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Mack-Cali Realty Corp  (NYSE:CLI)
Q3 2018 Earnings Conference Call
Nov. 01, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone and welcome to the Mack-Cali Realty Corporation Third Quarter 2018 Earnings Conference Call. Today's call is being recorded.

At this time, I would like to turn the call over to Michael J. DeMarco, Chief Executive Officer. Please go ahead, sir.

Michael J. DeMarco -- Chief Executive Officer

Thank you, operator. Good morning, everyone and thank you for joining the Mack-Cali's third quarter 2018 earnings call. Mike DeMarco, CEO of Mack-Cali. I am joined today by my partners; Marshall Tycher, Chairman of Roseland, our multifamily 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. As always will be estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that these 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 have filed last night, our supplemental for this quarter and we'll be releasing a revamped investor desk this coming week in preparation for next week's NAREIT meeting. We look forward to seeing you there. These combined presentations will reflect the ongoing transformation in Mack-Cali's portfolio and more importantly with NOI composition, we will be referring to key pages in our supplemental during the call and please contact David, my partner on any further suggestions as to the content.

As we've done before, we're going to break our call down to following sessions. I will make some brief opening remarks, Dick will discuss our office leasing performance and our view of the markets going forward. Marshall will provide an insight on multifamily operations. David will then recap our operating results, and then I will close before we go to questions.

We had another successful operating quarter as we delivered extremely positive results for the first time in 2018. 2018 has turned out to be a relatively good year for us and a strong quarter of leasing on the waterfront and our lease of the multifamily and with the groundwork for the remainder of 2018 and well into 2019. Our individual asset distribution strategy which David will go over in his remarks, is substantially behind us and now we are solely focused on leasing, leverage and operations. For example, leasing of the waterfront 12 assets had great momentum this quarter, toward (Technical Difficulty) Nick will go through the detail as this proposals and we obviously have got great numbers coming in.

We believe next quarter will be equally as good and possibly even better and we look forward to 2019. 2019 is shaping up well as tenants are accepting the new product that we delivered as far as we've ramped cafeterias lobbies and many package and improvements we made to the waterfront and also for creating a sense of place at all our assets. We believe our assets will be really well we see the 2019 as these projects are coming to a close. For the remainder of 2018, we have substantially done our leasing for the year and now we're basically looking at just getting net absorption in the last quarter. Just the new deals coming at some very attractive rates with some great names that will change the way people view our portfolio.

Moving forward, just to note, we have very low expirations for 2019, 2020, 2021, if you zoom at the Flex business that's going, which is something we've been working on and believe we will have a completion too in short order. We only average with our remaining office portfolio that's 625,000 square feet, while almost in a $11 million plus portfolio. So it's about 6% less, this is all-time low for us to deal with.

Looking back and when we started the team, the first year was 21%, then it was 18% and 14% always double-digits relatively high numbers. This year, we expect and Nick will go into detail to do almost 2 million square feet of leasing. Our projection at beginning it was 1.2 million square feet and change. The market has definitely picked up for us. We're benefiting from that, we can actually cash in on that and achieve some great results. We're very happy and we're able to deliver the right rates, we haven't had an increased concessions and we're getting some great tenants.

Regarding multifamily, Marshall will go over this -- his points in detail, but we had a very, very good quarter for leasing at RiverHouse 11 is now stabilized and zoom behind that with Signature Place, Portside and 145 Front Street. Thereafter or by the end of the year or at the most beginning of the first quarter 2019. The only activity we have lagged is the hotels which we expect that Residence will be opening this November, pre-Thanksgiving and the autograph will be opened in late the first quarter of 2019.

Lastly, one most important topics, leverage is going to come down. We talked about before and we have some trades that will happen in the next several months to get us down to more acceptable level. This is the high point of leverage for us, it's going to be more downhill from there. We committed to it as is our Board.

I'd like to turn over to Nick for answering questions of leasing. Nick?

