Mack-Cali Realty Corporation
Q3 2017 Earnings Call Transcript

Published: 11 Nov 2017

[Operator:]

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

[Michael DeMarco:]

Thank you, Operator. Good morning, everyone, and thank you for joining the Mack-Cali Third Quarter 2017 Earnings Call. This is Mike DeMarco, CEO of Mack-Cali. It's a great day on the waterfront in Jersey City. I'm joined today by my partners, Marshall Tycher, Chairman of Roseland, our multifamily operation; and Tony Krug, our 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 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. Last night, we filed one slimmed-down supplemental for the company this quarter and revamped it again based on a number of suggestions. We will continue to work to refine this document to contain only the most relevant information, and therefore, we welcome all comments. We'll also be referring to key pages in the supplement during this call. As we have done before, we're going to break the call down to following sections. I will discuss our office leasing performance and our view of the markets. Tony will recap our operating results for the quarter, and then Marshall will provide insight into our multifamily operations. I will then provide an overview of our capital market activities and our guidance for the fourth quarter of 2017 as well as provide an update on our strategic plan before we take your questions. As disclosed last night, we had a very good quarter, our tenth in a row as a team, as we delivered positive results for 2017 and laid the beginning of the groundwork for 2018 and beyond. Our disposition strategy, which involved rebalancing our portfolio, is coming to a close. We completed a number of key dispositions this quarter and have the balance up to close in the fourth quarter or early 2018 for tax reasons. The lease-up of 1,160 units that we delivered this year has been completed as we are now over 95% occupied as of today. Lastly, we've seen some early activity in the waterfront in the form of renewals, expansions and some new deals, all with tight concessions with a rent at historic highs of $49 to $51 per square foot. I'd like to make some additional comments on 3 areas of our business. First, regarding operations, we had a solid quarter in our effort to transform and operate the company. We executed on all objectives for this quarter from a leasing disposition perspective, and our residential business continues to outperform. The results of operation allowed us, again, to produce another quarter of excellent growth in AFFO, which we highlighted in our press release. I'd also point out, on Page 22, we had a 6.5% same-store NOI growth for year-to-date 2017. Second, the strengthening of our balance sheet is a core focus. We maintained our leverage ratio this quarter, with interest ratio at 3.4x and fixed charge coverage at 2.6. Our line is no longer being drawn down each quarter as we've refinanced our balance sheet, and we now can focus on reducing debt levels, which we started this quarter, due to our sales effort. As Tony will go over in detail, we now have a complete available line of credit, and upcoming sales are targeted to pay off both unsecured and secured debt in this quarter and early first quarter of 2018. Third, our portfolio has been defined. We have a focus on the waterfront and other key transit-based locations for both office and multifamily. As stated earlier, our sales activity will be complete by early 2018. The transformation of our platform is showing real results in increasing revenues for both office and multifamily while delivering stronger operating margins. Take note of the fact that we're producing increasing net cash flow after dividend and CapEx needs for the last 3 quarters, expect to do it in the future, but we are investing in our assets in a number of new cafe, gyms and lobbies. These renovations totaling approximately $50 million has been substantially funded and will be completed in early first quarter 2018. The improvements are being highly noted by our tenants and brokers. This is changing the way we are perceived in the marketplace dramatically. In 2018, we'll be using our net cash flow to fund the $75 million transformation of Harborside. Moving on to leasing. Our core waterfront and flex portfolio of commercial properties was 90.1% leased at September 30, up slightly from last quarter, 89.9%. We're currently having a solid fourth quarter as October had some significant leasing activity at excellent levels. We signed almost 750,000 square feet of transactions during the quarter, bringing our year-to-date leasing activity to over 1.8 million square feet. As previous -- indicated in previous calls, given our repositioned portfolio, we set a goal of 500,000 square feet per quarter, and we have exceeded it for this quarter. Across all segments, our rents on third quarter deals rolled up 6.6% on cash and 14.6% on a GAAP basis. For the full year, we have rents rolled up at 1.2% cash and 14.3% on a GAAP. We continue to hold the line on leasing costs. For this quarter, we committed $2.03 per square foot per year of lease term. Our year-to-date average is $2.16, well below where we've been in recent years. And as I mentioned on our last call, highlight of our third quarter transaction is the long-term renewal we signed with Montefiore Medical Center for 300,000 square feet across several of our buildings in Westchester County, New York. Of that total, 115,000 feet represent migration of 2017 and 2018 rollover. As for the properties we plan to sell, remaining rollover for 2017 is approximately 681,000 square feet, and 2018 expirations have been reduced to 1.5 million square feet. In the supplemental, we have some preliminary thoughts how to handle this rollover on Page 21. Our transformation of Harborside is well underway, and tenant interest continues, but those companies still have been slow to commit. We believe our addition of a ferry station in Harborside connecting us directly to Hudson Yards and Brookfield Place in less than 8 minutes is a great addition for us. While market vacancies increased slightly on the Hudson Waterfront, asking rents rose again 1.9%, above already their historic highs. Looking at the broader markets. New Jersey stayed the course during the third quarter. Leasing activity continues to lag behind 2016's breakneck pace. But key markets such as Monmouth County and Metropark have produced significant drops in vacancy. Direct Class A rents across state have increased year-over-year from $30.50 to $32.10. Demand is largely being driven by tech and life science sectors that we anticipate will be drawn to our many rich waterfront and transit bay locations. We look forward to a positive finish to this year. I'll now turn the call over to Tony.

[Anthony Krug:]

Thanks, Mike. Funds from operation for the quarter ended September 30, 2017, amounted to $57.8 million or $0.57 per share as compared to $59.9 million or $0.60 per share for the quarter ended September 30, 2016. For the 9 months ended September 30, 2017, FFO equaled to $174.1 million or $1.73 per share as compared to $172.2 million or $1.71 per share for the same period last year. Core FFO for the quarter was $57.8 million or $0.57 per share as compared to $56.5 million or $0.56 per share for the quarter ended September 30, 2016. Net income available to common shareholders for the quarter ended September 30, 2017, was $38.1 million or $0.39 per share as compared to a net loss of $8.5 million or $0.10 per share for the quarter ended September 30, 2016. For the 9 months ended September 30, 2017, net income available to common shareholders was $20.6 million or $0.06 per share as compared to income of $102 million or $1.13 per share for the same period last year. Included in net income for the quarter were gains from property transactions of $41.9 million and net gains from property transactions of $21 million for the 9 months ended September 30, 2017. Same store NOI was up 4.1% on a GAAP basis and 6.5% on a cash basis for the quarter, with the first 9 months at an increase of 4.8% for GAAP and 6.8% for cash. Total company G&A for the quarter was $13.1 million, with $10.2 million for the office public company and $2.9 million for our Roseland subsidiary. Turning to our financial statistics. Our total indebtedness at quarter-end was $2.8 billion with a weighted average interest rate of 3.87%. Debt-to-undepreciated assets ratio was 46.2%, and net debt-to-EBITDA annualized was 8x for the quarter. We had a fixed charge coverage ratio of 2.6x for the quarter and interest coverage of 3.4x. Our $600 million unsecured credit facility was undrawn at quarter-end. I will now turn the call over to Marshall.

