Good day, everyone, and welcome to the Mack-Cali Realty Corporation Conference Call. Today's event is being recorded. This is the First Quarter 2017 Earnings Conference Call. At this time, I'll turn the conference over to Michael J. DeMarco, Chief Executive Officer.

Good morning, everyone, and thank you for joining the Mack-Cali First Quarter 2017 Earnings Call. This is Mike DeMarco, the CEO of Mack-Cali. I'm joined today by my partners, Marshall Tycher, Chairman of Roseland; Mitch Rudin, Vice Chairman; and Tony Krug, CFO. On a legal note, I must remind everyone that certain information discussed on this call might 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 and annual and quarterly reports filed with the SEC for risk factors that could impact the company. We again filed expanded disclosure about operations in 2 supplementals, one for Mack-Cali's office portfolio and one for Roseland Residential Trust, our residential subsidiary. We continue to refine them to contain only the most relevant information. We've taken your comments to heart. That is, we're trying to get our supplementals into the bathing suit mode for the season. We will be referring to key pages in those supplementals during this call. As we've done before, we're going to break the call down into the following sections. Tony will recap the operating results for the quarter, Mitch will discuss the office and leasing results and our view of the markets that we're in and Marshall will provide an overview of the multi-family operations. I will then provide an overview of capital market activities and comment on our views of guidance on 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, showing real positive results for 2017. Our strategy, while evolving to market…

Thanks, Mike. With respect to earnings, core FFO for the quarter was $56 million or $0.56 a share as compared to $49 million or $0.49 per share for the quarter ended March 31, 2016. For the current quarter compared to last year, the 14% growth in core FFO per share resulted primarily from increased base rents and interest expense savings from refinancing of high-rate debt in 2016. We reported net income for the quarter of $19.9 million or $0.11 per share as compared to $62.2 million or $0.69 per share for the quarter ended March 31, '16. Included in net income for the first quarter of '16 were $58.6 million of gains from property sales. As shown on Page 31, same-store NOI was up 5.9% on a GAAP basis and 6.2% on a cash basis for the quarter. Total company G&A for the quarter was $11.6 million, with $9.2 million for the office public company and $2.4 million for our Roseland subsidiary. Reducing G&A expense remains a focus for us and we expect to achieve additional savings as we streamline our portfolio throughout 2017. Turning to our financial statistics. As indicated on Page 30, our total indebtedness at year-end was $2.73 billion with a weighted average interest rate of 3.8%, essentially unchanged from 3.79% at year-end 2016. Debt to undepreciated assets ratio was 43.8% at quarter-end, and net debt-to-EBITDA annualized was 8.5x for the quarter. We had a fixed charge coverage ratio of 2.9x for the quarter and interest coverage of 3.8x. Our $600 million unsecured credit facility had $90 million drawn at quarter-end and $122 million drawn as of today, leaving meaningful availability to support our business initiatives. And back in January we closed on our senior unsecured credit facilities totaling $925 million, comprised of a renewal and extension of our credit facility and a new $325 million unsecured term loan. The interest rate on the credit facility is LIBOR plus 120 with a facility fee of 25 basis points. It has a term of 4 years with 2 6-month extension options. And we swapped a floating rate on the term loan to a fixed rate through the end of the 3-year term. The all-in swap rate is 3.31%, including amortization of deferred financing costs. The term loan has 2 1-year extension options. Also in January, we closed on a $100 million mortgage loan secured by Alterra at Overlook Ridge, our 722-unit multifamily community in Revere, Mass. The mortgage loan carries a fixed interest rate of 3.75% and is interest-only for its 7-year term. And in March, in connection with the office portfolio acquisition, the company closed on a $124.5 million mortgage loan secured by 3 properties on JFK Parkway in Short Hills, New Jersey. The mortgage loan carries a fixed interest rate of 4.06% per annum and is interest-only for its 10-year term. I'll now turn the call over to Mitch.

