Good day, everyone, and welcome to the Mack-Cali Realty Corporation Third Quarter 2016 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 Operating Officer. Please go ahead, sir.

Thank you. Good morning, everyone, and thank you for joining the Mack-Cali 2016 third quarter earnings call. This is Mike DeMarco, the President of Mack-Cali. I’m joined today by my partners Mitchell Rudin, CEO; Marshall Tycher, Chairman of Roseland; and Tony Krug, CFO. On a legal note, I must remind everyone that certain information discussed on this call, may constitute forward-looking statements, within the meaning of the Federal Securities law. Although we believe the estimates reflected in these statements are based on reasonable assumptions, we cannot give 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. As always, we look forward today to an open and spirited dialog about our results and plans going forward. We again filed expanded disclosure about operations in two supplementals, one for Mack-Cali office portfolio and one for Roseland. We will be referring to key pages on those supplementals during the call and as always, we’ll continue to provide the best disclosure in our operations, strategy and results. As we’ve done before, we're going to break our call down into following sections. Tony will recap the operating results for the quarter. Mitch will discuss leasing results and our view of the markets; and Marshall will provide an overview of multifamily operations. I will then provide an overview of our capital market activities and comment on our views of guidance for remainder of 2016 and guidance on 2017, and as well 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 showing continued positive results for the first nine months of this year; our strategy over the last 18…

Thanks, Mike. With respect to earnings, core FFO for the quarter was $56.5 million or $0.56 per share as compared to $47.6 million or $0.48 per share for the quarter ended September 30, 2015. For the current quarter compared to last year, the 16.7% growth in core FFO per share resulted primarily from increased base rents over the same quarter last year. We reported a net loss for the quarter of $8.5 million or $0.10 per share as compared to a net loss of $126.9 million or $1.42 per share for the quarter ended September 30, 2015. Included in net income for the quarter ended September 30, 2016 was $17 million of net losses from property sales and a charge of $19.3 million from the early repurchase of some of our 7.75% August '19 bonds. As shown on Page 26, same-store NOI was up 5.5% on a GAAP basis and 2.9% on a cash basis for the quarter. And with year-to-date same-store coming in at 8.6% GAAP and 4.3% cash, we believe we’re on target to get to our guidance range for the full year of 2016. Total company G&A for the quarter was $14 million or $11.7 million for the office public company and $2.3 million for our RRT subsidiary. G&A included approximately $1.4 million true-up for additional bonus hurdles expected to be earned based on company performance to-date. Reducing G&A expense remains a focus for us and we expect to achieve additional savings as we streamline our portfolio. Turning to financial statistics, as indicated on Page 29, our total indebtedness at quarter end was $2.5 billion with a weighted average interest rate of 4.48%, down from 4.79% at year end and we expect to further reduce that as we move forward through '16 and '17. Net debt to EBITDA annualized for the quarter was 7.7 times. We had a fixed charge coverage ratio of 2.6 times for the quarter, and interest coverage ratio of 3.3 times. Our $600 million unsecured credit facility had $95 million drawn at quarter end and $135 million drawn as of today leaving meaningful availability to support our business initiatives. As Mike mentioned, we accessed the secured debt market this quarter. We took a 10-year $250 million 3.19% interest-only mortgage on one of our office properties. We also refinanced one of our multifamily assets taking a seven-year $59 million interest-only loan with an effective interest rate of 3.56%. And then also contributing to our reduced weighted average interest rate was a repurchase of $115 million of our 7.75 bonds due in August of '19. I will now turn the call over to Mitch.