Nicholas A. Hilton -- Executive Vice President-Leasing

Thank you, Mike. We expected to say it was a great quarter for the leasing department across our entire portfolio. As we look at our leasing results, we signed just over 816,000 square feet of transactions in our Waterfront Core and Flex assets and -- ending the quarter at 84.2% leased, of those transactions, approximately, 454,000 square feet were new leases and we are also able to capture over 362,000 square feet of in-place renewals. Across these segments, our rents on Q3 deals rolled up 9.9% on a cash basis and 30.9% on a GAAP basis.

This quarter's transactions we committed $5.50 per square foot per year of lease term, which is largely a result of our early renewals and expansions in our Waterfront portfolio. Examining our results by market, the Waterfront continued its positive momentum from the end of Q2, shortly after we completed the 132,000 square foot E*Trade renewal and expansion which was discussed on last quarter's call. We signed a renewal and expansion with SNBC for 111,000 square feet in Harborside 2. Another sizable transaction also included the renewal and expansion of First Data for over 80,000 square feet at 101 Hudson.

In all, we completed over 389,000 square feet of transactions on the Waterfront, with a cash roll-up of 12.7% and a GAAP roll-up of 41.1%. As we look to the fourth quarter, we are currently in negotiations with numerous new tenants on the Waterfront, totaling approximately 190,000 square feet which will further drive our vacancy lower and continue the positive response we're seeing in the market.

Our Suburban portfolio also remained active in the third quarter. Specifically, we had over 221,000 square feet of leasing, some of the most significant transactions included the trustees of Princeton University for over 67,000 square feet in Princeton and the renewal and expansion of Investors Savings Bank for over 56,000 square feet in Short Hills. The outlook for our Suburban portfolio continues to be stable through the fourth quarter and we'll be looking to close roughly 153,000 square feet of additional transactions before the end of the year.

With that, I'd like to turn the call over to Marshall.

Marshall B. Tycher -- Chairman

Thanks, Nick. Roseland's third quarter was highlighted by the delivery an extraordinary leasing success at RiverHouse 11, a 295-unit community in Port Imperial. The property commenced leasing activities in July and as of today is 95.6% leased. Moreover, we raised rents 8 times during this initial opening.

We have 4 additional lease-ups totaling 917 apartments from our 2018 deliveries, including Portside Phase II and East Boston Waterfront, which is also had tremendous success and is currently 73% leased. The majority of unleased inventory there are affordable units awaiting residential approvals. Signature Place, a 197-unit apartment community in Morris Plains, New Jersey is currently 86% leased. We are targeting stabilization for Portside and Signature Place by year's end.

145 Front Street, a 365-unit project is an integral component of the revitalization of downtown Worcester, Massachusetts, we delivered in Phase 1 in the first quarter and Phase II in late second quarter. Phase 1 is currently 57% leased and overall project is currently 49% leased. And finally Metropolitan Lofts, 59-unit community in Morristown recently stabilized at 95%.

Roseland's lease-up portfolio from these 2018 deliveries is 74% leased in total is highlighted on page 34 of the supplemental upon stabilization we forecast that NOI after debt service from this portfolio of $14.5 million. We anticipate the opening of our 372-key, dual-flagged hotel with the fourth quarter opening of 164-key Residence Inn and late first quarter deliveries of the 280 autograph collections.

These hotels will serve as a cornerstone amenity for the Port Imperial, offering excellent access to Hudson Yards and exceptional views of Manhattan skyline. On stabilization, hotels are projected to generate $9 million NOI after debt service. As quarter end, Roseland's stabilized operating portfolio of leased percentage of 96.4% as compared to 97.4% last quarter and Roseland's same-store portfolio experiencing a 1.2% increase in NOI on a GAAP basis.