Thanks, Tony. Our core Waterfront and Flex portfolio of commercial properties was 90.4% leased at March 31, down slightly from last quarter's 90.6%. We signed over 350,000 square feet of transactions during the quarter, with average rents on the Hudson Waterfront at almost $45 and over $33 in our transit-based suburban markets. Across all segments, our rents rolled up 1.9% on a cash basis and 11.6% on a GAAP basis. Our leasing costs were held to $2.87 per square foot per year of lease term, which is the lowest we've seen since the third quarter of '13. We'll continue to keep those costs down. Our Flex portfolio continued its solid performance with large renewals in Westchester County, New York and Central New Jersey. The remaining 2017 rollover in our core Waterfront and Flex properties is 1.4 million square feet, most of which does not expire until the fourth quarter. We had substantial interest from tenants in the last 2 months, and our tour activity and RFPs are up substantially. Looking at the broader markets, economic news continues to trend well in New Jersey. Unemployment is at 4.4%, and private sector job growth continues. Leasing velocity picked up in Northern New Jersey after a slow fourth quarter, although givebacks and some large corporate consolidations contribute to a slowdown and slight uptick in vacancy rate in Central New Jersey. Westchester County, 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 its largest ever year-over-year drop in vacancy, falling 580 basis points. Given the leasing gains over the last several quarters, our leasing benchmark should be in the range of 500,000 square feet a quarter, and our current pipeline indicates we should meet that for the first half of the year. Consensus among the brokerage communities is that velocity in Northern and Central New Jersey will pick up in the second half of the year and it's just dealing with the timing issue now, and rents will continue to increase. For example, the average asking rents for the Waterfront are at an historic high of $42.80 per square foot. With that, I'll now turn it over to my partner, Marshall.

Thanks, Mitch. Roseland had a strong first quarter. Our stabilized operating portfolio had a lease percentage of 97.5% compared to 96.1% last quarter. Rents in Jersey City and Overlook Ridge, our largest 2 submarkets, where we delivered M2, Urby and Chase II over the past year, were up 1.4% and 6.5% for the year, respectively. Our existing Jersey City operating stabilized properties Marbella and Monaco maintained an average lease percentage of over 96% amidst the adjoining lease-up activities. The balance of our portfolio, including holdings in the East Boston Waterfront; Port Imperial; suburban New Jersey; and Washington, D.C. [indiscernible] approximately 3% year-over-year. [indiscernible] first quarter leasing success was comprised of 3 recent deliveries representing 1,162 [indiscernible]. We forecast stabilization of these communities by the fourth quarter of 2017, which upon stabilization will deliver approximately $16 million of net cash flow for the full year in 2018. These [indiscernible] highlights include the Jersey City Urby, our iconic 762-apartment, 69-floor tower on the Hudson Waterfront which commenced leasing activities on March 1. [indiscernible] 10 weeks since opening, we have leased 325 apartments at an average price per square foot in excess of $56. As of today, the community is 43% leased. Chase II, a wholly-owned 292-apartment project representing the next phase of [indiscernible] our masterplan [indiscernible] community north of Boston, is currently 62% leased. And Quarry Place, a majority-owned 108-apartment community in Tuckahoe in lower Westchester is currently [34%]. In addition to its lease-up portfolio, Roseland has 9 projects representing 1,928 apartments and 372 hotel keys in construction. The construction portfolio represents $765 million in cost, $54 million in projected NOI and average gross-in ownership of 94%. Roseland's next deliveries from this portfolio will be in the fourth quarter of this year, the opening of Signature Place in North Plains, with a…

Thanks, Marshall. We finished the first quarter of 2017 on a strong note, with all objectives in hand. We are reaffirming our provided FFO guidance for 2017. Beginning on Page 26 of the supplemental, we provide commentary on some updates to our guidance. I'd like to go over 7 items in a little bit of detail. Our lease percentage range is between 90% and 92%. However, that achievement at the end of the year could be subject to our fourth quarter expirations. Our lease activity strong. We start off at the Waterfront at 94.6% currently and Metropark at 94.5%. Our recent purchase at Short Hills is in the same level of activity. We also achieved this quarter 90.4% on our combined Waterfront and Core/Flex portfolio. We feel for the few next quarters we're in good shape, and the fourth quarter is what we'll work on. Two, we continue to drive rents in our reshaped portfolio and expect same-store NOI on the post-sale portfolio to be [ 6% to 8% ] on GAAP and 3% to 5% on cash. We've been achieving this level for the last 6 quarters; it's a matter of maintaining it. Three, non-core asset sales. We have -- expected to have $700 million to $800 million in 2017. We're on the market early in the year with approximately 75% of that amount and our practice of [indiscernible] other assets for additional sales. The approach in 2017 is to sell the next layer of our bottom, continually add to the top if possible, but complete our portfolio retransformation by the end of '17. Fourth, acquisitions. We announced several deals last quarter, which we completed. Each one of them significantly added to our portfolio quality in choosing our strength and allow us to produce hopefully excellent results in the…