Thanks, Tony. Our portfolio of commercial properties was 87.7% leased at September 30, up 100 basis points from last quarter and up 190 basis points from the same period last year. Third quarter gains were the result of both positive absorption from leasing activity and the continued disposition of non-core assets. During the quarter, we signed 62 deals for 664,000 square feet and our rent roll up for the quarter was 9.1% on a GAAP basis and 2.3% on a cash basis. Year-to-date, we signed 2.5 million square feet of transactions. We are very pleased with the pace and level of demand for our space. Outside of Jersey City, velocity was heaviest in our Parsippany, Monmouth County and Princeton, New Jersey submarkets. We were also very active at our Flex properties in Southern New Jersey where we’re now over 92% leased. Significant transactions highlighted in our press release include 144,000 square feet of new leasing on the Jersey City Waterfront. Particularly noteworthy was the lease with TAMI Tenant Omnicom, the world’s second largest advertising media company which chose Jersey City after a burrow-wide New York City search. Our Waterfront portfolio is now 94.6% leased. Additionally, we spotlight three leases totaling 120,000 square feet in Monmouth County and Princeton, two of our core transit-based submarkets, as well as a renewal expansion in Parsippany which contributed to the reduction in our '17 expirations. We continue to enjoy the fruits of the leasing initiatives we implemented last year. Transaction metrics such as lease term, average rent, tenant retention and space leased are all up year-to-date over the same period last year. Our remaining '16 expirations are only 361,000 square feet and we still anticipate finishing in 2016 in a range of 89% to 91% leased. The progress on our '17 rollover is updated…

Thanks, Mitch. At quarter end, Roseland’s platform included 5,214 operating apartments and 3,057 in-construction apartments and hotel keys. We are pleased to report that Roseland portfolio had a quarter end lease percentage of 97.8% as compared to 97.1% last quarter. Rents in our largest two submarkets, Jersey City and the Overlook Ridge, were up 3.1% and 6.7% year-over-year, respectively. Our operating portfolio is inclusive of the recently opened M-II at Marbella in Jersey City. The 311 unit, 39-storey tower was 79% leased at quarter end with objective stabilization by year-end 2016. Since opening, market rents at that property have increased from $44 a square foot to $49 a square foot. There further detail on Page 16 of the supplemental. Roseland has 11 projects actively under development including pending deliveries in the fourth quarter of 108 apartments in Tuckahoe, New York and 292 apartments in Chase II at Overlook Ridge in addition to delivery of the 763 unit URL tower in Jersey City in the first quarter of 2017. Roseland had three construction starts in the third quarter, 51 Washington Street, a 310 unit apartment community on the Waterfront in Conshohocken, Pennsylvania; the Lofts at 40 Park, a 59 unit apartment community on the Green in Morristown, New Jersey; and 145 Front Street at City Square, a 128 unit apartment community and the second phase of our project in revitalized downtown Worcester, Mass. For the remainder of 2016, and as highlighted on Page 33 of the supplemental, we forecast two additional construction starts totaling 406 apartments. These starts exemplify two of our successful repurposing efforts, 209 apartments in Bala Cynwyd, Pennsylvania and 200 apartments in Short Hills, New Jersey. One of the company’s primary goals has been to increase ownership and reduce subordinate joint venture interest. To that end, Page 8…

Thanks, Marshall. Moving on to guidance, we increased our expected full year 2016 core FFO to [indiscernible] approximately $2.14 to $2.16. We’re again raising the bottom and top of our range and moving the target guidance this time to $2.15 and expect fourth quarter FFO to be approximately $0.55 to $0.57 per share. We feel very comfortable with the new target of $2.15 and believe that it’s clearly achievable if we have continued success. We’re also providing initial FFO guidance for 2017 in the range of $2.25 to $2.40 per share. Beginning on Page 21 of the supplemental, we provide commentary on some updates to our 2017 assumptions, including we expect leasing percentage ranges to be between 90% and 92%. Our lease activity is strong. The Waterfront, as Mitch mentioned, is 94.6% currently, Metro Park’s 94.5%. We also achieved again for the second quarter over 90% on a combined Waterfront core and Flex portfolio to third quarter of 2016. Two, we continue to drive rents on our reshaped portfolio and expect same-store NOI on a post-sale portfolio to be in the 6% to 8% range. We may see that if we are lucky in leasing and 2% to 5% on cash. Three, non-core asset sales are expected to be in the range of 500 million to 600 million, as I said earlier, as we finish the end of our transformational stage in 2017. To-date in 2016, we’ve closed on 465 million, we have 265 million expected in the fourth quarter. We essentially close a deal every couple of weeks and all through the early of 2017 as we carefully manage the last segment of our original group of assets. Four, acquisitions. As we previously mentioned, we closed on 111 River in Hoboken and 101 Wood Metro Park in 2016 with…

[Operator Instructions]. We’ll go first to Jamie Feldman from Bank of America. Your line is open.

