Good day, everyone, and welcome to the Mack-Cali Realty Corporation First Quarter 2018 earnings conference call. Today's call is being recorded. At this time, I'd like to turn the call over to Michael J. DeMarco, Chief Executive Officer. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us at the Mack-Cali first quarter 2018 earnings call. This is Mike DeMarco, CEO of Mack-Cali. It is truly, truly a beautiful day on the waterfront today. The weather is superb. I'm joined today by my partners, Marshall Tycher, Chairman of Roseland, our multi-family operation; David Smetana, our CFO; and Nick Hilton, our EVP of Leasing. 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 any statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. We refer you to our press release, annual and quarterly reports filed with the SEC for risk factors that could impact the company. We filed last night our supplemental for this quarter, and we'll be releasing our revamped investor deck next week. These combined presentations will reflect the ongoing transformation in Mack-Cali's portfolio and NOI composition. We'll be referring to key pages in our supplemental during the call, and please contact my partner David with any further suggestions. As we've done before, we're going to break our call down into the following sections. I'll make some opening comments, Nick will discuss our office leasings performance and our view of the markets going forward, David will recap our operating results, and then Marshall will provide insight into our multi-family operations, and then I will close and we'll take questions. As disclosed last night, we had another successful operating quarter, as we delivered positive results for early 2018 and really laid the groundwork for the remainder of 2018 and beyond. We are, as stated in our press release, nearing completion of our disposition…

Thank you, Mike. As we look at our leasing results in the first quarter, our core waterfront and flex portfolio ended 85.2% leased, and in that timeframe, we signed just over 265,000 square feet of transactions. Of those transactions, approximately 55,000 square feet were new leases. We were also able to capture over 210,000 square feet of in-place renewals. Across all segments, our rents on Q1 deals rolled up 5.1% on a cash basis and 10.7% on a GAAP basis. Additionally, we continue to hold the line on leasing costs. For this quarter's transactions, we committed $3.34 per square foot for year-of-lease term, well below the $4.35 per square foot in the fourth quarter of 2017. Turning to the waterfront submarket, of the approximately 20 million square feet of office space comprising the waterfront office market, we see the market vacancy rates hovering around 18% and average asking rents for Class A space in the mid-$40 range. With that said, we're seeing signs of true organic growth within the marketplace, evidenced by the recent expansion of two financial services companies in the Newport submarket. This amounted to over 200,000 square feet coming off the market, and within our own portfolio, we're currently seeing the same positive signs of organic growth. Currently, we are in negotiations for approximately 100,000 square feet of net absorption from in-place tenants expanding and renewing, all of which have healthy cash and GAAP rollups. For context, this combined 300,000 square feet will represent a 4% decrease in availability between the 12 million square feet made up of the Newport and Harborside submarkets. Moving out to the suburban portfolio, we've seen our efforts to make the necessary improvements in our assets and improve available amenity options translate into steady deal flow. By way of example, within our…

Thank you, Nick. I would like to touch on a few financial highlights before handing it over to Marshall for an update on our multi-family operations. We reported core FFO per share for the quarter of $0.50, versus $0.56 in the prior year. The year-over-year decrease is due mainly to move outs of tenants on the waterfront. As highlighted in the release, we had two nonrecurring items that we added back to core FFO. The first was a $5.1 million charge relating to the departure of two senior executives, as well as a broader reduction in force. The second was a $10.3 million charge related to the early repayment of three high coupon mortgages with maturities in the next 12 months. These mortgages carried a blended interest rate of 6.8%, and their prepayments represented an opportunity to reduce interest expense and avoid disadvantageous escrow requirements. We also highlighted in the release $2.6 million of income included in our equity and earnings of unconsolidated joint ventures. This represents our share of income from a tax credit at our Urby project we qualified for in the first quarter. We believe we will continue to receive income from this credit annually over the next nine years. This income was contemplated in our original guidance issued earlier this year. Same-store cash NOI was off by 8.7% in the quarter, and we still see same-store NOI cash NOI falling in the range of minus 15% to minus 17% for the year, primarily due to the known move outs we have discussed previously. Let me remind everyone that AIG moved out of approximately 271,000 square feet at 101 Hudson on April 30th, and Wiley moved out of 46,000 square feet at 111 River on April 30th as well. These large move outs will further pressure the…