[Marshall Tycher:]

Thanks, Tony. Roseland had a strong third quarter, led by recent lease-ups and stabilization of Urby, our 762-unit, 69-floor tower along Jersey City waterfront, which commenced leasing activities in March, is over 95% leased with average rents of approximately $58; and Chase II, our 292-apartment project representing the most recent phase of development in our master plan for Overlook Ridge community, north of Boston. Quarry Place, a 108-unit apartment community in Tuckahoe in Lower Westchester is currently 75% leased and, we expect, will stabilize in early 2018. Collectively, these 3 communities total 1,162 apartments that will deliver approximately $14 million of additional stabilized FFO. At quarter's end, Roseland's stabilized operating portfolio had a lease percentage of 97.4% as compared to 97.9% last quarter. Rents in Jersey City and Overlook Ridge, our large 2 sub-markets where we delivered M2, Urby and Chase II over the last year, were up 2% and 1.6% year-over-year, respectively. Moreover, our stabilized Jersey City portfolio of Marbella, M2 and Monaco maintained an average lease percentage of 97.9% during the adjacent lease-up of Urby. In addition to our stabilized and leased-up portfolios, Roseland has 1,928 apartments and 372 hotel keys in construction and 9 projects. As detailed on Page 41 of the supplemental, this construction portfolio represents $785 million of costs with $55 million of projected untrended NOI, generating a blended yield, including the hotel, of approximately 7%. Average Roseland ownership across this portfolio was 96%. We forecast initial deliveries of 1,025 apartments in the first quarter of 2018 from our construction portfolio, including RiverHouse 11, a 295-unit apartment community on the Hudson Waterfront in Port Imperial; Portside Phase 2, a 296-unit apartment community in East Boston waterfront; Signature Place, a 197-unit community in Morris Plains, New Jersey, representing the first delivery of our re-purposing program; and the Residences at City Square Phase 1, 237-unit community located in downtown Eastern Massachusetts. These first quarter deliveries are forecast to produce $14.4 million of additional FFO upon stabilization. As detailed on Page 33 of the company sup, we forecast our combined lease-up and active construction portfolio would generate approximately $46 million of new additional FFO after debt service. Roseland recently entered into 2 acquisitions which had and will utilize 1031 exchanges. In the third quarter, the company acquired a $44.5 million land note encumbering a potential future development site in Jersey City. We're working on approvals, which will ultimately enable us to acquire and develop the property. In addition, subsequent to quarter-end, Roseland reached an agreement to acquire and improve a residential development site in Jersey City's waterfront sub-market. We are targeting a mid-November close and a mid-2018 construction start for a 749-unit mixed-use project, which will include an elementary school and will benefit from the below-market 20-year tax abatement. We anticipate construction -- commencing construction before year's end of a 360-unit Riverwalk C in Port Imperial. Development of this site will allow us to complete Port Imperial's Riverwalk neighborhood retail corridor. We are also finalizing pre-development activities on a number of future starts in 2018, including Harborside in Jersey City, Port Imperial and Overlook Ridge. As detailed in the supplemental, we estimate a Roseland NAV of approximately $1.62 billion. After accounting for Rockpoint participation, Mack-Cali's share of Roseland NAV will be approximately $1.47 billion or $14.60 per outstanding Mack-Cali share. Importantly, this value is primarily in operating or in-construction assets and geographically concentrated along the Hudson Waterfront and key Boston submarkets. At quarter-end, the Rockpoint Group had $150 million of capital investment in Roseland. I'll now turn the call over to Mike for closing remarks.

[Michael DeMarco:]

Thanks, Marshall. Before we take questions, as I stated earlier, we finished the third quarter 2017 on a strong note. You know our objectives. Fourth quarter is also looking a bit stronger than expected, therefore, we're updating FFO guidance for 2017 in the range of $2.23 to $2.27. We'll provide 2018 guidance early in the year, allowing us to even more time to execute and complete all our pending transactions. We've done a great deal of work in the last 30 months, and it's really making a difference in our results. Consider that by year-end, we will have sold over half of the assets we inherited when we started in 2015 in June. Selling is rarely accretive. We believe our efforts would significantly strengthen the company, however. The sale of $1.5 billion of assets results in a loss of earnings of approximately 2%, which equates to $30 million or $0.30 per share of FFO. However, our earnings over this time actually increased significantly. How did we do this? We accomplished it in 6 ways. We reduced personnel costs. We reduced operating costs, thereby, expanding margins. We lowered our cost of capital. We leased up vacant space. We reversed the roll-down in rent and now have 10 quarters of GAAP and cash roll-up. And sixth and not least, we established a real multifamily platform which supported growth prospects. The reason why I mentioned this is we've always confidently looked forward. Someone personally told me this past week that I should take a moment to look at what we've accomplished over the last 30 months. Once we complete the sale process, which is coming to an end early in the next year, all the gains in the future of these areas that we talk about, which we will leave -- still, I guess, exists for us to do in 2018, will solely accrete to earnings. As a preview, 2018 will be a year that we'll be focused on 2 major areas, in our opinion. First, the lease-up of the multifamily deliveries that come throughout the year, as Marshall outlined. And then -- and they come from a variety of excellent projects. We believe, based on current conditions, that this will go very well. Second, the lease-up of the vacancies in the waterfront based on our completed and planned improvements. We believe we will make steady and productive progress and ultimately drive higher earnings and greater value for our shareholders. I will now turn it over for questions. Operator, first question, please?

[Operator:]

[Operator Instructions]. We'll go to John Guinee, Stifel.

[John Guinee:]

Let's see. First, I noticed there was a property list omitted from your sup, and I think there's no list of year-to-date acquisitions and dispositions. Is that correct, Tony?