Great. Thank you and good morning.

Good morning, Jamie.

Good morning. Maybe just talk about your comments on some of the non-Waterfront markets, the demand pipeline you’re seeing and just how deep that demand is and why you think you’ve had so much success there lately?

Well, two things then I’ll turn it over to Mitch for the back part of it. The first part is we’re reshaping the portfolio, so we have a different collection of assets today than we had last year. So we’ve been trimming the bottom, Jamie, so it allows us to have more focus on assets that you could actually lease to tenants that want to be in. And as we’ve noted before, and happen to know where you live, the Short Hills market is a perfect example, right. You can rent in Short Hills but you have other problems in Essex County for a variety of reasons, like for example our properties on Eisenhower and Roseland never lease but Short Hills does. So we want to own more in the areas that people want to be and then less in areas that people have decided for any number of reasons not to be in. So by adding assets to Metro Park, we increased that quality of portfolio. By trimming the bottom, we’ve been able to eliminate some of the weaker markets. The reshaped portfolio has responded better to tenant demand. The tenant demand today is coming from a higher quality tenant who wants a more amenitized base, and I’ll turn it over to Mitch for further comment.

Hi, Jamie. If you’ll look in the supplemental, you’ll note that page where you’ll see that in our core markets we outperform – our portfolio outperforms by almost 300 basis points. And what we’ve been able to see in those markets is increased velocity, as you’ve seen as we’ve talked about the different market reports and I didn’t really identify any particular brokerage firms, because in this instance there was an absolute consensus about the uptick in velocity and where they see the year going. And then it’s a continuation of this trend, which has become accepted wisdom about what’s happening with the older millennials and their movement to selected suburbs and we’ve been well positioned to take advantage of it.

Okay. I guess moving on, so can you talk about your operating margin outlook, like by year-end '17? Where do you think your portfolio operating margins might be versus where they are today?

If you looked when we took over, I would have said we were in the low 50s, like maybe 51%, 52%. Today, if you ran the numbers and we did them last night, we’re 59%, 58% in that range depending on how you look at things. We’ve been able to do that in really two functions, Jamie. One, we’re growing revenue, right. Two, we’ve held really, really tight expenses. As a matter of fact, they continue to go down quarter-over-quarter. Part of that is a complete maniacal [ph] focus on staffing levels. We’ve had a hiring freeze since the day we took over and if you notice in the disclosure we updated it we’re down 71, 70 some-odd spot [ph] on a company our size, which is relatively significant. We think that it will be a 100 by the end we get through which will reshape the portfolio, because as we have less assets but more value assets, we need less people to run them. So that burden gets basically affected in the margin. So we are focused on operating expenses from an electricity point of view, we’re focused on staffing levels, services. In the same line, we’re actually investing a significant amount of money on the amenities. So we’ll have six or seven projects this year where we call it swinging hammers, so we’re out of the design phase and actually into the construction phase that enables us to deliver better first-class product. But I assume we get to a six handle on margins sometime by the end of '17, maybe even better than that. In the Waterfront, for example, just one last comment, if you assumed we were a mid-30s market when we took over, we’re a mid-40s market. So if we had $15 expenses, Jamie, on 35, we still have the same $15 on 45 and the margin obviously moved dramatically. So we can expect that in a number of markets is what we’re trying to achieve.

Okay, great. Thank you.

We’ll take Emmanuel Korchman from Citi next, you’re line is open.

Good morning, everyone.

Good morning, Manny.

Guys, your acquisition guidance in '17 probably higher than I would have expected. What are you looking for out there? And as you sort of reshape the portfolio, are you more focused on disposing, on buying, are those land sites? What is that call 400 million going to be composed of?

