplished a great deal in those 26 months. The portfolio today is much stronger, it's much more balanced, and it's the right composition, as Marshall just outlined, (inaudible) our multi-family business has come into its own.

Regarding our earnings, we readjusted our range and FFO guidance for 2017 down to $2.18 and $2.28. This was primarily caused by the delay in leasing new space to replace explorations coming due at the end of 2017. We've chased several deals with tenants that go for incentives. We put proposals out and we're close to securing those tenants, but they have not yet fully committed to us. Therefore we felt that it was cautious to basically put out to us what we think will be the performance. I will tell you this, it does not affect the cash number for this 2017. The third quarter earnings are pretty much we think in solid where we think it should be. And 2018, the rest of fourth quarter should be as expected as planned; we expect no other hiccups.

We believe we're in a place now to handle our debt levels to within a range. We also believe we've done a great job of reducing our exposure to suburban office as in the histogram in the presentation we gave you that goes over obviously the combination of the Flex business which was proven to be relativity resilient. Marshall's business which is obviously multi-family which is growing and underlying urban and waterfront portfolios, the suburban business that plagued us from the beginning is probably less than 15% at the end of 2018. And with that I'd like to turn over for questions. Operator, first question?

(Operator Instructions) And we'll take our first question from John Guinee, Stifel.

Great, great. Okay. I know you guys are doing a lot of things there and in general it sounds like things are good. FFO dropping $0.09 at the midpoint gets you down to a run rate of $0.53 or $0.54 per quarter in 3Q and 4Q. And I pay a lot of attention to this stock, but I can't figure out what the heck's going on, so I know nobody else on the call can. Can you just give us numbers that we can live with on the office dispositions? It looks to me like there's about a $1 billion scheduled between 1/1/17 and early '18 if I'm looking at page and reading Page 6 correctly, 63 million has closed as I think is what it says here, so that implies that you've got $950 million Flex or secondary office to close. First, is that correct? And then second, can you give some conservative, but definitive numbers in terms of disposition expectations over the next 3 or 4 quarters?

Surely, John. So what we had tend to do is to lay out a plan of dispositions at beginning of the year, and we chose a target of $700 million to $800 million, which is the guidance we provided back in October, which we've updated you to the quarters. In order to hit that number, we actually outlay a little larger portfolio, so we go down and say what do we actually need if something falls out of bed, or we want a asset manager who'll pull back a deal. We don't have a use of proceeds of $700 million, $800 million other than debt repayment or some potential deal that we haven't found yet or identified to purchase. So currently, we, as you pointed out, sold about $60 million in the first part of the year. This month we have several dispositions that are closing. We should have by the end of the third quarter probably $400 million or so in closed -- so probably $500 million in total when you add what we've already done. And in the last part of the year, we have a number of dispositions that have been set up and we've agreed to terms not fully documented, probably gets you to $200 million maybe another $300 million, which will give us the total that we chose to do which is about $800 million. We list as a preview to what people think over the quarters, what we will do in early '18. Early '18 is the remainder of everything else we thought we would need to get rid of in order to get down to the portfolio that we want to operate. That total is probably another $200 million, maybe it's $300 million. After that we're done. We're literally done hopefully in the first quarter of '18. So what you have now is this month a number of dispositions coming through, the fourth quarter a couple of deals mostly in bulk not individual assets, which we've agreed to terms with people that we've done business with before and these deals have already been marketed, due diligence substantially done. And then the first quarter had deals that we think we could do but haven't yet put to market.

So if you were modeling, I always hate that word, someone might say dispositions of secondary noncore office, $300 million to $400 million in 3Q, $200 million to $300 million in 4Q and $200 million to $300 million in 1Q 2018.

That's good numbers, John.

Okay. And then the uses of that capital are $465 million of debt repayment and the rest redeployed into apartment development, is that the right way to look at this?

The first $465 million is clearly identified for 2 outstanding issues that we've told the market we would like to eliminate in our balance sheet, one is the expiration of the $250 million of unsecured bonds that come due in December of '17, which if we even failed on the sales, which we don't think we will, we have the line capacity to take out. The second is a piece of mortgage debt held by New York Life and Northwestern Mutual, which comes due in '19 which is on Plaza 5 --

'18.