[Michael DeMarco:]

He's checking. He'll look through it. John, we struggle, when we do the sup, to get it down to -- we have a rule of 50 pages or less. So we might have thought about that -- those pages not being particularly relevant.

[Anthony Krug:]

Yes, John, we don't have a property list, and the acquisitions and dispositions, I guess the activity is in a number of different places. But as I might have pointed out to you in the past, and we'll look to making the change in the future, the information is in the 10-Q. But we can put a page in the sup going forward,

[Michael DeMarco:]

If that's your suggestion John, assume it will be done for next quarter.

[John Guinee:]

And I guess you don't yet understand that you're the only guys who don't do that and that probably everyone on this call wants that information in order to understand cap rates and proceeds and price per pound and adjusting their NAVs and replacement costs accordingly. Do you understand that people want something that simple? Second is it looks like you paid $44 million for 1 piece of dirt. What did you pay for the other piece of dirt? And that $500,000 a key, it looks like the development cost for that is about $350 million to $400 million. Is that correct?

[Michael DeMarco:]

The projects we look at in Jersey City are about...

[John Guinee:]

Just answer the question.

[Michael DeMarco:]

Yes, that's 750...

[John Guinee:]

Just answer the question. Yes, the 750-unit one, how much did you pay for that? What -- when does it close? And how much is it going to cost you for the dirt?

[Michael DeMarco:]

It's about $53 million of -- at closing for the land. And the project would be about $350 million to $400 million. You're correct.

[John Guinee:]

Okay. So you just closed on $100 million of land when you're at an 8x net debt-to-EBITDA. You just told us you're going to spend $150 million on renovating your core North Jersey portfolio of office and $75 million on Harborside, plus you've also told us that you're going to pay down and delever $460 million worth of debt. I know the math doesn't work.

[Michael DeMarco:]

It does actually work, John.

[John Guinee:]

Can you explain to me why I'm wrong?

[Michael DeMarco:]

Well, because you've put them all together so quickly, you kind of jumbled it up. One, we already funded...

[John Guinee:]

Okay. Let me give it to you again. Let me give it to you again.

[Michael DeMarco:]

John, I have it, John. I don't need you to give it again. I don't need again. Thank you. The $50 million of renovation, we already funded substantially. That's already been done, right? It gets completed in January or February at the latest. But as we sit here in November, almost all that money has been out. There's a little bit left, right? So put that aside. Second of all, the Harborside renovation comes off of cash flow. It's a 2- to 3-year project. That's $25 million to $30 million, which we project we can easily handle. Third, as Marshall pointed out, the acquisitions we made were 1031s, which mean I had to basically reinvest the money because the tax penalty exceeded what I was getting in proceeds. So I didn't really have a choice about taking that money and paying down debt. That's why we used it as 1031. Fourth, I already laid out we went down slightly in debt this quarter with some of the lines being paid down. We haven't really made any new acquisitions. So what we're doing now going forward is the sales that are coming through that I laid out, go to pay off the bonds that come due in December and the mortgage on Plaza 5, which we outlined. But we accomplished our objectives for our dispositions, right? I still have to reinvest in the assets. Otherwise, I want to have a continuing cash flow and have to balance all 3 of them.

[John Guinee:]

So from the end of the third quarter until the end of the fourth quarter, what is your sale proceeds? And then how do you fund $100 million of debt -- of land acquisitions out of those sale proceeds plus the Harborside, $75 million, plus $460 million worth of debt, plus finance a few thousand units of Roseland Realty Trust starts?

[Michael DeMarco:]

The starts are already -- the starts already -- the 2018 deliveries have already been funded. Other than a little bit of debt that we draw off the construction lines -- we don't draw down on our balance sheet. It's substantially -- well, we don't put new money in, right? No sales are going to start a new project. The deals that we sold or will sell in order to fund the acquisitions for the 2 land parcels, one is Upper Saddle River, which is due next year, which has a fairly large embedded cap gains, which I can't avoid. So I'm using those land proceeds, which have been essentially dead money sitting in a safe in Upper Saddle River, and moving it to Jersey City, which, sometime in the future, we could use. Once you own the land, which we will, and it's a site that you can develop on, which Jersey City is, I don't have to put any more capital in because I could just easily do a 50-50 JV with an institutional partner. So I'm not looking to expand the balance sheet more by buying deals. I was looking to protect our tax basis. The other deal we sold was Curtis Center, which had an embedded tax gain because we had rolled, prior to my taking over, the gains on the Wyndham sales into Curtis, which I then needed to roll into another transaction, which we rolled into the Jersey City site. Again, we don't get the proceeds if we don't roll over the tax base. So I just rolled 2 dead money deals, both of which had 0 EBITDA or NOI to us, and put them into land parcels, which I then think I can attract a joint venture partner in the future to develop. So putting that aside, the Harborside goes out over 3 years. The suburban has already been funded. So now we're left with the core question, which is the sales. The sales, right now, the line is undrawn. So the line had a balance on it. We basically paid it off. The future sales go out. We basically use it to basically pay off the bonds, and then we use it to pay down the mortgage on Plaza 5. And it's laid out. Between now and the first quarter, we have enough proceeds.

[John Guinee:]

And how much more of the asset sales you mentioned so many times but never listed what's been done and what hasn't been done -- how much hasn't been done as of 9/30?

[Michael DeMarco:]

On Page 23 in the sup, John, the disposition page, it basically says through 9/30, we did $472 million. I have $364 million under contract. I have another $69 million scheduled for the beginning of next year. And I have some additional ones that are probably about to be contracted for. That forms the essence of what we would use. That's over $400-some-odd million, about what I had on bonds and mortgages, give or take. I might have a little bit I might have to put on the lot.

[Operator:]

We'll go next to Michael Bilerman, Citi.

[Michael Bilerman:]

Look, I was wondering if you can go through some of the leasing activity for the 2017 expirations and what's coming up in '18 and as I just think about your balance sheet and your stated goal in the sup of wanting to stay under 7x debt-to-EBITDA. Based on the office portfolio, you will only have this massive lag because of the stuff that's not leased yet that's rolling. You got to have it leased, and then you got to redemise the space. The tenants got to work out, and then ultimately, they'll start paying cash rent. So walk us through -- and it's not inconsequential amount of space and NOI or EBITDA that's going to go away during that time. And I recognize you say it's not a question of if it gets rented. It's when it gets re-leased. So it could potentially be a big lag, right? Someone is not going to take the space as is, and it's still not yet leased, the stuff that's rolling in the fourth quarter, plus a big chunk in 2018. So maybe you can walk through some of that, where things stand and what the potential timing is because it just sounds like EBITDA is going to go down before it goes up.