So we do it in a benchmark, so we’ve probably bought a little less than we thought we would have in – let’s go back from the beginning. If you looked at where we thought we were in '15 and where we are in '16, I will tell you we’ve noted a number of differences. One, we sold more than before, right, and Marshall has been better at restructuring the joint ventures than before. So we used to have the knock that we had too many subordinate interest and that’s got down dramatically and will get down even further in coming months. Also, conjunctively we’ve done a very good job of exiting certain markets. We’ve moved quicker than people thought we could on selling. We’re going to achieve the goal we laid out, maybe we’ll exceed it. We have a couple other portfolios we’ve teed up. As we do that, we get a semblance on what works and doesn’t work. So we’ve to look at where tenant demand is and where people are going. And I would tell you the Waterfront is highly active, no better way to describe it, and rents have pushed boundaries. So if we can an acquisition on the Waterfront and there are some deals that may come up as people view themselves as the right time to sell, we kind of set up some to look at that. If there’s also some things in suburbs that’s on what we call a covert list, so we literally have a list. It’s not a very long list, it maybe has 10 buildings on it that we would like to buy in the upcoming several quarters. And it doesn’t have 40 names, it doesn’t have 60 locations, it has really 10. And that covert list if it comes up, we’ll transact on if we can get it for the right price. If you look back we passed on 70 and 90 Hudson on the Waterfront because we felt it was not the right price at the time. In retrospect, given where the market moved, maybe we made a mistake but I think we exercised good judgment at the time given where we were in the transformation. So if you look, we’ll probably be bigger on sales, less on acquisitions, more limited on development as we kind of moderate what we think we can do in the timeframe we have and drive ourselves toward at the end of '17 having a portfolio that doesn’t have as many moving parts, a lot less complex and more easily understood.

That’s helpful. If we think about it from that context, is there an opportunity for you to do JV deals where you would control more of the market? You’d be in charge of leasing. You’d collect a fee. It would look like a Mack-Cali building, but you wouldn’t have to put up as much equity or debt, or is this really maintaining the size of the company or growing the size of the company and you’d want to cut the entire equity check yourself?

Size doesn’t matter to us. We don’t believe in – our predecessor was big on always using the biggest and how many square feet. I think we’re making more money, if you think about it. We’re up about $59 and people expected from the time we took over with less assets, right. So if we could do that trade every day, Manny, we will do it twice on Sunday. We would run 15 buildings and have $4 a share of FFO. So we look more fundamentally the way we approach the new building we want to build at Harborside. Of all the things we know and don’t know, one of the things is how to build a $500 million building. So we’ve partnered up with the best guy in the business, really a master builder, who’s going to put in an equity check and then it’s us and him and we have the ability to do financing and take in a third party. So we’ll look at that as kind of a place where we know how much FFO we could create and we have to balance by how much risk. I look at joint ventures as adding complexity to our numbers as opposed to removing them. Marshall and I always talk about it. You want to own buildings that you can control. Deals that we own, you can sell immediately. Deals that you’re in a JV, you have to have a conversation. The difference between being married, I guess, and being single, let’s put it that way.

Great. And last one for me on Harborside. Your recent ad in the Wall Street Journal, it didn’t have a picture of you. I would have thought that it would have been your face right in the middle, but --

As Alfred Hitchcock, we have our predecessors somewhere in the clouds. You got to look carefully.

So the headline was 100% confident. And yet, you talk a lot about getting a prelease, getting – locking up some risk before continuing with this building. Are you close enough to a deal that you’re 100% confident or are you confident in the Waterfront, and you think it’s going to come?