Additional third quarter highlights, include the acquisition of Prudential's majority ownership in the 412-unit at Marbella in Jersey City. In addition to eliminating our last significant legacy subordinate interests, the acquisition enhanced Roseland's market-leading position in Jersey City and translated to a gross asset value of 4.62% cap rate. The construction started on Chase III, the next phase development in our Overlook Ridge community where we currently own and operate 1,386 stabilized apartments. This $100 million project has 326 units and we financed this $62 million construction loan.

And finally, the construction start up building 9 in Port Imperial adjacent to the recently stabilized RiverHouse 11. This 313-unit projects is in close proximity to New York Waterway Ferry terminal with a 12-minute commute to Hudson Yards. The -- $142 million project will be financed with the $92 million construction loan. We are targeting two strategic construction starts through the end of this year.

We have started site work on 233 Canoe Brook in Short Hills, one of the premiere suburban towns in New Jersey. This 200-unit repurposing projects is located adjacent to Mack-Cali's 150 JFK Parkway, the mall at Short Hills at Canoe Brook Country Club. Our second remaining start is 25 Christopher Columbus. 718-unit signature development in Jersey City (inaudible) will commence in the fourth quarter with growth construction late in the second quarter of 2019.

As detailed on page 7 of the supplemental, we estimated residential NAV of approximately $1.84 billion. After accounting for Rockpoint participation, Mack-Cali's share of NAV be approximately $1.58 billion or $15.71 per outstanding Mack-Cali's share. We have materially improved the composition for NAV with 84% of value along the Hudson Riverfront in our Metropolitan Boston Markets.

On page 37 of our supplemental, we included a residential calculator reflecting a typical residents' net income availability after tax and rents based on living in Manhattan versus Jersey City, I encourage you to take a look, the numbers speak for themselves. As stated previously, Roseland's platform is self-funding operation as we have excess capital source availability, including undrawn capital from Rockpoint to complete our active construction projects and fund our target construction starts.

I'll now turn the call over to David.

David J. Smetana -- Chief Financial Officer

Thank you, Marshall. I'd like to touch on a few financial highlights before handing it back to Mike for closing remarks. We reported core FFO per share for the quarter of $0.43 versus $0.57 in the prior year. The year-over-year decrease is due mainly to move-outs of tenants on the Waterfront and lost NOI due to asset sales from our disposition program.

We reported $0.42 of NAREIT White Paper FFO and had a $0.01 per share on non-recurring item, employee separation costs that has added back to arrive at core FFO of $0.43 per share. Same-store cash NOI declined by 6.5%. The decline driven by move-outs in our Waterfront portfolio partially offset by lower real estate tax expense. We are tightening our cash same-store NOI guidance to a range of minus 11% to minus 14% for the year, better than our previous guidance due mainly to lower real estate tax expense estimates and we strongly favor the high end of that range or the minus 11%.

Touching on the Waterfront move-outs hopefully for the last time, ICAP was our last major expiration of our 50,000 square feet on the Waterfront. ICAP vacated 90,000 square feet in Harborside Plaza 5 on August 31st. We believe our office EBITDA has bottomed with the last of the major move-outs occurring in the third quarter combined with the extremely positive leasing results we have just reported. Shifting to transactions, we saw 3 office properties in 2 transactions during the quarter for a total of $32 million gross proceeds, at a blended cap rate of 7.8% and $139 per square foot.

On the disposition front, we expect another $40 million to $100 million sales for the remainder of the year to wind up our disposition program. With available net proceeds to pay down balances on our line of credit. The $63 million reduction from the previous midpoint of $400 million is due to a large land parcel in the $40 million to $45 million range slated for Q4 that now looks like it will creep into 2019 and the vacant office building scheduled to be sold to the occupier that also now looks to be a 2019 close.

Turning to the balance sheet. As expected, net debt to EBITDA was 10.0 times this quarter and as expected, this will be the peak for this metric. The new leasing activity was robust in the quarter. Tenant work needs to be completed before spaces handed over and GAAP rents commenced. We continue to see the greatest driver in the reduction of our net debt to EBITDA metric through the reletting of our Waterfront assets. At market rents, we estimate a 1.4 times reduction to our current net debt to EBITDA upon reaching stabilized occupancy of 92% on the Waterfront.