[Michael DeMarco:]

So if you look at what the sup puts out, we have about 2 million square feet for 2018 and 2017 combined, right? So it's a little lighter than it's normally been for 2018 because we've redefined the portfolio. It breaks down to some easy components that allow us to basically get to the right number. The smallest portion that's on Page 21 is the non-core, which we're selling. So that will be gone, so we don't have to deal with that rollover. Flex is about, give or take, 15% or 20% maybe of the remainder. The remaining flex portfolio is Westchester County, which has always been in the low 90s, so we don't really feel a little uncomfortable rolling those tenants over. The urban core is just about 7%, 8%, which is mostly Short Hills and Metropark, in which we enjoy relatively high occupancies, and there's been some tenants that want to expand. We're good on that. So we're good on the 30% of it relatively easily. The suburban core, we have a couple of new tenants taking some space in, hopefully, the fourth quarter or the first quarter. So they'll be in early, which means they'll be paying rent soon, which I believe will then help us achieve that $277 million, which shouldn't be a problem for us. So it really comes down to the waterfront, bigger rents, bigger tenants, bigger vacancy. So Plaza 1 is going offline, which is going to totally redo the building, as I just discussed with John, to basically get it to the standard upon which we could get the rents that we want. The rent expiring there from Deutsche Bank is probably in the $33 to $34 level, and we think, given what we get on other buildings in the marketplace, which is $49 to $51, that if we redo that to the standard that we should do to, we'll be able to get those rents. So the return on invested dollars is excellent. Now that would be problematic if you say, okay, how long does it take. But that's the last block of vacancy we'll deal with. We have a tenant looking to expand in 101 Hudson to take a floor. We have a tenant looking to -- a new tenant looking at a space in Hoboken. And then we have a couple of tenants looking to expand. So we think the fourth quarter, we could eat up about 100,000 square feet of that 867,000, plus some stuff that we still have leftover. And each quarter, we need to do about 100,000 square feet of new leasing on the waterfront for us to basically do around 500,000 between the fourth quarter and next year. If we do it programmably, it will roll in the same way, and that should recoup almost everything we're losing. So we hope it's a 5-quarter problem. The first quarter, we think we made the right moves. Now we need to have the first quarter of next year, and then, obviously, each quarter subsequently to get to the same place. The rents that we're losing, you have to look at it as a balancing act. Our multifamily has ramped up. So the things that we delivered in the fourth quarter this year now have greater cash flow next year. And the units that Marshall deliver during the course of the year provide us revenue. So while we're losing office on one side, we're steadily gaining multifamily on the other because that's a more meaty revenue and bottom line hit. And the 2 don't balance out. We have a loss, but we think it's a loss that we can recoup during the course of '18. That sets us up for '19 to have an excellent year because then you'll have the engine running on all cylinders, which is -- by then, the waterfront should have been re-rented, and we will have the multifamily stabilized. The two then combined add substantial growth to our numbers. Did I answer your question, Michael?

[Michael Bilerman:]

Well, I mean, let me go to numbers right? There's going to be a period of time for the fourth quarter roll, and the 2018 roll, there's going to be a certain amount of NOI and EBITDA lost before you can re-lease it, recommit the space, rebuild-out the space and ultimately have cash rent-paying tenants. So I understand you're going to get some benefit from the multifamily business and the developments there, but I'm having a hard time understanding how your office business does not ramp up in leverage pretty significantly by the amount of capital that you need to put out, which you've talked about, and then the loss of EBITDA. And so when we get on the call in the first or the second quarter and your stats will show EBITDA lower and debt much higher, you're going to have to sort of have a discussion about it, right? So I'm just trying to understand your sort of bridge in getting there from a leverage perspective.

[Michael DeMarco:]

From a leverage perspective, what we've done is we've bifurcated the leverage. So while John looks at it and says it's 8x, right, the 8x has really been split. The office business is where we put most of the leverage on. We haven't added, really, that much of leverage in the -- sorry, we added leverage in the multifamily business, not the office business. So every time we build a project or we acquired one, we're at 60% leverage, which obviously blows your net debt-to-EBITDA. On the office side, we've been progressively paying it down. And now the thought is we would take care of the bonds this quarter, the loan on Plaza 5 through sales, take an earnings hit, but which is somewhat muted by the rent-up or lease-up and also the fact we continue to have roll-up. I pointed earlier we've done what people said we couldn't do, Michael. When we started 30 months ago, everyone said, you can't sell. You'll be dilutive. You can't go into the multifamily business. You won't get there. We started off with $1.72 the first quarter we worked. Now we're at numbers where we're thinking about $2.24 to $2.27. That's $0.50 higher, right? We have been able to do it. We've cut expenses. We've reduced personnel cost. We reduced the leverage cost. We rented up space. We're 90% occupied. The day we took over our core portfolio, which is definitely different -- same-store was 82%. We're just going to get there. I mean, it's simple math. My multifamily ramps up. I lose some office. I have some new deals coming in this quarter, which will get me to the bridge. My first quarter is -- or probably, my first 2 quarters are my worst. And then by then, I should be coming out of it and getting to the right spot at the end of '18.

[Michael Bilerman:]

Okay. Last question just on the sales. How much dollars were sold in the third quarter, at what cap rate? What was the timing? And then of the 434 that's pending, what is the anticipated exit cap on those assets?

[Michael DeMarco:]

I'll give you the blend for the whole because it's really just the way we look at it. We've been averaging around $100 a square foot.

[Michael Bilerman:]

Yes, but we need the third quarter, right, because third quarter was reported. So how much was sold in the third quarter? What was the timing of it? What was the exit cap? And then how much -- on the 434, what's the cap rate on that?

[Michael DeMarco:]

Right. It's 344. We sold it probably toward the end of the quarter, give or take. Some stuff came in, in July. Some stuff came in August. The bulk of it came probably in September, just the way the calendar worked. About $100 a square footage is where we averaged. Cap rate was about a 6.5%. And for the year, we're projecting essentially about the same price per square foot. The cap rate might go a little bit lower because there's some buildings that are substantially vacant. We might average a little bit like towards 6.3%.

[Michael Bilerman:]

That's for the 434?

[Michael DeMarco:]

Yes. In that range.