[Operator Instructions] John Guinee of Stifel.

I was just looking at your disposition, and it looks like you sold about $47 million worth of assets, 745,000 square feet, $63 a foot. Was that because of any one particular deal? Or is $63 a good number to expect for the next $700 million of asset sales?

No, I think, John, that's an anomaly. That was some Class B space that was in the Cranford-Clark area that we finished up at the end of the year. That's a low number for us. We're probably averaging over $100 for the remaining of what we expect to sell in 2017, and that range is anywhere from $100 to $150. As we go through the next layers, we're selling better stuff. But the end of '17, we had a deal or 2 that transferred over into -- sorry. At the end of '16, we had 1 or 2 transactions that transferred over into '17. I would use that as a bad sample size.

Okay. And then you made a big investment in Short Hills/Madison portfolio, best submarket in Northern Jersey, I guess, I hope, 1.1 million square feet. Can you talk about the lease economics, gross rents, net rents, turnkey, what's the releasing packages you have to spend to backfill the space, et cetera?

So when you examine New Jersey, and we have examined it in detail the last 2 years as a team, you find certain submarkets that have individual characteristics. Short Hills is one, which has certain peculiarities that exist only in Short Hills. One is, it's the home of a number of corporate headquarters, key business units. So this is not back office space. This is not the space that you shift outside of New York to be someplace in New Jersey to be cheaper. This was chosen because someone lives in the area in high end executive housing and chooses to operate their business close by. It homes -- basically has David Tepper's operation for Appaloosa, obviously, in 51 JFK. KPMG has a large part of their audit division for the state of New Jersey in there. Most of their senior managing partners work out of that office. Dun & Bradstreet has their global headquarters in those buildings. Investors Bank, which is one of the larger banks in the United States, it's like #40, growing bank in this area, also have their global headquarters -- sorry, their U.S. headquarters there. We had the same experience across the street. So we would buy in a market where we already knew, based on our experience at 150 JFK, what you could get. Those buildings get between $40 and $50 in rents. The concession package is the same as we offer throughout the state. Same brokerage commission at the same cost of attainment; you just have higher rents. The joke that I made the last time we discussed this regarding Short Hills, is most times when we go through the due diligence, we have transactions where tenants can put back the space to us, right, because it's a standard feature, in the seventh…

Okay. Great. Fill in a couple more numbers. What's the OpEx on a, say, a $45 rent in Short Hills? And what sort of full TI and leasing commission package do you budget?

It's $11 to $12, John, depending on what the -- you go from, not to be too pedantic, but Essex County has slightly higher taxes than Morris County because you cross the border. So Madison is probably a little lower because it's in Morris County. Essex County contains the city of Newark, so it has slightly higher county taxes. So it's probably $12 in Short Hills and $11 in Madison. About $1 difference on a tax basis. And that's the full OpEx package. And your cost of attainment is probably a $50 package, $40 to $50 package. Standard for us. Not much different.

We'll go next to Manny Korchman of Citi.

Mike, if we think about the makeup of tours or desires of tenants to look at the Waterfront since you took over, how has that changed? And maybe, most recently, what types of tenants are looking to take space in that market?