Looking at our debt stack, our 2019 maturities are very manageable. We have 1 unsecured debt obligation with an initial maturity in 2019, our $350 million term loan. We have given notice to our bank group on electing the use of the first of 2 one-year extensions. The remaining maturities totaling $408 million, you can see on page 21 of the supplement are mainly construction loans and successful multifamily properties. These will be converted to permanent financings and all have extension options. There is also a $26 million permanent loan due in 2019 that secures a property currently under a contract to be sold. Lastly, we have tightened our FFO guidance for the year by $0.01 at both the bottom end and top end to $1.81 to $1.85 per share.

With that, I'll turn it back over to Mike for closing remarks.

Michael J. DeMarco -- Chief Executive Officer

Thank you, David. In closing, I think we're set up to have a good 2018. The fourth quarter is looking to be very strong for us in all fronts. As my colleagues have all commented with a lot of projects in motion, as always. And I feel very comfortable that we'll be accomplishing all our goals. We believe we can have a better 2019 than 2018 so a simple fact, the momentum is with us, we're feeling of course in the entire portfolio. We are able as Nick pointed out, the lease-up and renewal what we believe the higher rates we had thought at the beginning of the year. As David pointed out, we are deleveraging in due course -- throughout 2019 and the demand overall is growing.

Capital improvements are being very well received and we finished up on the CapEx projects that started three years ago. We're going to start a small set going forward of a few buildings that we fund to casual. We think that will yield us additionally good results. Our focus obviously has been on the Waterfront, you will see us in the next coming months make some moves to consolidate our holdings to give a much clearer concise story which will give us the benefits going forward.

David commented on before, there are lot of companies looking to be in New York Metropolitan Area and some of them can afford the actual New York rents and the spilling over to New Jersey. We've got a number of serious conversations with firms based in (inaudible) that want to be on the Waterfront from a point of view of attracting the right talent, running their operations, equating right brand.

That all being said, and still a lot of work ahead of us. We have a plan that we started three years ago when we took over as a team. We're at the very end of it. I think we've accomplished almost all objectives and as I said earlier, we feel very strong in 2019 even 2020, excellent years for us. We will be announcing an Investor Day in early 2000 -- January 2019. I hope you can join us, details will be forthcoming and we look forward to seeing you all at NAREIT next week.

With that, I'd like to take some questions. Operator, first question, please.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question today comes from John Guinee from Stifel.

John Guinee -- Stifel Nicolaus -- Analyst

Great, thank you. Mike, there must be some very, very good reporters at Bloomberg, because they always come up with information about sales and all that sort of thing, company sales. Any comment on, is there a real live in writing offer?

Michael J. DeMarco -- Chief Executive Officer

Well, John, this is an earnings call. So we're not supposed to talk about M&A matters, but it's a very good question and it's very timely. I'm a board member and I'm the CEO. Every day I come to work and check to see if my phone works, my email works. As most of you know, and John, you know, particularly I answer my own phone. We've had Board meetings, we've had these conversations long before because we've had a conversation with John's letter. We know of no-bid, it's not a factual comment that we've received an offer and we can just wait with anyone making it further or have a conversation with us.

And anything we're actually open to receiving offers if they're appropriate. The Board has been more than apt on that subject. So we've had conversations with Bloomberg, we've obviously responded no comment, but I appreciate your question but no John, no active bids. I will also point out, if there was something in the market, you would hear from ex number of bankers we've done financing package, we've raised equity. We haven't had any confirmation of that subject.

John Guinee -- Stifel Nicolaus -- Analyst

Okay, great. Nick, David was very kind to say that to get the water -- when you get the Waterfront from 9 -- 74% leased to 92% occupied, that's worth a 1.4 turns on the leverage, how long does it take to lease up that 950,000 square feet?