[Operator:]

Our next question comes from Rob Simone, Evercore ISI.

[Robert Simone:]

Mike, just real quick on the NAV sheet. I noticed you guys took the midpoint down by a couple bucks. And just given the sales in the quarter and all the moving pieces, just trying to pin down exactly where you're taking a more -- or if you are taking a more conservative approach and whether or not that could be a result of getting lower pricing than expected on your asset sales. Just the ins and outs and all the different components building up to that.

[Michael DeMarco:]

We took a hard look at NAV this quarter and laid out more pages with more assumptions. And we looked at where we were trading at and where The Street estimates were and then said, okay, what exactly are we looking at? And what are we getting on sales? And we had some new sales activity and looked at some things that have -- compatible to us, took a harder look and then redefined it at the end of the quarter. It didn't move by more than -- it's not a 10% move, that's for sure. It's maybe $1. It's probably 6% to 8%. But we looked at it, took a view and said, we do this once a year, usually around the third quarter because by then we've had most of our sales activity. We also have more leasing activity and it gives us a chance to bridge into what we think is a clearcut view. We do it pretty stringently every quarter for the multifamily division because of our partnership, and then we took the same view on the office business.

[Operator:]

We'll go to Jed Reagan, Green Street Advisors.

[Joseph Reagan:]

I guess just a follow-up on that last question there. In terms of your view you're giving us of the internal NAV. Was that a reflection of what you sold year-to-date kind of coming in a little weaker than your expectations? Or, I mean, do you sort of see that look through for the rest your portfolio makes you feel a little bit less robust on kind of what that stuff is worth?

[Michael DeMarco:]

We took a look at where leasing activity was. We looked at what we thought we would have projected for 2018, Ned -- Jed, sorry. And we come back and said to ourselves, okay -- there was a trade on the waterfront, for example, for a building called 10 Exchange owned by Manulife or John Hancock. They sold it on the Singapore Exchange and they got $5, $10 a square foot. I could have extrapolated my whole portfolio over that, but I don't think that would have been appropriate. But I did look and said, okay, what is my IRR? What's my current cap rate? What's my embedded growth? And where should it come out to? As I sold more of the Flex business, I probably got a little bit less proceeds, but I got rid of the stuff that I didn't want in New Jersey. I've reflected it in the NAV. If you sell, it's not accretive. We looked at the numbers, took a hard look at what the numbers should be, took a view as to what the buckets we have, what we think the Short Hills, Metro Park would actually sell for. There's been some activity there about other trades. There were some buildings sold in Summit, which is effectively next to Short Hills and we could comp that off of JFK Parkway. There are some asset sales in Metropark that are ongoing. We had a view toward what those buildings should trade at. We took that data, applied it to the portfolio, took a hard look at what the suburban remaining was and came back to a new number. Just a thoughtful approach we do once a year.

[Joseph Reagan:]

Okay. And cut me off if you've covered this. I dropped off there for a second because of technical difficulties. But the math on Page 7 of your sup suggests that year-to-date sales have been about $50 per foot. Is that, right? And then how does the 9 million square feet you sold this year shown on that Page 7 tie to the stats actually on that page, too which shows more like 4 million square feet that's been sold this year -- or is going to be sold this year?

[Michael DeMarco:]

Jed, I'm going to get back because I seem to have made a remiss by not putting in a page that listed acquisitions and dispositions because everyone's so focused on what we sell, even though it's gone in our opinion. I will get back to you. I stand by my numbers. It's $100 per square foot. The cap rate's a mid-6, right. I know what we sell. The range is anywhere from $50 to $171. I'll get you -- I'll put another -- I'll put a disclosure out. It's not -- look, some of this stuff is partial. Some of this stuff could be JVs. I mean, I loved that -- I mean, I'm a little frustrated because everyone loves to focus on what I sold as opposed to what will remain. But I'll deal with it accordingly. I'll get you the data.

[Joseph Reagan:]

Okay, appreciate that. It looked like you moved about 600,000 square feet from that urban core portfolio into noncore. Can you give us a little flavor for kind of what were the assets that were moved over there? And has your view changed on a specific submarket?

[Michael DeMarco:]

Yes, we went through, and we had a suggestion from somebody that we were outlying the markets. So we took a harder view and said, okay, what do we really think is our Class A product, that -- which is really Short Hills and Metropark. And then we reclassified some things as suburban, and then we, obviously, moved some stuff that we think now we want to sell. It's just the way we go through it. And we just essentially come back and say, what do we think is our ongoing portfolio? I mean, I have to say this. I'm going to be emphatic about it. I never worked in this company 30 months ago. So for 30 months, I've been trying to figure out exactly what the assets should or should not be that we should own. I try to do my best quarter-to-quarter and to put my intelligence in that use, but you guys are holding me to a standard. It's fundamentally, the waterfront assets which we want to hold. Flex, we made a decision to basically sell it over time, and it's supposed to sell [indiscernible]. The remainder is only the Westchester, which has the best results. Multifamily has been defined. And between the Suburban portfolio, I break it out into two buckets, stuff I really think is Class A that could trade to institutions, and stuff that I own that is core that I think I can get the right IRR on. That's where the math is.

[Joseph Reagan:]

And what's the timing for sort of unwinding the flex portfolio? Is that a couple years?

[Michael DeMarco:]

No. What I have remaining, I think I'd like to hold on to and get a good bid. I've gotten unsolicited offers to move it at a good number. I may take that up with the board. It's a question of then, again, what we'll do with the proceeds. We have a fairly decent embedded gain in that portfolio. We've owned it for a long time. When you own things, you depreciate them. When you depreciate them, you have gains, so now we have to deal with that accordingly. Selling is not that easy, and we've probably sold more than any company our size in the history of the REITs. It's an art form. We can move things around to some degree, and then we'd see our proceeds and we use it appropriately to pay down debt.

[Joseph Reagan:]

Okay, great. And maybe last one for me and I'll jump back in the queue. But recent broker conversations I've had suggest the state of New Jersey has been reducing the size of the tax incentives they've been offering for tenants relocating to the waterfront, but it's sounds like they're still offering full credit for maybe more distressed urban areas. Can you offer any perspectives on that and if you think that could impact your ability to lease space there? And then also, I'm just curious what the future of the program might hold just given the change in the governorship last night.