I don't think there's been much change because I'm the CEO and my pal Mitch isn't. We just changed seats at the table. But putting that aside, I think what we've seen consistently for the last 2 years, and I'd like to expound on it, is a different type of tenant coming. So the Jersey City reputation of being back office -- which, by the way, was very well deserved, right. You looked at the list 2 years ago, it was predominantly the back office operations of Wall Street. That is changing. We keep on seeing it changing. We look at it as 2 types of business models: people going through cost containment that look at New York and say, "I need to be in the New York region but it's a little expensive." So you look at Hoboken, where we bought into that market last year, it's full of publishing houses. It's Reuters, it's Wiley, it's Pearson. They moved off of Third Avenue for a reason and happily do business in Hoboken. When we saw Rubbermaid Newell go into Hoboken last year as a global headquarters from a company coming out of Atlanta, which could've chosen any place in the country to occupy, that was one indication. When Ernst & Young moved 1,600 of their accountants who served the metropolitan area to Hoboken, that was the second. When Tory Burch went into Newport, that was a third. When Forbes went into Newport, that was a fourth. When Omnicom came into our building, that was a fifth. And in the tours that we've seen this year have been pharmaceutical companies, medical device companies, fashion tenants, again. Oh, e-commerce has really picked up. So we get lots of people who come to us who operate e-commerce divisions of either financial services companies or consumer product companies that look for space. Those are the tours that I would say make up most of the list. And then the financial services are probably a third of the list now. We still have the banks looking for space. We still have someone rolling in that's a money manager looking for space.

And how are you feeling about the expirations that are coming up at the end of the year?

You know, I always say we have to work hard and be talented and then luck intersects your path. So looking at what we're doing in preparation of that, we have plans to redo Harborside 1, Plaza 1 and basically duct the building to bring it up to standard. It's been occupied by Deutsche Bank, originally Bankers Trust, since 1980. It's 37 years, right. So when they move out, we have to do a certain amount of remediation. We've gotten pretty good demand, or people looking at that building because it's the right size, scope, it's right on the PATH, and I think the demand -- the plans that we've put out that we're finishing up now will be compelling. Other than that, we've been basically taking the market here and changing it. If you look at it, we kind of dominate the Jersey City exchange market because of the size, Harborside being our largest asset. If you went into Harborside when we took over 2 years ago, there wasn't one stick of furniture. There was just 3 things in it. There was 2 restaurants, or bars, primarily bars that I would look at as, being a bar owner's son, would put in a Class B to C level, and a cafeteria that was built in 1980. Couldn't make it up, right? Today, the cafeteria's gone, both bars are gone. We replaced the entire revenue stream that those places were making, we're about 15% higher and we have no liquor business, which means we're significantly higher on the food business. When you go downstairs today at 11:00 or 12:00, 12:00 and 2:00 o'clock, you'll see 700 people walking through our lobby eating in what we put up as 15 separate pop-ups, anything running from poke to empanadas to crepes. You name it; we have it. It's changing the feel and touch of the building. And the reason why I'm dwelling on this, Manny, is it changes how the brokers feel about us. When they walk through with a tenant who's going to Jersey City and they look around and say, "Wow, I'm going to have to be over here because my boss is bringing me over here, it makes sense, base incentives, but this is the building I want to be in because it feels like a building that I'd like to be in." We have seating, for example, that we put in the last 2 years outside, which is now the weather months are accommodating that, we have 750 seats outside. We're like a small park in some degree. So that's what we're really doing to basically allow ourselves to get to the next level, and the tours are reflecting that. And then we've obviously done everything we can to modernize our buildings along the way.

Manny, it's Mitch. Let me just add. Since Mike and I started, we've got the deepest pipeline that we've ever had. And as Mike indicated, it's the most diverse. It's over 3 million square feet. And in addition, we're tracking over another 1 million square feet of tenants. And as you, as someone who lives in the New York area, probably the first time ever, on Sunday in The New York Times, there were 3 articles about Jersey City, which is just a reflection of -- it's the overall increase in awareness.

If we focus on the Deutsche Bank space specifically that you brought up, do you expect to have a lease signed before they move out or do you think you have to do the redevelopment before you can really get the interest levels up that high?