Thanks, David. At quarter end, Roseland's stabilized operating portfolio had a lease percentage of 97.3%, as compared to 96.3% last quarter. Roseland's same-store portfolio experienced NOI growth of 1.3% on a GAAP basis, which was impacted negatively by higher than expected snow removal costs in our Northeast-based portfolio. Most significantly, we commenced leasing activities 789 apartments in our core geographies. In part delivery brings our average building age to what we believe is an industry low, of under nine years, a metric that will trend down with our pending scheduled deliveries coupled with potential dispositions of select older assets. In 2017, Roseland had excellent leasing results, having stabilized 1,162 market rate apartments. That effort has now continued into 2018 with 4 newly delivered properties beginning lease-up. Signature Place, a 197 unit community in Morris Plains, represents the first delivery from our repurposing efforts. This apartment house is currently 27.4% leased since its February open. 145 Front Street, as highlighted in the recent press article where Roseland is playing an instrumental role in the revitalization of downtown Worcester, Massachusetts. These efforts include the phase 1 opening of 237 units, which is currently 28.3% leased in just 70 days. We recently delivered Portside Phase II. This 296-unit community on the East Boston waterfront has had an extraordinarily leasing success to date, having preleased 93 apartments, or 31% of the community, at above pro-forma rents prior to opening. New lock leases will commence this weekend. The fourth property is Metropolitan Lofts, a 59-unit community in Morristown, which is currently 22% leased. Through the remainder of 2018, we anticipate deliveries of an additional 795 apartments, including RiverHouse 11, a 295-unit apartment house on the Hudson waterfront at Port Imperial; a 372-key dual-flag hotel in Port Imperial with a full-service Marriott autograph collection; and Residence…

Thanks, Marshall. In closing, we are set up to have a good 2018 from what's already occurred, and a better 2019 if we're able to lease up and renew as we expect and deleverage as planned. As Nick pointed out, tenant demand is clearly growing, and our capital improvements are being very well received. Marshall and I have talked about this at length. Our focus on the waterfront for office and multi-family is yielding good results, with the prospect of excellent results in the near future. We expect to announce some significant news in the late summer. As commented on by my New York City colleagues on their calls, more and more companies are looking to be located in New York City or close to New York City, in our opinion. We believe we are very well-positioned for East to West and West to East moves. With that, operator, I'd like to turn it over for questions.

Thank you. [Operator Instructions] And we'll take our first question from Manny Korchman with Citi.

Hey, good morning everyone. Nick, you spent a lot of your prepared remarks talking about expansions and tenants that are ready in the market to increasing their footprints, probably a little bit less time talking about tenants that are looking to grow into the markets that aren't there. Could you give us some color as to those types of tenants and where they might be coming from and how active that type of demand is?

Manny, I'll start off, and then I'll turn it over to Nick in a minute. The demand that we're seeing across the spectrum is coming from pharmaceutical companies in a number of instances, almost three now, that are looking for part of the marketing operations or moving their entire headquarters. We've seen technology companies in the consumer product area looking to do relatively large commitments, over 200,000 square feet. You have some financial services firms also in the same arena, and then there's been a mix of people coming out in the 15,000 to 100,000 range, some of them in the retailing business and then - I'm trying to think of anything else. Nick, do you want to pick up?

Then we also have our fire industry as well, which also will make up a portion of the tenants that we're seeing.

So one thing Nick and looked at, Manny, when we did the tours lately is the map. So every tenant comes, and we ask them about the map that they have, which shows where their employee base is or where they think their employee base will be in the next five years, and what's happening now is the map is really being drawn from portions of Brooklyn to Lower Manhattan, to Jersey City, Hoboken, Weehawken and West New York. That's the market where people feel - you'll find that young millennial in abundancy, which is where we're getting the tenant demand. Now, the question that comes up - and just to finish up - is last year we had tenants who had the same map and then wound up in Newark because they didn't want to come all the way east. Now we're seeing more and more people saying, you know what, I think this is where I really need to be.

Got it. Thanks and Dave, one for you. None of us expected the tax credit. It sounded like you were sort of unsure as to whether you were going to get it or not, so it wasn't highlighted in guidance. Are there any other items in guidance like that that sort of you're contemplating or haven't included that that the Street might not be aware of?

I'll start backwards. There are no other guidance items like that. With the Urby tax credit, it's important to remind everyone that it is our joint venture partner that takes the lead in receiving that. We knew at some point this year we were very likely to get that. It was 100%, but we had not received confirmation of that until very late in the first quarter. So it was contemplated in our original guidance, but we did not have confirmation of it when we gave it, and apologies if we did not break it out explicitly for everyone. Thanks.

Thanks.

And we'll take our next question from Jed Reagan with Green Street Advisors.

Hey, good morning guys. I just wanted to make sure I heard it correctly. So it sounds like there is 100,000 square feet of potential expansions in the hopper for the waterfront, and these would be part of, what, 2019 renewals, I gather? And then what would be the potential timing for some of those deals to maybe hit? If you could just kind of expand on that a little bit.

We'll do again the passing back and forth, Jed. So what we did is the 2018s have moved out. That's already done. We have talked about that. We've looked at the '19, '20, '21 and '22 expirations, and a lot of tenants come back to you two or three years early. The market has moved up significantly in price. Some of these people are enjoying mid-30s or low-30s rent in old deals that were done by my predecessor. We're going back to them and saying, you can renew now at a discount to where the market is, but you have to do it three years early. That involves several hundred thousand square feet in total, and each of them is coming back us and looking for a small expansion, some as much as 15%, some 10%, some are 20%. So it's probably - I'll turn it over to Nick now. It's a half dozen deals, give or take, Nick?