[Michael DeMarco:]

Yes, I think I've had conversations with the governor's staff that would indicate that he's open-minded to the incentives. I think some of the incentive packages that were given maybe intrastate were considered to be maybe too large, so people would just move from one county to another. Regarding the waterfront, we haven't seen the dissipation of the credits. There really hasn't been that much activity, so I don't know if the brokers know more than we do. I would argue probably they don't. The incentive is the same. Jersey City qualifies as a distressed area as does Newark, as does Camden, as does Rahway and a few other towns that have mostly Abbott school districts. It's a little too early to tell what the Governor's policies are, but he's a businessman, he's very pragmatic, so I don't think it'll change dramatically. It's been a good program. I know my renewals that I've been getting from people who are not getting any incentives are still at the $49 to $51 range, that bodes well. And on a straight comparison -- if the incentives went away, it's a negative to us. You can't beat it, right. Can't argue that point. I would argue still that we still have a price comparative both on cost and overall rent cost in New York City. And by the way we've redefined the market and the connectivity, it's going to be an easier place for people to get to over time.

[Operator:]

And we'll go to Michael Lewis, SunTrust.

[Michael Lewis:]

My first question is for Marshall. When I look at this Page 41 in the supplemental, where you list the active development projects, it looks like several of those the stabilization date was pushed back a little bit from what was listed a quarter ago, some of them the initial occupancy as well. So my question is, has anything changed as far as the timeline of getting buildings completed and/or the time line for getting them leased?

[Marshall Tycher:]

I mean, lease-up, for the most part, has gone as it should go. I mean, it's not -- it's never right on the money, but we've been pretty close on our lease-up. As far as dates, in the development process, both the construction itself has slips and starts, but most of our stuff stays within the 60, 90 days at the outside movement from -- when we're able to starts something and deliver it. As far as starts themselves, these are -- the project development is subject to land use and approvals and getting your bids in and getting a job started. So those things do move around by a number of months. They're a forecast and we can't control each of the things that impact that forecast, whether it's your financing rigor, contractor bids or building permit issuances, et cetera. Each of those can add 30 to 60 days one way or the other. It's not an exact science. We do a pretty good job forecasting, we're usually pretty close.

[Michael Lewis:]

Okay. Mike, on the 5,000 square feet of leasing per quarter, that's essentially equal to the 2018 expirations, including the whole thing. But obviously, a lot of that noncore will be sold. So do you still think -- is 500,000 square feet per quarter a good run rate for 2018? Or do you think that goes -- does that go down next year because your portfolio is going to be smaller?

[Michael DeMarco:]

The portfolio is a little smaller, so a lot of our activity, obviously, is renewals, it can run anywhere from 60% to 80%. So if there's less renewals, you have less activity. I do point out, though, as we look at it, in '18 we'll also do some '19 deals because that's the way tenants are, they'll do them a little early. So the '19 expirations are a little larger than what we have. But it's also getting a little lower. My waterfront actually doesn't have much expirations in '19 and '20. So really, '18 is the year to deal with. So we feel pretty comfortable if we can deal with this problem, then it should go away over the course of '18. Because it won't pile up into further expirations in '19 and '20 because they are somewhat reduced. So to answer your question, that 500,000 is what I'm sticking with now as activity. We'll update it at the end of the year, but it could go to 450,000 maybe or even maybe as low as 400,000. But it will be indicative of what we think about at the end of the year when we look at the full year calendar.

[Michael Lewis:]

Okay. And just one last one for me. When you issued your 3Q '16 earnings, you gave the 2017 guidance. You didn't give 2018 on this 3Q call this year. Was there -- were there moving parts or uncertainty that made you decide to delay it out one more quarter?

[Michael DeMarco:]

So when we took over as a team in June, we promised people a 100-day plan. It happened to be September, so we did a presentation at the Four Seasons, and we gave, at that time, '16 guidance. And then we did the exact same presentation last year. This year, given all the moving pieces, we decided, you know what, we should take it -- at the end of the year, really take a hard look at sales and so forth to give movements. When you sell as much as we do and develop as much as we do, there's a lot of moving pieces. I got -- we got criticized, rightly so, that we walked down numbers. That was based on over a year ago us looking at what we did in '16 and projecting that into '17's activity. Activity wasn't there. It isn't like we lost deals. It isn't like my competitors got deals because we were either foolish or didn't have the right pricing. The deals just weren't there. So I'd like to take a few more months to basically -- to look at the numbers, see where our expenses wind up, we'll be doing some cost reduction and other things, and then give an '18 projection. And then also, I'll probably give '19 guidance also in brackets. I'll give you a road map from where I'm going to be in '18, to Michael Bilerman's point, on how will I get to '19 on a thoughtful process.

[Operator:]

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

[James Feldman:]

I was hoping you could just give more color on leasing progress at the Waterfront. I know you said that's your -- kind of one of your key focuses. Just maybe talk to us about the pipeline and how it stands versus this time last quarter.

[Michael DeMarco:]

Sure. So if the deals were announced, I could announce them. But what I have is, I have a tenant who's an existing tenant in 101 Hudson who wants to expand. I have a possible new tenant for my Hoboken space who may take 1 to 2 floors. I have -- I just booked a renewal of a tenant in 101 Hudson at a 15% cap and cash roll up for a full floor, early because they wanted to expand. I have tenants in both Plazas 2 and 3 that want to lease stack. So, Jamie, they want to basically invest money and they have 4 or 5 years left in their lease. They don't want to actually have 4 to 5 years, so they'll extend for another 5 years. And some of them want to take additional space. I have another tenant who's looking to take a little bit more space. Most of these are technology-based, by the way, or e-commerce, that tends to be the trend lately. And that's going to hopefully get us about 100,000 square feet of new deals and probably 150,000 of renewals for the waterfront just for this quarter coming up. Whether they get done in the next 5 weeks or they slip into January is always an art form for us. But that is the pipeline that we have.

[James Feldman:]

Okay and in terms of kind of new tenants interested in moving there, how does that look?