We have someone looking at the space now who's going through the incentive process that would take the majority of the space. I don't know if that deal's going to get done or not because it's obviously still a proposal. But we could get one done. If not, we would expect to get one done after they move out. We've done the plans. We've done the renderings. We've done the construction side of it. We just can't activate the construction until they move out. It's hard to actually do demolition with a tenant in place. But as soon as they move out we're ready to move. And I think once you start that process, it becomes much easier for someone to see what you're doing and then transact the lease. But it's likely that all the space in Jersey City that's available, an entire -- it has the best logistics from a transportation point of view. It sits 90 feet from the PATH. It's its own contained building. It's the right size. The floor plates lay out well. And for someone who wants to rent anywhere from 100,000 to 400,000 square feet, it's an ideal building. We feel comfortable on that space.

We'll go next to Rob Simone, Evercore ISI.

Two-part question. First, is it safe to say that Q2, from a leasing perspective, could look somewhat like Q1, maybe a little bit higher? And then secondarily, behind that, you guys have a pretty big chunk of space expiring in '18. So at what point this year do you start thinking about that space? And what are some of the bigger moveouts in that number?

So on the first part of your question, we think the second quarter actually is shaping up to be a better quarter. We have some deals that could be substantially better from a GAAP and roll-up basis because they're new deals and they hit the numbers on a harder basis from the accounting rules. The second part of your question is regarding the '18 expirations. They mostly roll over in building Plaza -- sorry, 101 Hudson, which is a building that's currently 100% rented fundamentally. We have some tenants that want to backfill. So we feel pretty comfortable with that. The biggest rollover there is AIG, who still hasn't made a determination as a corporation whether they want to keep part, if not half to all, the space. It's not likely they keep all. They'll be giving back some space. Whether they keep half or not is problematic, which means we'll have a renewal on that space, for a majority of it. So hopefully the '18 expirations will be a little bit lessened. We would point out that while we have this period now of '17, '18, the embedded rent for the period of the tenants rolling out is in the mid-30s. As Mitchell pointed out, the Waterfront is in the low 40s, call it $43. For our Plaza -- sorry. The 101 Hudson, the average rent that we're quoting today is in the $47 to $49 range. Plaza 5, the same. Harborside is in the $42 to $43 range. So we would think there's a scheduled roll-up. To make the point clearer, we only have to do 2/3 of the space to achieve the same rent we have today because of the margin. That extra $10 to $13 allows us to not rent 1/3 of the space and still achieve the same results. If we rent all the space up, we'll have a substantial roll-up for next year. And the last point is, '19 and '20 are very light years for us. So once we get past this bump, we need to basically reap the yield in this one because '19 is going to be a little less space, still advantageous rates, and '20 is even less than that.

We'll go next to Tom Catherwood of the BTIG.

Page 5 of the supp, under Strategy, a new bullet popped in there which I wanted you to talk a little bit more about. But in this comment you say the strategy is to "Align with joint venture partners that have a long-term view and seek to benefit from our expertise." Obviously, Rockpoint falls under that category, but what else do you have in mind as far as expanding your joint venture book?

Well, we're going to be faced with, in a transformation, of looking to redeploy capital. And we've obviously been active on the sales side. I think everyone can give us -- grant us that. And we're still active in our second year in the process. At some point going forward, we have a number of opportunities to do development deals in Jersey City that we think are advantageous. As Marshall outlined, and maybe we should embellish now, we built M2 at basically a 7 cash on cash yield. Urby is coming in around the same yield, if not slightly better. If we were going to invest in a community at a private equity firm, which I've had the pleasure of working at, you would make the case, well, listen, you did 7 twice in the last year, why wouldn't you do the third deal? I mean, these are advantageous numbers. The market value of the assets, we're making 40%, 50% on a cash-on-cash basis. From an NAV basis, we're probably 2.5x our equity on a roll basis. So those projects are large in Jersey City. Urby was a $300 million deal that might be worth as much as $475 million. M2 was a couple hundred million dollars. The projects we're doing on the Waterfront in Weehawken and West New York is literally about $350 million of collective asset between the hotel and Building 11. So we look at the second stage of Urby, Plaza 8 and 9, those are deals where you'd have to make a considered approach as to what's the house limit of how much equity you want to put in, do you take in another partner, whether that partner is Rockpoint or another entity, based on the economics we think is available to us. I think if we brought the deal out today and said, "We're Mack-Cali, we own the land, it's fully zoned, we have the local expertise to building that's extensive, we have unbelievable connections with the City to work through any zoning issues, do you want to partner with us," I think it would be a relatively productive conversation.