‘18, excuse me. 2018, which is on Plaza 5, so we look to repay that earlier, so the latter part of the year, it's like November I think, 2018. Those are the 2 pieces of debt that total and combine $465 million that we've identified. After that we have to look to either pay down other pieces of debt if we chose to, to get our leverage correctly or we may purchase other assets. As we've always stated, we do have built-in gains on a number of assets, and we've always been very careful about getting rid of assets that we don't want to own, but not triggering distributions that we don't want to live with which will rob us of capital. So we could buy something, we could redeploy it into multi-family development. But I would point out, we still have a $150 million of what could be termed as dry powder from Rockpoint that we haven't drawn down on yet. That would satisfy the upcoming uses of funds and Marshall's platform for the next quarter or 2 maybe 3.

Okay. And then I guess the good news is, there is 1031 gain in these assets. On your preliminary numbers, does the 1031 gains essentially require you or make it highly favorable to buy a certain amount of assets and were you able to shelter that in the Monaco deal?

No, what we did tell, John, is you're going on the right path just made a slight detour. When we bought the RXR portfolio in the first quarter, it allowed us to have a parking place for the next series of buildings that we'll sell, have the proceeds be available as to pay-down debt, but the gain not be attributable to us because we've put it into the Short Hills and Giralda farms assets. And then the next set is something we have to do which -- we do tax conversations biweekly around here and we're pretty adept. I would point out is just not to self-congratulate us. But as an institution, we've moved pretty quickly and pretty adroitly through what most people consider a minefield of tax situations to have sold as much as we have, to redeploy it as much as we have and we have no intention of stopping. We will accomplish. Actually, we set a lofty goal when we headed for sales, actually it was much more difficult. This is easier for us because they're mostly portfolios, still the same gain problems, but with fewer transactions and better quality assets were signed.

We'll go next to Manny Korchman, Citi.

If we switch back to the I guess the delays in the leasing, is it a matter of the tenants not being ready, is it a matter of them looking at other options, is it a matter of this never happening, sort of give us a flavor for how, what's happening with the leasing discussions?

I would tell you if you looked at this 2 years ago and each quarter thereafter, 3 years ago the other conversation would've been about back office financial, right. You would've said you know we would've gone to renewal 2 years ago for Bank of America, which opened up some technology but it was essentially their back office operations. Since that time the tenants have changed, we get production companies. We get ad agencies of which we landed Omnicom last year. We've gotten more technology base in -- companies. So the companies we were chasing had gone through incentives and had listed our building as the building to receive incentives, but haven't made the decision yet, 4, I can't identify them, but fall into different categories, they fall into consumer products, food, technology, fashion. So those are the 3 or 4 big ones that we looked at. They're still out there, they haven't found a home yet. We think they will enjoy being here as a tenant, but we're not waiting for them. So we constantly look to upgrade the buildings. And as you know and you visited with me recently, we've done some things to downstairs. We're doing more things. We're using this time in August. We're working every day to upgrade our buildings across the board. The ferry should be in by mid-September, which is a game changer for us because you'll have direct access right off the door of Harborside to Wall Street -- sorry, to the World Financial Center, and 39 Street on a continuous run. And we have a new restaurant opening downstairs with a leading chef, which we think will add to the amenity package and we have other things we've planned and discussed with the cities about activating the Waterfront. So the tours go well, people like what they see, they've been enthusiastic about us. We've been told by the brokerage community repeatedly that we're the buildings of choice in the market, because we've added so much to the amenity package. We just haven't landed it. So I would confidently say it's when not if.

And so if we bring that back to guidance, what have you assumed in guidance now, are you completely cutting out any prospect of leasing in a year, are you assuming that they come in now, call in October or November instead of in August, I don't know what your initial plan was, but sort of specifically what in or out of guidance, and so now I guess the question is, if you landed at least call it next week, is there a upside to guidance or if it doesn't happen until December 30 is there a downside?