Michael J. DeMarco -- Chief Executive Officer

John, I'm going to go first and then Nick will jump in. That we've had very good acceleration and we don't have a really good quarter essentially couple of hundred thousand square feet of net absorption. So we think we'd end the year in a very positive note. The big question is, the larger tenants, we have at least a half dozen names of people over 200,000, some as large as 500,000 that are circling. If we just get one given at 250,000 that obviously will make it a much more accelerated, but since that conversation and I will ask Nick's point of view, we should be able to do between 300,000 square feet to 400,000 square feet a year. So hopefully 2019 is as good as 2018 once. So we'll get another halfway there and then we'll finish up in 2020. And Nick, please give your comment.

Nicholas A. Hilton -- Executive Vice President-Leasing

All right in line, Mike with exactly what you said. We're averaging about 300,000 or at least we're projecting about 300,000 square feet to 400,000 square feet a year. The tours and the amount of proposals we're negotiating on right now, is falling right in line with that to be able to make those numbers as well.

Michael J. DeMarco -- Chief Executive Officer

Nick also talked to John about the fact that the quality of tenants has really changed. So we only use to see financial and now that moving to some of the categories people that are talking about.

Nicholas A. Hilton -- Executive Vice President-Leasing

Absolutely, yeah to Mike's point, we're seeing everything from electronics, consumer products, of course, we always have financial services, but they just make up a portion of it, not just the overwhelming majority. Fashion and even some HR outsourcing companies as well. So it's really running the gamut and it's -- and co-working as well. And it's really showing that the market is attracting more than just the financial services in the connectivity to downtown Manhattan, but really attracting a wide base.

John Guinee -- Stifel Nicolaus -- Analyst

And then David, if you go to -- if you start with the 10 times net debt to EBITDA and you take out, reduce it by 1.4 turns, I don't have my calculator with me, but I don't think that gets you down to what the industry expects. Is there anything else going on that will get you down to what, whether we like it or not, the industry expects? And then I'm assuming that you're going to run the Residential portfolio at a higher leverage, any sense for where you want to get to on the Office portfolio?

Michael J. DeMarco -- Chief Executive Officer

So John, I'll do this first for David. The one thing we're missing is the Flex sale, which we expect to do in the next few months, brings it down at 1 full turn maybe a little bit more than 1 full turn. So that's get you down 2.4 to 2.5, which you get it from 10 to about 7.5. And if we get -- we're working on some other asset sales, we get do a more manageable number. The rates on a split is going to be a barbell, John. It will be -- Office will be probably 6.5 or less and multi then around higher. We feel a risk and the company has always been on the exogenous side of the Office business as evidenced by the move-outs and multi -- have higher leverage. We feel today we actually have a much better balance sheet from a risk point of view as to what credit provide us when we did, even when we started in 2015 where we were at 8 times. And I'll let David please to jump in.

David J. Smetana -- Chief Financial Officer

So, John, to be just exact on my word so the 1.4 times we view as our largest debt to EBITDA reduction and what I'm really trying to say there is, we're not at Office company that's 94% and 95% occupied, running at 10 times. So we should do something now or even contemplate diluting our shareholders. I'm just trying to illustrate for people that we have some runway on the EBITDA side there.

And as Mike said, slightly behind the 1.4 times would be a Flex transaction which would get you about a turn. We'll talk about this more at the Investor Day, but we really do feel with the Office below 7 times and multifamily, the mortgages running about 12 times. We've actually created a safer debt stack than an unsecured suburban office company that runs 7 times, 8 times on an unsecured financing basis.

John Guinee -- Stifel Nicolaus -- Analyst

Great, thank you very much.

Operator

We will now take a question from Manny Korchman of Citi. Please go ahead.