Correct. Yeah, it's about a half dozen deals. Generally speaking, the number I was referencing were in place - the 100,000 square feet of absorption was based on in-place tenants and growing within our portfolio that we're in active negotiations for. The timing of these are - it would probably be towards the end of the year, to answer your question.

Okay, perfect. That's helpful and then I think, Mike, you mentioned on the last call maybe 400,000 square feet or so of leasing per quarter could be a reasonable betting line for 2018. Does that still feel like kind of a reasonable expectation?

Well, our projection is 1,285,000, so it's a little less than that, Jed, so it should be like 300,000 and change. I used the 400,000 because I know this quarter, for example, we have two deals that we're about to sign. One is on my desk for signature today that's 125,000, and we have another 35,000 to 160,000. One is a tenant coming out of a building and expanding. The other one is a tenant from a building that we sold that's coming back into our portfolio. That will, hopefully, pop next quarter. We haven't finished next quarter yet. We're only in the first month. But that should be, hopefully - the second quarter should be higher. I'm probably in that range of 325,000 to 400,000, to be honest, so the number that we have for guidance I feel very comfortable with, but I think we could actually do better, and there are some deals out there that, if we hit, as Nick pointed out in his comments, we could do significantly better. So that's where we are.

Okay, great. And then maybe just one last one from me, and I'll jump back in the queue. You lowered market rents in Jersey City, and your internal NAV estimate. Have you cut your asking rents specifically, or is this just part of a broader decline you're seeing across the market?

No, I think we looked at rents - Nick and I can pass back and forth. In Hoboken, we have paper out on at least three or four transactions, which have the five handle, which is an all-time high for us in the two years we've owned that building, and as people may know, the principle tenant is Wiley, at $37 a square foot. So if you're getting $50 rents from space you get back from Wiley at $37, that's not a bad day at the beach. In fact, that would make my year, actually. In Jersey City, we've been doing deals in the high 40s. We just took a hard look at the NAV, and people commented about the discount between our NAV and where we show it, and I looked and said some of the deals I'm going to basically do early with people. We're basing it on a blend of a little bit of downtime and how you look at - how the effective number comes in, because you have to wait six to nine months longer. We took it all into effect and said, okay, what would the model spin out? So it's a little bit - the rent is probably the same, but I'm getting it six to nine months longer than I thought. And to be honest, on some deals, I'm looking to basically get rid of my '19, '20, '21 or '22 expirations because it gives me more stability, and I'm willing to take a slight haircut to do that. Those 2 items, the downtime and the slight haircut, will reflect in the number, but the actual base rent on the space that we show probably hasn't changed a penny, to be honest.

The concession is a little bit higher, I'm hearing.

No, the concessions are about the same. It's just the fact that I thought deals that - there are deals that we're working through that I thought we would get done two months ago, three months ago. Look, my three-year anniversary with the company is next month, and I think of myself as a self-teaching person. The 1 thing I have is a bias towards action, or maybe aggressiveness, but what I've learned is that that doesn't always translate into the results I want, right? Tenants are coming to the table. We're closing them out. It's just taking longer than I expected. So we looked our numbers and reflected that bias, as opposed to an expectation of it could be done sooner.

Great, thank you.

Thank you.

And we'll take our next question from Steve Sakwa with Evercore ISI.

Thanks, good morning. I was just hoping you could kind of maybe pull together - I know Marshall went through a lot of kind of the developments, so just sort of what is the capital spend is multi-family as we think about maybe '18, '19 and, if there's visibility, into '20? Just kind of what are the dollars that Mack-Cali/Roseland need to spend on developments over the next, say, two to three years?

So what we've done, Steve - and I'll turn it over to Marshall in a minute - is we've outlined in the supplemental we only have, say, just slightly over $29 spend for the remainder of the '18 starts, which is the same number we commented on last quarter. It's really whatever we have left that we're delivering in building C, right? We haven't started a new deal yet. We've been taking a pause to basically absorb the amount of units that we have, also reflected in the fact that our EBITDA was down because of the lease expirations on the waterfront. Our plan is we have $140 million left for Rockpoint's capital. We also own all the land that we need to in Jersey City or in Weehawken or West New York or in Overlook Ridge, which is the four or five sites that we've identified. The big question is how much joint ventures do we do? And then the second question is do we sell another portion of Roseland at the latter part of '18 as a means of deleveraging ourselves to the right level? Those are two things we haven't come to conclusion with. I'll turn it over to my partner Marshall to finish up.

Just to follow up, as Mike mentioned, we're about done with the in-process construction and capitalization in that remaining $24 million. For the new starts we're projecting, as discussed, we still have Rockpoint's money to take down. We have construction - projects coming out in construction we've put permanent mortgages on to generate additional capital, and inside Roseland, we have a couple of dispositions that will generate capital as well, so we cover the lion's share of our requirements for the next few projects, and as Mike mentioned, whatever we don't cover with those capital generating out of Roseland, we'll do with third-party JVs.