It depends on how the tenant comes into us. So what we were trying to do is, we have spaces already occupied, so it's hard to put a tenant into that space immediately when someone vacates because of construction and repositioning. We had space and the ones that we were showing that was getting well received is the vacant space in Harborside plazas 2 and 3, which we've gotten pretty good feedback on. If we land, we have a proposal out to a tenant, happens to be 75,000 square feet. That tenant came to us, it could impact this year slightly back end, most likely it impacts '18 and for our numbers that we'll be running we're assuming it's toward the middle to the last part of ‘18 because of the lag factor. We lost and we've been saying this somewhat loud voice and then probably little louder each quarter and obviously with this announcement in the loudest voice that it was a little slow on new leasing on the Waterfront since President Trump took over. People have been a little cautious. I think my colleagues have been having some of the same experience as far as just the new deals. We believe it's not a price issue. You look at our renewals, we're getting the price. I felt confident when I looked at the data of what we did this past quarter and got 17% on GAAP and 6.6% on cash. We're not exactly where we want to be on cash, but the GAAP numbers was in a range. And we felt like we could keep those numbers and people have accepted those rates. The asking rent on the Waterfront today for our space is about what Cushman and Wakefield's averages as we set the market. The expiring rent for this space that we're losing some of it's in the low 30s, some of it's in the 40s, so we have a roll-up both cash and GAAP if we are able to replace those tenants.

So maybe I'm misunderstanding this, but if you're talking about leases for space that's already occupied, why would delays impact 2017 numbers if those tenants couldn't have been in in the first place, so why is guidance going down on leasing?

No, you missed the point, Manny. I said the space I was trying to re-lease, the space that I was trying to lease was vacant space, that vacant space was available to me. Now, I had the vacant space and I have spaces expiring end of the year, I was making the distinction that I'm not replacing Deutsche Bank immediately, because I have to redo the space, remodel it. I'm not replacing ICAP which is also a third quarter expiration, because I have to remodel that space. What I was trying to lease or the tenants I was seeking was for vacant space in Plazas 2 and 3 that was available immediately for occupancy subject to me constructing tenant improvements.

And a quick final question from me Mike. The assets that are under contract for sale, is there any status update on the process, there is now I think they have been under contract for a while or under – or their lease haven't closed yet, sort of where are we in terms of closing dates?

No, I think I got a fairly large group closing by the end of the month. And I got a few others that'll close hopefully post Labor Day, in the process because there were more portfolios that were more lumpy. Last year we did a lot of smaller deals one-off. Now, we're doing more portfolios of $100 million, $80 million, $200 million which therefore take a little longer as far as the -- they kind of hit a 1-shot, that’s the way it is.

We'll go next to Jamie Feldman, Bank of America.

So I know you've focused mostly on the Waterfront as a reason for the delay, is there anything outside the Waterfront that's going slower than you had expected on the office leasing front?

I have a couple of tenants that I will have -- I have reached terms with in the pharmaceutical and in the advertising agencies to go into Parsippany and Morris County locations I just haven't finalized those deals. I always make the joke, and I hate to say this publicly, but it's true but the entire brokerage community has got the beach this summer. Everyone I talk to says, oh, I'm on my boat today, I was playing golf in DL or Planet Hollywood, so when they come back from their lovely vacation they assume September will pick up, but we have proposals and finalizing terms on a decent amount of square footage for the suburbs.

Okay.

Oh, I apologize, and one thing that I'd add is, I mentioned it briefly, 2 years ago, we started a program of looking at what assets we wanted to upgrade, this is the year where it gets done, because it takes you a while to draw, to do the CDs, to commission the work and actually get it done, but we're turning over some brand new space or lobbies and cafes in Parsippany and Short Hills, in Woodbridge and Morris County. So we feel good about where our assets are repositioned coming the third and fourth quarter.

Okay. And you had mentioned a good quarter in Westchester, I know the reviews in New Jersey have been very positive over Wegmans, are you just seeing any kind of shift here or any kind of, are you feeling any more positive on what these amenities really are going to bring to the space and what tenants are saying?

I go by the brokers that we use to help handle our space, so whether it's JLL or CW or CBRE or Newmark of which we all have some individual contract to them, they've been pretty positive about what we're doing, because we're showing leadership. We showed leadership last year in setting rates and in trying to change the way the state leases. You know, we're credited with -- we do more annual bumps as opposed to bumps that was staggered into a kind of a lease and we've obviously had an experience of rolling up rents as opposed to rolling down rents. Now, with people looking and saying, you got -- people want to pay for the right product, you can't build in this state less than $45 a square foot for a new product. So we’re in that market the top end stuff is Short Hills around $45, and in the rest of it the top end is in the high 30s or mid-30s. That tenant wants to get close to almost a new building feel, which means they want the right type of gym, they want conference room space, they want cafes that they want to be in, and we're making those changes. So we feel pretty good that we'll be at the top end of the range of activity from people saying it's the right spot to be.