It’s kind of a combination of both and obviously, it’s advertising. So the first ad for everyone’s benefit was our way of thanking the tenants and the recent people that we work with in the industry for having us achieve 95%, which is given where we started was a great accomplishment in the 18 months we’ve been together as a team. The second ad was to say, listen, when you’re this full and you look at the tenants that roll out in New York City, they rollout this past year, there’s six of them that are over a quarter million square feet kind of circling for space. We don’t have the space available and we’re the largest landowner on the Waterfront. We own a quarter of the market and we own obviously much more of that if you just look at downtown Jersey City where we had probably 65% market share. So our view was if you look at what’s winning in New York City, the genius of Steve Ross at the Hudson Yards, the genius of Larry Silverstein at World Financial Center, because new is better than old. People will pay for new. They want the amenities, they want the quality, they want the – to be able to go benching, the destination elevators, the enlarged bathrooms, the better HVAC, I could go on and on. We happen to have a site now. We didn’t buy the land not the same way as our colleagues, the SL Green, who are going long something. We have a parking lot. It makes a great deal of money as a parking lot. But if a tenant comes to us and says, listen, I want to do a 500,000 square foot use and there’s another guy who will do 200, we’ll build it around 100,000 square foot building and go long a couple 100,000 square feet of spec space, absolutely. I pointed out on the Investor Day, if we did the trade at what we think of today’s rents and we’re assuming $50 and the market for existing space is $45, so that spread is not a lot, Manny, for what we think new building is worth. We earn about $0.20 a share on our piece of the deal, assuming the land is zero. If you don’t assume the land is zero, you earn obviously about $0.10. But assuming that the market has to give us credit for the land, it’s an impactful thing for us. So I’m just staying confident. I think we’re confident that this is a great place to do business. We’re investing a substantial amount of activity. I will tell you we’re doing this call today for the first time at our new office space in Jersey City. We’re looking out lovely midtown and downtown Manhattan from our conference room window. It’s a beautiful day in New Jersey, a lovely day in Jersey City, 100% confident.

I’ll wave to you from our windows. Thanks, Mike.

Our next question comes from Tom Catherwood with BTIG. You’re line is open.

Thanks. Good morning, guys.

Welcome Tom.

Thank you. Building on kind of Mike your comments about tenants being interested in the newer and most modern office space possible, how has that impacted your renovation plans for the Harborside complex?

Well, it’s actually very funny. They kind of run both ways. Mitch and I had this debate. We’re in an old space. We’re in a fourth floor. We have these big mushroom columns, we have an exposed window – sorry, exposed brick, Tom, and people love our space, absolutely adore it. And on the other hand, the elevators are antiquated. They don’t run exactly the way you’d want to. The bathrooms aren’t the right size. So there’s two of theories. The old space has a certain attraction but has to have the right amenities and the new space for the big corporate tenants who are worried about green, security, benching, so on and so forth that actually works. So you need to play both sides of the market. But to answer the question totally directly, we’re going to re-skin the east-facing wall of Harborside, which is the one you can see from the city with floor-to-ceiling glass. It’s an older installation. We’ve hired a contractor. We have somebody who’s extremely competent to do it. We’ll do what’s called a window wall system. It’s not curtain wall, it’s attached outside. It should look spectacular. It should add up the views and enable us to get higher rent. We’re also going to redo the public common space, which we’ve been advancing. If you come here week-to-week, we’re constantly swinging hammers with the night crew who is demoing space and reconfiguring it. And we’ve got a tremendous amount of tenant demand for restaurants and other retail users.

When we think of – I think that’s a very good way to say it, kind of bifurcating the market, some new product, some product at different price points. But we are seeing too some new competition from renovated space. Spear Street Capital is talking about putting money into 70 Hudson. How do you think of kind of positioning? Do you think of increasing the amount of capital you’re investing in Harborside or are you happy with – I think your previous projection was roughly $45 million or so of incremental capital into that asset?

We’re fine and we’re very close with the Spear Street guys. They’re going to do a lobby renovation, that’s really about it. The capital is their lobby was built as a grandiose office lobby and kind of iconic what Manhattan would have been 20 years ago. And they want to make it softer, add in some seating and do a restaurant function. We’re well ahead of them because we’ve been planning it 12 months earlier and obviously it’s a much larger project. And we welcome their addition because it will only make the market better. We actually can concentrate on a number of different things. So we won’t change our assumptions. If we do, we’ll update you.

A very fair point. Then turning to dispositions, as we look into 2017, obviously, Mike, you used the term trimming the bottom, selling the assets that people don’t want to work in, or that have the lower demand. How have you seen investor demand for those types of assets trend over the past few quarters? And do you see prices moving up or moving down or staying flat for those types of assets?