And, Steve, just for reference, a typical project in Jersey City, let's say, is 700 units for us, the ones we've been building, and if you take out the land component, which we already own, the cost of construction is about $400,000 a unit, give or take, maybe $400,000 to $450,000, so you really have a $300 million project. The bank will lend you on that number, inclusive of land, say, $225 million to $240 million. You have about $60 million to $70 million left per tower. The money that we have from Rockpoint you can assume is really two towers, effectively, maybe just about two towers, and we have about five projects that we've outlined. So the question is how do you do all five or do you do all five, but we're being very cautious about the next move as far as capital allocation. Does that answer your question, I hope?

Yes, thanks. That's it for me.

And we'll take our next question from Jamie Feldman with Bank of America, Merrill Lynch.

Great, thank you. So Nick, I just want to clarify some comments you made. So it sounds like you have 100,000 square feet of potential expansions from tenants at the waterfront. And then did you also say there's another 100,000 square feet of net absorption in the suburbs, or did I hear that wrong?

No, you heard that correctly. The distinction was, in the suburbs, it's a mixture of expansions and new deals. The 100,000 square feet I referenced on the waterfront was specifically for in-place tenants expanding.

Okay and then I guess sticking with the waterfront, can you talk a little more specifically about the big spaces, like prospects to get each one done and timing on those, or maybe just the amount of interest for each, something like that?

Jamie, we'll play catch. So, Nick, on Hoboken, we have back - we'll do it from north to south. In Hoboken, we have back two floors from Wiley, and we have about another four and a quarter, give or take?

Correct.

And we have paper out on about three quarters of that?

Yeah.

Even higher, a little higher.

80%.

Almost 80%, so we think that building could be full by the end of 2018, God willing and tenants actually do commit the way we think. If you roll down, Jamie, you go into the Exchange Place area, building 4A, which is TD Ameritrade, is full. The Plaza 1 is being emptied. That's undergoing renovation. Plaza 2 and 3, Nick, we have paper out for almost all the space, give or take.

Give or take, yes, close to 75,000 square feet, 50,000 square feet of it being in-place tenants for expansion.

Right, so we wind up - and that building will get into the low 90s when we're finished with that.

Correct.

Alright, then the two biggest vacancies we have there, Jamie, is 101 Hudson, which we just got back the AIG space. We're going to take a portion of that and turn it into an amenity floor. And then we have some tenant demand for about two floors?

Right now, it's about two floors, correct, and we are just starting our capital plan to renovate the - to gut the existing insulation there.

Right and that would take that building into the high 80s, maybe 90% if we did the two floors.

Slightly lower than that, but close to.

Close to. Then the last building, Jamie, to finish up the dialogue, is Plaza 5, which we got back the Allergen space, and we're getting back the ICap space at the end of the year. Then we have a prospective tenant for 210,000 square feet that may or may not come. We're in the proposal/lease negotiation stage.

And another 150,000 square feet behind it.

Right behind it, that building could get filled, if we were actually lucky. That's a little bit more, let's just say, on the outside of the probability as opposed to more probable. Does that answer your question, I hope?

Yeah, that was great. Thank you. And then I guess just tied to it, I'm just trying to gauge your optimism versus last quarter, because it sounds like you feel better about the conversations you're having, but you mentioned in the - you took down your leasing outlook in the NAV, and even your comments in this press release saying it's kind of taking longer than you thought. Can you just help us read through those kinds of mixed messages and where you stand versus this time last quarter?

Yes, I think we can put this down to the abused child syndrome. So we had a situation in which we expected things to probabilistically happen last year, right? We expected to get 300,000 square feet of leasing, have a problem that was substantially reduced. Last year was a complete bust, right? We basically got nothing. And every time we got close on a deal which we thought we would be good on, people assured us in the industry, brokers were confident - it didn't happen. So I've become a little bit more cautious, I've become more thoughtful. I've tried to present items that there's less ambiguity on. So if I'm sending a mixed message, I'll try to clear it up. I think today is much better than the last call we had three months ago. The market seems to be reacting very well to our capital plans. Tenants seem to like the buildings more, and we're getting much receptivity than we did before. One of the things I would point as a reason that it's changed is we have pumped a lot of money into our buildings over the last year and announced. As has been announced before, we put about $50 million into the suburbs. When we do tours with tenants today, they are somewhat wowed by what we have done. We have clearly the best buildings in our submarkets. The submarkets of New Jersey are very dependent upon, obviously, locality, and people really want to be in certain localities. On the waterfront, the comments that were given to us two years ago that I've reacted to is the tenants coming out of Manhattan want the amenities today. They don't want to wait for them, so we redid our lobbies. We have two new lobbies downstairs. We added restaurants. We have a few other restaurants coming. Tenants can see it. We've talked about before we added the ferry service. It just feels better. Now, maybe this will go away tomorrow - I hope it doesn't - but today, if you ask me, Jamie, we're more optimistic, but I'm going to use the word cautiously in front of that statement. Does that help to clear up my comments?