Okay. And then can you talk about the buyer pool for the assets in expectation of your cap rate?

Guidance is what it is; we should be on track, we listed as in NAV page. The pool is changing a little bit, we're getting bigger deals, so we're doing 80s and 100s and 200s so the buyers are obviously a little bit more sophisticated and some people we sold $5 million, and $10 million and $20 million last year, you get private equity funds either financing an operator or being the purchaser themselves, you get some opportunity funds and then you get some local individuals, which have a great deal of net worth who are buying assets from us and putting it into their family business.

Okay. And then the last question from me. Can you just walk us through the liquidity needs, I guess mostly for Roseland over the next year or so just as we think about funding the development pipeline?

Yes, so we've actually been in a good spot with this. So for the first 2 years of where we took over maybe it was more like 20 months, we funded off our balance sheet of Mack-Cali. And then when we did the Rockpoint trade, we bought Monaco with that money which gave us a bigger base in Jersey City. Now, we have that set up and the cash flow is coming in off that entity. Since they don't have a lot of CapEx needs, Jamie, because it's relatively new buildings, the drop down is 100%. That money is going to fund the short term development needs for the last several months. So we haven't drawn down or made a contribution into that business since April, so it's been 4 months. We also think we have the ability to sell a couple of the assets that we view at the bottom of the pile of that portfolio and redeploy the capital into something else. The next set of developments would be a big project in Jersey City per se, but this is a good segue. One of the things you should look at when you look at Mack-Cali as a company, and I would really focus on this is how much of the asset base and income is going to be from Hudson County by the end of 2018. As you know we bought Monaco, and Urby comes online, so that's a great amount of revenue coming through from multi-family. But then you have in the first quarter of 2018 what we call Building 11 which is a 311-unit building in Weehawken, that's going to be constructed that we own a 100% of and then we own the Marriott Hotel and Resident Inn complex that's being built in Weehawken. We own 90% of it. Those 2 assets total probably $350 million of let's say NAV which will start cash flow in '18. You add those funds, you add what Urby is going to kick out, you add what we put with Monaco and we shifted from the western part of the state, which was producing most of our money clearly toward really the Waterfront which is really producing most of the money. So something to take note of when you're looking forward at us. The next project we will do is likely in Jersey City for a start. We haven't figured out which one yet, but the market seems to be strong enough obviously based on our experience with Urby and M2 to support another development.

And we'll go to Rob Simone, Evercore ISI.

All my questions on the leasing have been answered already, but just wanted to go back to the asset sales for a second, so Mike you mentioned that early '18 there's something like $200 million to $300 million of additional sales you guys could execute to get the portfolio where you want to be, but just trying to reconcile that with the, I believe, it's Page 23 of the supplement future dispositions of a $185 million that's 14 assets. I guess, I'm just trying to get a sense of how many additional assets are kind of comprised in that GAAP and what's the composition and the timing on the balance?

Well, that's a question I probably want to do offline in a little bit more detail, but what we're -- we're getting rid of ourselves which is public information, this is out there is the Bergen County assets, Totowa, Morristown, Wall, those are the Flex businesses. And then we have some other individual asset sales for some assets in Parsippany, some in Princeton, but also have been out on the market with brokers. The next segue, which we haven't put out yet would logically be the Flex business in Westchester County, which is more than a couple hundred million, but it's just a placeholder, and obviously the financial center in the White Plains. So those are the buckets; those are the ones we identified from our last October strategic plan as assets we'd want to trim down from. And that would leave us with portfolios in Parsippany that's been trimmed down, Giralda Farms, Short Hills, Metropark and then Monmouth County and then obviously the Waterfront.

Okay, got it. Yes, I'll follow-up via offline. And just one more follow-up. So I notice you guys raised the dividend this quarter and as your multi-family stabilizes and you kind of complete the asset disposition program, the cash flow profile of the company is going to change a little bit. So I guess I'm just wondering what's kind of like the metric that you guys target in thinking about your dividend, is that an AFFO payout ratio, and if so kind of what's the threshold there for you?