Very fair. Kind of sticking with that, on the next phases of Urby, are they contractually set up so that's the same kind of 85-15 deal with Ironstate? Or can you kind of go out and negotiate with any joint venture partner on those?

No, we have a deal with them at Stallings. One, we have a buy-out right that's 2 years from the date it opened, which is March 31, as far as [indiscernible] or 1 year from 80% occupancy, which is likely to be July of this year. So we could either exit that venture, them buy us, we buy them, so on and so forth. If we chose to do an office building on that site, just for example, they have no right to the property. If we chose to do a hotel, no right. If we chose to do a for-sale condo project, no right. If we choose to do a rental project, we have to offer it to them, and they have the right to basically do it on the same terms. So we're going to have a conversation with them about those terms going forward. We've made no bones about that. I think they expect that. I think the landscape has changed when they were the partner of choice for my predecessor when he didn't own Roseland. So he made a strategic decision to align himself with what we think is a very high quality, truly talented organization who built a great project. So the next stage goes. Plaza 8 and 9, which sits across the street from Urby, as you know, Tom, because you're a native, actually has a better profile to the City and more of a Waterfront view. It's likely 9 would start before the second stage of Urby would. That, we have the right to do whatever we want. Urby might be a more further down the road decision.

Appreciate that, Mike. One more for me. Page 15 of the supp, you reclassified your assets amongst urban cores, urban core flex, and non-core. And it caused a pretty substantial jump up in what you're considering non-core, from probably 2 million square feet to 3.8 million. What was the kind of impetus behind this?

So what we do is, we don't really have a good comparable number for you because we're constantly adding assets. So the comp number is hard to do and probably not that relevant. So what we tried to give you in this instance is what we think quarter-to-quarter we want to own. So now we've shown you Waterfront, which doesn't change; Flex, which is getting slightly smaller, as we basically start to trim that portfolio. We created this urban core, which is basically the high income stuff where you know we're getting the right margins and it's the assets that we get the long-term tenants in. And then we have our traditional suburban, which has some smaller tenants and other tenants who are more price conscious. And then we put whatever we think we're going to sell for the year in the non-core bucket. It indicates to you what we should focus on. It allows you to look and say, "Okay, they basically told me they're going to accomplish this." As opposed to us hiding it on the top part of the line and selling stuff selectivity, which allows us, if we fail, not to be able to disclose it to you, we're kind of going the other way and being very transparent and saying, "We believe strategically the best avenue for us is to rid ourselves of these assets, and we're going to do that" and redeploy the capital as we'd indicated.

Okay. But the thought is to clear that whole 3.8 million square feet in 2017?

By the way, you can easily find this out. We moved our suburban county assets, which we put on the market, which is well known, through HFF, which we're close to basically coming to a contract with, hopefully with a purchaser. That's the majority of the move.

We'll go to John Guinee of Stifel.

I'm very excited about seeing the supplemental in its bathing suit form. So we won't go any further, though. Question. And just help me with the numbers a little bit more. Non-core is about 2.75 million square feet. If you're able to get $125 a foot for that, that's about $350 million of asset sales. Where's the other $350 million located?

We haven't put this -- we haven't put those assets into this quarter because we're still debating which assets to move down. So you have Bergen County and Moorestown, and then next quarter we'll be disclosing other assets that we moved at the end of this quarter, John. But you'll see the next [indiscernible] that can come down. Once -- our accounting rule is, once we put them on the market, John, we move them into the non-core section.

Mr. DeMarco, I'll turn the conference back to you for any additional remarks.

We thank everyone for joining us. I think we're going to start doing these calls at 8:00 o'clock. If people feel it's appropriate to do it before the market, please let us know. We think it works out well for everyone. Thank you, and have a good quarter.

That does conclude today's conference call. Thank you for your presentation. You may now disconnect.