Yeah, definitely and then just a quick one for David, any initiatives we should plan to see? I know you haven't been there too long, but anything from the investor side we should expect to see with you in the chair?

Thanks, Jamie. So on the investor communications side, we continue to chip away and try to improve the supplement every quarter on the margin. We don't want any wholesale changes, so everybody has to restart over. And the other one I'm finally getting some time to turn my attention on is cost reduction and really working with the asset management teams here at just driving better margins in our properties and better tracking our cost of capital and our capital spend.

Okay, great. Thank you. Thanks everyone.

And we'll take our next question from Michael Lewis with SunTrust.

Thank you. My first question is about Nick's comments, and maybe I heard incorrectly, but I thought you said that you had maybe several hundred thousand square feet in negotiation for leases and a lot of net absorption. Could you just repeat that, how much is in negotiation and then maybe how many tenants make that up? Are there some large blocks there that make up the bulk of it?

No problem and I'll try and break it out, because I did, I spoke about the suburban portfolio, and I also spoke about the waterfront. So are you asking specifically about the waterfront and those absorption numbers?

The waterfront, yeah.

Okay. So I referenced two factors, right? So I referenced organic growth within the marketplace that we are seeing within our own portfolio and active negotiations, and that was 100,000 square feet of these negotiations we're currently in. It's approximately 100,000 square feet of net absorption from in-place tenants. Okay, so that was the first figure, and then towards - at the end of my statement, I spoke about overall negotiations we're in, right? So this inclusive of the 100,000 I spoke about earlier, but this is taking into account new tenants as well. So total footprint or total square footage would be about 700,000 square feet, and the resulting net absorption would be about 540,000 square feet. Now, again, these are in negotiation. This is not signed, but the idea of talking about this was to kind of juxtapose last year to this year.

Okay, thanks. Those are the numbers I thought I heard. I just wanted to confirm.

Yeah.

My second question is when I saw AllianceBernstein move into Nashville, I actually thought of you guys, and the reason for that is because they were looking to lower cost. They're leaving a lot of people and a lot of functions in New York, and maybe your space would've made some sense, but instead, maybe tenants that are cost-conscious in Manhattan, they're not just cost-conscious about rent, but they're - in this case, they were looking at cost of living and housing and weather. Are you seeing any shift in the tenants that are looking for the less expensive option to Manhattan, looking at other cities as opposed to staying here? Because this seems kind of like the kind of in between back office type of stuff that maybe Jersey City should have or would have captured in the past.

Michael, its Mike DeMarco. We had a tour with, actually, AllianceBernstein, an extensive one. We showed them some space. They were interested. They came back, and we've had conversations with them because they're actually a shareholder, so we see them at all the conferences. It's really about moving their entire back-office processing out of 1345 Avenue of the Americas, which is a relatively expensive space, into Nashville. We don't get a lot of processing here in Jersey City anymore. That's the old school. We get computer operations or tech. So if you look at all the buildings and you look at the wires in the street, which has the best network, I've been told, in the country - you have Goldman Sach's back office, but their trading operations in Jersey City. Deutsche, Sumitomo, Bank of America. In Newport, you would have [indiscernible], JPMorgan, DTC, a couple of the other - UBS. That's what you're finding. So the number of tech workers, when you run the map, that are concentrated in the Jersey City market is off the hook. I mean, it's a huge number. I actually sit on a board with the woman who runs the wealth management division of JPMorgan, and she says they just expanded extensively in Jersey City for the third time in the last four years, and it's because of that tech worker, which they can recruit, attract and then retain. Bank of America did the same thing to us about three years ago when they did the expansion at 101 Hudson. So the back office label needs to be dropped. It's really the tech part of it that we get. The tech isn't the tech that you know of as Amazon, but it's the tech in the sense of the data networks that run all these financial institutions, which are crucial to them, and they want to be on the wires, and the best wire network in the world is in New York City, and it really runs through New Jersey because that's where it comes in from the ocean. It comes in at Wall Township and runs its way up the turnpike.

Great, thanks. And just one more. It's about Roseland. You mentioned deciding if you want to sell another piece of it maybe late in the year. As you look at the value there, right, I mean, $15 of NAV - your stock is trading at just over $17. How do you think about - at some point, it makes sense to harvest that, and probably you've talked about a pure play from your office? How do you think about it from where we are in the cycle and the value that's there and kind of getting the most value you can? Maybe you could give a little more on your thinking on what you do with Roseland, how you want to monetize it, what kind of the end game is.