When we discussed it with the board, we felt the company had obviously dramatically reduced its dividend under the last leadership team to a level where it was a little low versus the peer group. We do an analysis of taxable shield, our taxable shield was burning off, we had a lot of older assets. To your point as we add in more multi-family, we get a bigger shield from coming from it. We were bumping up against what we needed to distribute. We obviously -- given the fact that we were in a much greater cash flow position, as you pointed out the multi-family is contributing money, it doesn't have a lot of CapEx needs. We've dramatically reduced our CapEx needs, so now you're left with more cash. So we decided to raise the dividend to this level. (inaudible) probably have the 18 to 24 months again. And that was very interesting, Rob, I didn't mention this in the call, but I should know, but if you think back 26 months when we took over, we have $9 million less square feet and of the portfolio that we owned we've changed over probably three half million square feet of it. I have 100 buildings less than we owned the day I took over. I have a 150 people less under (inaudible) staffs, which I feel bad about, but it needed to be trimmed down. And I'm likely to make $0.60 more than people expected the year I took over. I think the model actually works, the question is how you fine-tune it.

And we'll go to Vincent Chao, Deutsche Bank.

Hey, good morning, everyone. Just I know, we talked about the leasing a lot, but earlier you'd mentioned a sort of caution on the part of the tenants, but the commentary about the environment, the economics et cetera seem pretty positive, and then you also alluded to softness since the election, but just curious is this really just the political environment that's causing this caution or is there anything else (inaudible) that's causing people to be a little bit more tempered in their leasing?

It's interesting when you talk to all the owners and I talk to tenants, brokers all the time, the biggest thing is the type of operation they want to run, Vince. As you know people are worried about how much, what densification they want to do, how they want to bench out, is it 4 per 1,000, is it 8 per 1,000 is it 6 common area and a lot of them are looking and saying this is probably a more important decision for them than it has been in the past, because they need to figure out where they're going to recruit, retract and retain talent. So we run demographic studies all the time and you look at us versus Manhattan and us versus Brooklyn, so it's Hudson Kings County and what's called Newer County and you look at the demographics status about how the age of the population is, the education level, socioeconomic so on and so forth and you realize that it's getting tighter and tighter for that pool of talent around those 3 counties, right. If you go and you spread it out to, the ring goes out farther, the numbers drop off dramatically. So we think people are looking for the right spot to occupy space. I think Brooklyn falls into the same category where it's been also a market, we're obviously a little bit larger and we think a little bit closer to Manhattan from a transportation matter. But really I think that's the #1 thing. I don't think it's about the price because our price is still dramatically less than Manhattan, I don't think it's about lifestyle because I think we're winning those about is this the place I want to put my 150,000 square foot operation for either front office or headquarters.

Right, okay. That makes sense, and then maybe just tied into that, you've been repositioning the assets in the suburbs to be more friendly, more amenities that kind of thing that can maybe help sway some of these decisions, it sounds like you're getting into the heart of that now I guess. Is the CapEx spend, should we expect that to be elevated here in 2018, end of '17 and then 2018, has that happened or is that mostly already done in terms of…

It's already done. We've spent a good deal of our money over the last several quarters and we would finish up this quarter in a little bit into the end of the fourth quarter. If you go out to Parsippany, we put a -- one of our buildings you put a new cafe in, we did the lobby, the building next to which is the complex we put a conference center in and a gym, about to redo the cafe. They all look great and people get a buzz off of it. We went out and we did all the food operations, we took everyone in-house, got rid of the third party purveyors and now we work with chefs that talk about wellness and the right type of menus. It's a rigorous process but it's important to people as is physical fitness, different things we intend to do. We intend to add maybe a hotel or 2 to some of our campuses in order to provide better amenities so people want to visit and also for meeting room space and also for dining options.

Okay. Yes, but it sounds like a bulk of expense behind you, so.

Now we'll conclude our question-and-answer session. At this time, I'll turn the call back over to Mr. DeMarco for any additional or closing remarks.

We appreciate everyone joining us (inaudible) at this time. If this is too early or not the right time please let us know and we'll talk to you soon and thank you so much. Bye-bye.

Again, that will conclude today's call. Thank you for your participation.