[Michael DeMarco:]

So we get tours all the time, tour activities have actually been okay. We've gotten various insurance companies look for space, medical technology companies, e-commerce. Some of these are 100,000 to 300,000 in commitments. There's only a few blocks of space on the market for large size, and I -- we track all of them. And hopefully, to be very candid, we think that the connectivity -- look, transportation is going to be a big thing going forward. There's 2 things about New Jersey that we like where we are. One, we put the ferry stop in. So you can get to 39th Street in 8 minutes and you get to Brookfield Place in 6. The PATH station is right adjacent to our rebuilding. The PATH is extending their trains. Once they redo the Grove Street stop, they'll go from 7 cars to 10, which means they're going up almost 30% in capacity, which will make that Newark to World Trade Center run a lot easier. These are things we think will bode well. We also believe when people look, they realize they can be in New Jersey for a different cost structure and still attract a New York City employee rather easily since most people living in downtown today are the younger workers. And Brooklyn, once you get to the Oculus, obviously, as you know, we're one stop away. So we have to work at basically leasing the waterfront. We did it in '16 to get up to where we were. We were 84% when we started. We got to 94%, right. Now we're going back down to the 80s. Not to 84% but probably the high 80s, and then we need to go back up again.

[James Feldman:]

Okay. And are there tenants that you guys have spoken to that have signed leases in other places? Like where -- if you're losing to anywhere, where are you losing to?

[Michael DeMarco:]

I haven't really lost anyone of significance. I've had guys who come, tour and decide to stay in New York City. I've had people tour from western New Jersey that want to relocate in order to get a younger workforce that haven't yet committed. I haven't had a tenant yet that I have looked and say, oops, they signed someplace else and when they do, I will announce it on the call.

[James Feldman:]

Okay. And then just as you think about the known moves, do you have like an early read on what your -- what the drag will be on same-store next year just from things you know are happening?

[Michael DeMarco:]

No. That's why it's a little early for us to do guidance. Not yet. But we'll do it as early as we can.

[James Feldman:]

Okay. And then just back to the Jersey City land site, is that -- do you need to buy more to have a full assemblage to start construction? I know you said you're working on approvals, but is that a full site?

[Michael DeMarco:]

No, no, these are all full sites. We had a chance, and I managed to go through this in detail, to -- there are 9 buildable sites on the waterfront. Two are owned by Goldman Sachs. One is owned by a company called EverTrust, which is a Taiwanese shipping Company, and the other 6 are under control by Mack-Cali. This is absent anything on Newport. If you want to build within the first 15 blocks of the waterfront, there are 9 large buildable sites. We have 6 of them. The other 3 are held by, as I said, Goldman Sachs and EverTrust. Of the ones that we own, they're essentially contiguous, which means every time we build a new building, we think we change the area and the market for the other buildings in the same district. So if we build Urby 2, which is 1,500 units, which we're planning to go to do that, it will affect, and add to the marketplace of Harborside, 101 Hudson, Plaza 5, Plaza 4A, when we do Plaza 8, which we expect to do in the upcoming year, that'll also do the same thing. The other two sites we bought were just outside of the ring of what we owned, and 1 of them involved a school, had a 20-year tax break, a pilot payment of 7.5% of revenue. Was a unique deal. We were probably the only person who could buy it because they needed to move the parking and we had the expertise. We have 1031 money. We think it's a site that we can easily JV. It just happened to be it had the right type of returns for us. Same thing with the other site. They all just become -- as we rebalance, money I can use to pay down debt, I pay down debt. Money I have to redeploy for tax reasons, I redeploy. It's a pretty simple algorithm.

[James Feldman:]

Okay. And then my last question is just when you finish the next round of act -- of dispositions by early '18, did you say what you think your target leverage will be then?

[Michael DeMarco:]

No, we still have the stated same goals.

[Operator:]

We'll go to Michael Bilerman, Citi.

[Michael Bilerman:]

Mike, if you look about your NAV Slide, which is Slide 12, and if you were to look back at the NAV slide from last quarter, which is Slide 8, you obviously are now, instead of using 4Q '17 NOI, you're using projected 2018 NOI. And your projections for 2018 NOI, if you just add up the 4 numbers of the office portfolio, total $218.5 million. If you were to total up the same for Hudson, Waterfront, flex, urban core and suburban core for 4Q '17 expected from your last supplemental, it totaled $266.7 million. So a differential of about $48 million, which, given every million is a penny, you're talking about a $0.48 share differential just on NOI between those 2. So can you help -- which is obviously $0.48 on a $2 number is a pretty substantial number. So can you walk through why there's not going to be this massive headwind from an earnings perspective given your published numbers of $218.5 million of NOI versus $267 million of NOI 4Q '17?

[Michael DeMarco:]

Well, one step you missed, Michael, is the debt is gone. So whatever I sold in the fourth quarter, the $500 million of debt that I'll be repaying, has a cost to it. Assume it's, on average, around 5%, give or take. So that's literally $25 million. So now that number goes from $0.48 to $0.23, right. And then in the $0.23...

[Michael Bilerman:]

But I thought all that was in the [indiscernible] asset sales.

[Michael DeMarco:]

No, no. It's not done yet. It's not taken off the page, right. So you're looking at one set of numbers and you keep on waiting for me to give guidance. I haven't given you guidance yet. My number for 2018, just to make it pretty emphatically, is above $2, right. It won't be below $2. It will probably be around $2.05 to $2.10, but we haven't worked it out yet, right. That's kind of where I think I'll be. My 2019 number, if I were to think about it today, is going to be substantially higher. It could $0.50 higher. I still have to work out that math, right. I've taken a hit on earnings for the lease roll down. I will cut expenses. I will reduce personnel costs. I will reduce operating cost. My leverage will go down. The multifamily rolls up, and it all balances out. I go back to my initial point I said earlier. You told me when I first took it over, I couldn't do what we did. You told me I couldn't sell and I couldn't go into the multifamily business. I still have the original research reports that basically state that. We are going to do it. It's going to be slightly down right, but we're going to get to the right spot, right. It's just the way the business model had to do it. There's no other way I could have done it. Anyone who thinks that I could have just sold assets to pay down debt, doesn't realize when you sell at 7% caps or 8% caps or 6.5% caps and you pay down debt, you don't actually work down your net debt-to-EBITDA. The only way you can do that is by selling either land, or selling Roseland or raising equity, which are the 3 options we have in front of us. We'll get to the right spot. Our board will be looking over leverage and [indiscernible] of return is on December 12. But did I answer your question?

[Michael Bilerman:]

So, I mean, there's is $15 million swing, right. Part of it is the flex, which I assume is part sales that were executed or sales that are pending, right, $55 million to $37 million. The other piece is waterfront from $108 million in the fourth quarter last projection, to $81 million for 2018. That's $27 million of change between 4Q annualized and what you are expecting in 2018 NOI. That's $0.28 a share. I just don't want there to be a massive surprise when you give 2018 guidance and the numbers, if The Street today at $2.23 is too elevated. I recognize you talk about it's not a question of when, it's a question -- not a question of if, it's just a question of when, but I think The Street needs to be prepared if there's going to be a drop in earnings and an increase in leverage.