We've grown Roseland from virtually nothing. It'll be three years and a month from now that we had a dinner that Michael Bilerman hosted in front of a bunch of investors, which one of the opening questions is what was Roseland worth, and it went from a negative value of $2 to a positive value of maybe $3 or $4. I argued $6 at the time, and now we're looking at getting close to $16. So we've done a good job of creating NAV there, and we think there are still some things to go. We have now filled out the portfolio. The next move to go on the table is to trim Roseland, which we're starting to do, which is sell some of the older asset, as Marshall laid out, repurpose the capital, and then we have a spectacular development pipeline, which, honestly, is probably too large for a company of that size, so we're going to have to think about how we capitalize it or whether it's actually within Mack-Cali. And there's another question on the table, which I've always asked at each board meeting, is should Mack-Cali exist given the fact that investors look at New Jersey, and we've proven out that rents can rise, but is that a long-term prognosis that we can attract capital at? I've always made it a very clear function that my job was to increase NAV to basically get this platform cleaned up, and then harvest that NAV either through having the market accept the pricing or basically find a way to basically get the shareholders their money. That hasn't changed, and I think I'm on a path to achieve that with very good clarity.

Thank you.

[Operator Instructions] We'll take our next question from Tom Catherwood with BTIG.

Excellent, thank you. Mike, kind of going back to your comments about the leasing, you've talked about it last quarter and then in your press release and on this call about the leasing process taking longer than before. What is creating this? Is this due to challenges with Grow New Jersey approvals? Are companies just looking over a wider swath of Brooklyn, Lower Manhattan and New Jersey, or are there other reasons that these leases are taking longer than they usually do?

I think it's just been a couple of processes. The Grow New Jersey was a little bit of ambiguity, which I think has been cleaned up nicely because Governor Murphy isn't in favor of attracting new jobs, but probably anti - against retaining jobs in the state. It does exactly what New York City does, which is they will pay to recruit jobs, but not pay to retain jobs, and I think that's been pretty clear and people understand that. I think tenants just take a little longer because the decision matters to them more. I'm going to speak very candidly. I think, before, it was a self-entitlement at the chief executive level, like what was good for me, what was close to me. He didn't have that ability today. That today is being run by the HR department that says, we need to make a direct decision if you want to run and attract talent over the next 10 years or 15 years, and they're just spending longer to make that decision because it usually involves moving. So the guys in Jersey City that we're coming up for retention on, they're happy as babies. They want to stay. They've been recruiting people, they love us, and they're expanding. That's great. What we've had a problem with is - Deutsche was one of those companies that was consolidating into New York, and now they're building a new headquarters and they're in flux. We lost them. Allergen moved out and went basically to a campus, because they felt that their talent pool was really in Morristown, with the other pharmaceuticals. We lost them. AIG, which is a company is flux, downsized. We lost them. And then ICap, which is the data business/voice data, which is probably becoming in peril because of trading platforms, also left. What we haven't done is attract the next one who looks and says, I really want to be in Jersey City for the reason of attracting talent, so I can move next to Tom Catherwood in Hamilton Park and enjoy myself, right? We're getting those types of demands. Marshall and I were talking about it today. The city just feels more enlivened, and we feel better about it, and we have some things working that we think will take it to the next level. It's just taking longer for people to make that decision about saying, I'm going to probably go to an employee that won't need cars as much, that needs mass transit more and the idea of being out on Route 287 and some flat parking lot isn't working for us today. My people want this amenity and so on and so forth. So it just takes a little longer, and we're patient. We'll get there.

Very fair and then I just wanted to clarify one other item. I thought last quarter you had mentioned plans to put an additional $50 million into suburban properties as far as amenities. Then it sounded like, this quarter, you mentioned that that was already complete. Where are we kind of at with that spending process on amenitization right now?

So it came from a John Guinee comment two calls ago about putting money out, which we commented that it was something we had announced since the beginning that we needed to invest in assets, that my predecessor hadn't done that. That process is being completed probably in the next 30 days. I scream and yell at the construction meeting every Monday, if you want to come by, about that, because it just takes time to get the last few items done. But we've done all of the Red Bank market, the entire Metropark market. We've done substantially half of the Short Hills market. The rest we're going to do on some more minor things. We've done a decent - maybe 40% or 50% of what we own in Parsippany, all right, and this has been from lobbies to gyms to cafes to conference centers, and we're seeing rents basically go up around, as Nick pointed out, 14%, 15% over what we used to achieve, which is a relatively good payment, and we're getting better velocity. That's being done. In the Harborside market, we've dropped about $40 million to date, which is already completed. That involved a couple of new restaurants, new seating. We have two new lobbies. We did the MEP package on the first floor to modernize it, so we can do the next round of retail off of that segment. You have to actually do it in one thing, which we have a number of restaurant tours that we're negotiating with to bring in into the marketplace.

So other than the - set aside the $75 million that was planned for Harborside, other than those buildings, kind of what's left, then, for amenitization spending, outside of, obviously, TI costs and all that?