I would say that demand has been steady. It is predicated as you well know by people’s alternative investment ability, so people view real estate as being a more preferred source of cash flow than you can get from bonds. So we’re getting a lot of family offices, collection of investors, some opportunity funds who look at it as still advantageous. As Mitch pointed out, New Jersey is growing in occupancy and in lease rate in some respects, so people feel like they’re buying into a market that has more legs than it does declining. We’ve been able to transact and the guy who does it for us, Ricardo Cardoso, has done an excellent job. He basically does hand-to-hand combat every day to basically close these things. Closing a $5 million sale for some miscellaneous asset that we bought in the Gale transaction 10 years ago is just as complicated as buying a $250 million deal in Hoboken. There’s no difference in them. We’ve been able to do that as has Gabe Shiff who’s Marshall’s Chief Investment Officer in exiting the number of joint ventures with credential and going back and forth and getting us to a more transparent balance sheet. If you want to be transformational, we actually have that activity.

Very fair point. Then one question on the apartment side of things for Marshall. This quarter, Roseland put up same-store NOI growth of roughly 0.7%, which – not as robust as it’s been in past years. But when we look at kind of the apartment REIT peers who reported negative same-store in the New York and Northern Jersey area, that 0.7% is looking pretty good. Their commentary was around challenging rent growth, it was around higher expenses and more concessions. How have you seen concessions and rent growth trend in your portfolio? And how actively have you been able to manage the expense side?

It’s a good question. Our denominator is a lot smaller than some of these recent reporting, so we don’t have as broad a base to measure from. A couple of our largest submarkets, meaning Jersey City and Overlook Ridge, north of Boston in Malden, as submarkets they showed great rent growth and those are two of our largest collection of assets. So that’s helped our top line on growth. Our numbers are actually negatively impacted by Crystal House, one of our repositioning assets which actually drags down our growth until we stabilize the assets sometime next year. But like everybody else, there’s more and more product in the market and the rate of rent growth is declining in a lot of the other submarkets. For Port Imperial, we hurt ourselves because we have five projects going on at any one time in construction, so we actually impact the ability to raise rents in adjoining properties by our own construction activities next door. But that too eventually will pay us. Expenses are up. For us the biggest impact in expenses has been real estate taxes. A number of the towns have had extraordinarily large tax increases which were appealing across the board and we expect to succeed in almost all of those appeals. And that should obviate a lot of the expense increases we’ve seen. We have actually worked very hard to reduce our controllable expenses in all of our properties to minimize these increases. But it’s a daily battle.

Got it. Thanks, guys.

Our next question comes from Rob Simone with Evercore ISI. Your line is open.

Hi, guys. Thanks for taking the question. I was wondering if given how much additional acquisition and disposition activity you have built into 2017 numbers, I was just wondering if you could kind of try to break out the underlying changes in occupancy and also NOI growth year-over-year. It’s just a little tough to kind of separate the two, given that there might be some adverse or positive selection in the assets that you sell. So, I was just wondering if you could elaborate on that a little bit.

Don’t know if I can give you that detailed answer, Rob, but we are looking at selling occupancy – assets that owners will occupy if we don’t think we can actually increase over the short term and make a meaningful impact. That has always enabled us to have better and better occupancy per quarter, because we’re trimming the bottom. We’ve also likely – those assets, other than the few that we sold early on, don’t have particularly high rental rates. So the average rental rate increases as we go to a quality picture versus a more broad-based picture that we currently enjoy. So you’re going to get – it won’t affect your same-store NOI growth that much depending upon what leases roll, but you’ll see as we’ve added buildings in Metro Park, for example, we’re able to drive rents the same thing on the Waterfront. So I think you’ll see us get – hopefully by the end of '17 have a clear picture of us having a quality portfolio that produces consistent rent growth quarter-by-quarter as opposed to the portfolio we have today which has a lot of quality in it driving and then we have some other numbers that are more averaged that temper down our numbers. So we think inside this company if you get rid of the bottom, say, 10%, 15%, you unlock the 85 which produces exemplary returns. If you want, we’ll get you a more detailed breakdown but I don’t think I can explain it more differently on the phone.

Yes. No, totally understood. That’s very helpful. Thanks. That’s actually all for me at this point. Thanks a lot, guys.

Thank you.

We have no further questions at this time. I’d like to turn it back to Mr. DeMarco for any closing or additional remarks.

Thank you very much for joining us. We’ll see you in a few months. Have a great day. Bye.