[Michael DeMarco:]

I do so, too. And I think I need the time, as I said earlier, to get to my guidance correct for '18. I'm not prepared to do it today, right. I just don't have all the facts yet. I still have to complete all the sales programs. I still have to pay down the debt. I still have a bunch of other assumptions I need to make. When I have the right moment, I will then update The Street, right? Last year, I did it early. I made a projection as to earnings because I felt we'll lease up. And I made the point this is historically aggressive. I wasn't able to achieve it. The market changed, I had to walk down numbers, which I don't want to do a second time. So I'd like to have that extra 3 months to sit down after all the sales activities, which we've sold a substantial amount this year, look at what the ramp-up is on multifamily and what the deliveries are, and then come to The Street with an estimate.

[Michael Bilerman:]

I guess what is -- in your NAV, you have the projected 2018 cash NOI numbers, right, which you use to develop your NAV of $36.61. So what's embedded in those NOIs? What are those based on in terms of -- in Harborside, let's take the biggest piece of it, at $81.1 million, what is embedded in that 2018 NOI number in terms of vacancy and lease-up and take-up of that vacancy in 2018? I guess why shouldn't we use just these NOI numbers you've put out for 2018 as our run rate?

[Michael DeMarco:]

I don't know why you wouldn't just use those numbers, but you have to look at the rest of the math that we haven't given you yet. You keep on looking at -- you keep on going to an NAV page, taking 4 numbers and wanting to extrapolate. Why don't you just sit and wait a little bit? I already told you I think the earnings are going to come out and we'll wind up at the right spot? I mean, Michael, you're asking me for precision on something I haven't rolled out. It's pretty emphatic. I know that my rents are going to roll down on the waterfront in the $0.25 to $0.30 range. That's all I'm really losing. That's all. All I'm really losing. The rest of it is either whether I sell the asset, do I pay down debt and what's the resulting reduction in leverage and cost. On the same line, which you're not seeing on this page because it's obviously on the multifamily side of it, is what my ramp-up is and those deliveries and how they come on. We'll get to the right spot.

[Michael Bilerman:]

No, obviously, given the disclosure though, what you've given us is what we can look at, right. And what you have given us is a 4Q '17 from last quarter's sup and a 2018 projection, of which there's a $50 million delta, and I'm just trying to understand where that $50 million comes and what are the assumptions that changed relative to 4Q '17 versus 2018.

[Michael DeMarco:]

Increase in multifamily, we had a reduction in expenses, costs have come down. That's why we have a better same-store. You're focusing on one revenue line item when we have other things that we offset it with it. It all comes down to the same number. If need be we'll work the next couple of days and we'll put out a supplemental disclosure. But we do the NAV as an attempt to basically give people a view about what we think value is and where we think cash flows are going. We've expanded the disclosure in that event -- in that pursuit. I'll take the next question.

[Operator:]

And we'll go next to Jed Reagan, Green Street Advisors.

[Joseph Reagan:]

Just a quick follow-up housekeeping, and I apologize if I missed this. But it looks like you cut the stabilized NOI and cash flow estimates for Urby and then cut the cash flow estimate for Quarry Place as well. Can you talk about what drove those reductions? I'm on Page 3.

[Michael DeMarco:]

Yes, Urby's coming online, it's a question of how we lease, whether we did 1-month or two-month concessions on a 2017 deal. Depending on how people did it and how they book it will indicate into how much revenue we took early versus late. So it's more of a smoothing factor, Jed, than it is actually a big change. And also, it's a brand-new building for us, and we're still looking at what the operating expenses are. So we're taking a little bit of a more conservative assumption. Still an excellent deal. Just the managing partner who is [indiscernible] leases for us came back and said, let's look at it this way going forward. So we basically made an exemption. And Quarry is leasing up just slightly slower than expected. So it's about 80% leased today, 78%, 79%. It's a 108-unit project, so it's relatively de minimis for our numbers.

[Joseph Reagan:]

And for that one on a stabilized cash flow basis, it's quite a bit lower so you just maybe had to just cut rates more than you thought you'd have to?

[Michael DeMarco:]

Yes, it's a little slower market on ramp-ups. So the 1-bedrooms did better than the 2s. The 2s are having to be a little discounted. It's a new market for us. Again, it's a relatively small deal, 108 units. Within the project, we'll be excellent at the end. But the ramp-up is more traditional of the suburban market. It takes us 15 months as opposed to Urby, which took us 7 months.

[Joseph Reagan:]

I mean is it fair to say on Urby that sort of rates -- asking rates in the waterfront are being impacted negatively by some of the supply that's kind of rolling through that market?

[Michael DeMarco:]

No, I think the opposite actually. I think the rates have continued to go up, so Urby raised rates 4 times during the course of the 7 months. We started our projection of $51 to $52, wound up with an average rent of almost $58. So the buildings were doing plus $60 when we finished it. It happens to be small [indiscernible]. It was plus $60 on the last [indiscernible].

[Joseph Reagan:]

Did you say pre-rent was up a little bit?

[Michael DeMarco:]

What I apologize, we're losing your phones a little bit, it's breaking up, but the rent started off at $51 to $52 a square foot. We averaged around $58 for the deals we did. In order to do that, to have that average we have deals above $60 for the last, let's say, 100 to 200 leases in order to make that balance work. The concessions were 1 month on a 13, 2 months on a 27, right, plus occasionally, we waived an amenity fee or parking, all standard things to do a lease-up. That building leased up, it's essentially 96%. It's been opened just about 8 months, right. It opened on March 1 or March 2. So that was a huge success. But your question prior to that was, has it been impacted by the supply? Jersey City has absorbed everything on an excellent basis. We track the next projects behind us as we plan to do starts, and they're absorbing, I would say, wonderfully. Some of them are in locations I thought might have been a little bit off, and not a problem. It just has a bargain. I mean, the math is pretty simple. If you want to live in Manhattan in a 1 bedroom, you need to make $250,000. You want to live in Jersey City in a 1-bedroom of the same size, you need to make $100,000 less. It's a big market for us.

[Operator:]

And that will conclude the question-and-answer session. I'd like to turn the call back over to Mr. DeMarco for any additional or closing remarks.

[Michael DeMarco:]

None, operator. Thank you so much. I'll talk to you soon.

[Operator:]

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