Well, the $75 million we referenced was substantially for Harborside 1, right? That's a 600,000 some odd square foot building. We're basically going to reskin it, bring it up to modern standards. It sits at the foot of the path. It'll be probably the best building in the marketplace from an amenities point of view and as a package, so it'll have new elevators, new bathrooms, new MEP, and a new skin, which is basically everything but the concrete. That building was built with relatively good clear heights and good column widths, so it actually works well for us. That's a project where we've been emptying the building out, and we're moving tenants into other parts of our complex. We're getting that back, and we'll be able to do that. The remainder is really going to be now more curating the space. So we've been buying liquor licenses up for the last couple of years. I'm proud to say we own just around 5% of the market, and we now have a number of tenants. We have a new restaurant going in the bottom of Urby, we have three deals that we're looking to put in the bottom of Harborside, and so on and so forth, and that's really where the money goes in, and those spends, to be honest, are about $2 million to $3 million per restaurant, sometimes as low as $1.5 million, but assuming $2 million to $3 million as an average, and we probably have four or five of these to do, and then some other retailing, but that's really about it.

So if we assume less than $25 million to kind of finish that clean-up, is that a fair rough number?

I would say that's a very generous number. It could be a little less than that too. Maybe $20 million or less would be the right number.

Alright, thanks, guys.

That would be done, by the way - and that would be done over an 18-month period, because as much as I'd like to get things done tomorrow, it just doesn't work that way. As my partner Marshall has taught me, everything we do in the construction business is built by hand.

Thanks, got it.

And we'll take our next question from Jed Reagan with Green Street Advisors.

Hey guys, a couple follow-ups. This question may be for Dave or Marshall. I think Roseland NOI growth was about 1% this quarter. I think it was more like 6% last time. I'm just wondering what drove that deceleration. And I know you don't give specific guidance for that metric, but is 1% kind of a reasonable run rate to think about for the rest of the year for Roseland?

I think the - I mean, rents are certainly flattening out somewhat. You're not seeing the same rent growth quarter to quarter in most submarkets because of the amount of supply. Jersey City, for example, had 4,000 units over the last year, so you don't see quite as much rent growth, and you have a lot of deliveries. We would've had, actually, slightly better growth last quarter in NOI, except we had four massive snowstorms, which is just a dollar-per-dollar hit on every property we own, and I can't quantify what that ding was, but it was significant. Most of the properties - most of the markets - our submarkets in greater Boston continue to have a better rate of growth than we've anticipated in the past, and we continue to manage expenses, so part of the NOI growth is on the expense side as we continue to consolidate expenses at the same time we're trying to grow rents. And we're essentially fully leased in the Northeast corridor, so we're running 97%, 97.5% leased, so as new products stabilize in the market, we should be able to continue growing rents. It might not be the same pace.

In sort of organic rent growth, what are you seeing in that portfolio overall?

I think organic growth is right now at around 2%, but it's submarket to submarket, so it's going to vary, and I think it varies mostly on deliveries. We're still seeing great traffic, and we're also continuing to see a growing demand of empty nesters. Some of the new lease-ups we're having, over half the tenants coming in are over 50 years old. That's very new for all these markets, so that makes for a slightly slower lease-up in some properties, but definitely good rent growth.

And looking ahead to 2019 on office expirations, can I get your updated thoughts on any potential move outs or potential move outs you're tracking for next year?

I think we'll be 100% retained, by the way, no move outs. As it stands today, based on the conversations we've had, 100% stay. It's not a big number, as you know, but that's only really two tenants who make up the bulk, and we've had really good conversations with both of them.

That's across the office, so I'm looking at the 11% expiring across the office portfolio, including the 'burbs?

Well, the 'burbs - I was doing the waterfront. That's what we're focused on. And in the suburbs, we'll probably have the same retention ratio we've been having, which is about 70%, and you can take it back out from there.

And similar in flex?

Flex is usually higher. Flex has been probably in the 75% range.

Okay, that's helpful. And then just a last one, I don't believe WeWork is in the waterfront, or any of the other kind of larger coworking firms. I think there was a deal that maybe went sideways with WeWork sometime recently. I'm just curious, are you seeing interest from the coworking firms in expanding in the waterfront? Is that part of the pipeline, or just kind of thoughts on their appetite for maybe expanding over there?

So we have Regus in the space already. They have two operations in Jersey City. They're also in Hoboken, at a competitor's building. We've seen WeWork has come out for tours. I had a conversation with them, as other people have had, and they look at the world and think that most of the people that are going to their locations in Lower Manhattan - a lot of them are coming from the New Jersey waterfront community. So if you live in Hoboken or Jersey City or Weehawken or West New York and you want to go to WeWork, you're getting on the ferry or the path and you're going over to Chelsea or Canal Street or all the other locations they have. The question is whether or not they want to cannibalize their own business or grow it accordingly. That's a conversation. We also see a lot of other startups in that space who come in, and the big question, as you've always known, in that space is the amount of capital you put out, the rent you receive, and the fact that the guarantor is usually nonexistent, so we look at that. We think it's a good use. We think that that's actually worked out well with Regus. We like Regus as a tenant here on the waterfront. They get a good pop. And we would also envision that we might see other people over time.

Would you do deals with some of those smaller operators?

It's a case-by-case basis, right? The thing that you have to learn in that business is it helps us in the following scenario. We're not a very big - we're not a small-tenant market in Jersey City, right? Buildings are big; tenants are big. They do very well at attracting guys who want to be in 5,000 square feet, who go inside their envelope of 75 or 60. The problem my colleagues in the business have is, if you put them in, then all of a sudden the 5,000 doesn't come to you, it goes to WeWork or it goes to Workshare or whatever, so you have to be careful about how you're putting them in and then how the formula works. Sometimes they want to do a revenue share, which I'm not a big fan of. But as a concept, I mean, the time I've spent in their places, I like the WeWork and Regus concept. I think friends of mine have used them, and they make sense in the marketplace. And I saw something recently in a piece that was out there that talked about how even corporations are utilizing them now for startups, like Apple might have tenancy in a WeWork or Regus because they needed to have 10,000 square feet. It was efficient for them, and they get started, they do it quickly, and the world has become a quick place. So the answer is we're very open to them, and you might see something from us, but it's a case-by-case basis.

Got it, okay. Thanks for taking all my questions.

And we'll take a question from Manny Korchman with Citi.

Hey, it's Michael Bilerman. Dave, on page 23, the transaction activity, the dispositions, you quote a 664 cap rate based on forward NOI. What would be the - most of these were sold in the quarter. What is actually the sort of in-place NOI on both the cap, GAAP and cash basis? And what would these commensurate cap rates be?

Thanks, Mike. So, yeah, the 664 cap rate is a forward 12 cash cap rate. That is very close or almost on top of the in-place cash NOI. The GAAP cap rate for this batch of sales is 6.9%, just about 7%. And here I'd also like to highlight to everyone, on our remaining sales, because it is heavily skewed towards land and non-operating office, we have less than $1 million of NOI on an annual basis left in those properties, so holding onto those properties is really not going to help us much. I'd rather have the proceeds to pay down debt earlier. So I'd just note that for everybody.

So that's $1 million annualized, and $170 million left to sell?

Yeah.

And then as you think about it, is there debt associated with any of that $170 million, or is it all free and clear?

No, all free and clear. Like I said before, we don't have any office mortgages due until 2026.

And then on that $170 million, if memory serves, I thought the majority of the totality of the office sales were going to be first half executed. As you think about the $170 million, I guess is there stuff under LOI? Is there stuff under contract? How much is being marketed? And sort of what is the timing of that remaining $170 million to be disposed? Because, obviously, it's dramatically earnings enhancing as you basically are able to pay down your line, which you just took up.

So, Michael, it's Mike DeMarco. So with the $232 million - which is about, say, 55% - in the first quarter, the two biggest pieces of the remaining $170 million is 650 from road, which is the remaining piece that we have in the Bergen County portfolio, which we have a deal signed, and the guy is going through due diligence. We've sold assets to this individual and his affiliations before, so we feel pretty comfortable about that, and that should probably close in the third quarter. We can make no guarantees. It might slip into early fourth. The other piece, that's the largest one, is the infamous Pearson site in Upper Saddle River, which is like a $44 million, $44.5 million deal that my colleague Marshall has under contract to Toll Brothers. It's a hard contract, full due diligence. It needs to get certain county and local approvals, which they're at the very, very end of it, and that deal should basically close - it could close as early as next month, or it could close in five months, but it's going to close. That's one pretty much that's baked, I would say, very fully. Those make up the majority of that number. The last $60 million or $70 million - if it's not that number, then it's $80 million - is in about another 10 deals that are relatively minor, and we're in various stages of negotiation with people, some hard, some deals are signed on for, and some deals still have due diligence to do. We feel very comfortable, given how much we've accomplished over the last two plus years in this process, this is all going to get done.

And what's embedded in the guidance, I guess, for the accretion now for this $170 million in terms of timing?

It's also built into the numbers already. This is no - there's nothing new in this number.

Well, I know it's all accretion, right? Because if you're not earning any NOI and there's no debt, you're going to get $170 million, and you can immediately invest that capital on your line of credit, which has got to be running you at least a 3% or more yield, so as these get executed, FFO should go up. I just didn't how much, what the timing was embedded in the 160 for the year.

Mike, I'd just point you to the roll-forward schedule. We had between $0.17 and $0.11 of year-over-year dilution from the dispositions, and it'll be skewed more towards the $0.17 than the $0.11 because we're selling the income producing upfront. In the rest of our guidance, the interest expense still falls in between.

Perfect, alright, thanks guys.

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

As always, we thank everyone for joining us. We know time is valuable. We appreciate it. Have a great day.

This concludes today's call. Thank you for your participation. You may now disconnect.