Emmanuel Korchman -- Citigroup -- Analyst

Thanks. Good morning, everyone. Mike in your release you talk about the -- getting tenants to our projects and we're pleased to see the conversion. When we look at the stats at least that we're close in the third quarter and a little bit in the second quarter, most of it was renewals, expansions of existing tenants with a little bit of new tenants. So are you talking about sort of the other tenant demand that Nick brought up when he answered the previous questions or is there something else that you meant in that comment?

Michael J. DeMarco -- Chief Executive Officer

I think what we're seeing overwhelmingly, Manny and I'm going to have a question for you at the end, is, we're seeing a different type of tenant coming over like fashion started about three years ago. So Tory Burch is in the market, Palmar (ph) a few other names out there and then you've seen more tenants would like to come through. So we're getting those types of tenants. The (inaudible) Whole Foods is looking for a tenancy in marketplace. And so (inaudible) is looking for tenancy in the marketplace. So we have those names which we feel very close to in a number of those tenants, which I think you'll see coming out hopefully in the fourth quarter is that early in January, which is what I was really referring to.

Whereas Nick pointed out, we could see customer electronic companies, drug companies, pharmaceutical companies in general comp. And we're getting larger formats there is about 1.5 million square feet of process out which is really good for us. So even if we got 10% conversion, that's a pretty good chunk, it's 15% of what we're trying to do of what's remaining. We got 30% obviously we'll be an excellent year. To emphasize a point of you made previous calls, the Waterfront, albeit not in 2017, average from 2010 and all the way through now around 300,000 plus square feet of absorptions here. So we just get back on track which is 2018 will be, we feel pretty good that we can get most of it done by 2019 if not into early 2020.

Emmanuel Korchman -- Citigroup -- Analyst

And then, Nick, those other types of tenants that you talked about whether it'd be fashion or technology or whatnot. Where else are they looking? So if you've got a 1.5 million square feet of proposals out, if you don't get the 1.5 million square feet, which I don't think you will, where are those tenants end up, is it in New York? Is it in Brooklyn? Is it in the Suburbs?

Nicholas A. Hilton -- Executive Vice President-Leasing

It's a mix. And it's something we actually discussed on previous calls too. So it's a mix from tenants looking from Manhattan, looking at the Waterfront. So they would also be checking at Attleboro's, whether there are midtown or downtown tenant checking other areas within Manhattan and including the Waterfront.

We also have a good -- actually historically good -- just view right now of tenants looking from Western New Jersey actually looking at the Waterfront really focused on how they can retain and attract people. I mean it's really -- it's quite surprising. So where else are they looking, it depends on where they're coming from to answer to your question. So if they're coming from Manhattan or looking in the Attleboro's if they're coming from Western New Jersey, you know we are competing, sometimes even just with ourselves with some of our other Suburban product.

Michael J. DeMarco -- Chief Executive Officer

Manny to be a little bit more specific, there's a project called on three which is on route three which is there we do the half on the roadside mini-sized project. Last year we were competing with them, they got prolonged that was coming out of Meadowland, they didn't want to cross over the route three barrier. Last year we competed with Nolek (ph) which has not gotten as much cross over as many inquiries lately, but last year they got miles which was coming at a Hackettstown which we are very close to doing a deal with.

So it's really, Nolek, if you want that experience, but I think people have found out that Nolek doesn't really get you to millennial base, it gives you a better transportation but not get you what you want. One thing we do is, we draw our map of that's done it pretty good for people in the presentation time very tight. We can show you within 40 minutes of commuting, how much you can get to mass transit, drive very subway to our location. And it's a really good map. That's what we really work for.

Emmanuel Korchman -- Citigroup -- Analyst

Thanks, guys.

Operator

We will now take a question from Steve Sakwa of Evercore. Please go ahead.

Stephen Sakwa -- Evercore ISI -- Analyst

Thanks, good morning. Mike, I was just wondering if you could elaborate a little bit more on the Flex sale. I know that that's something you've been talking about for a while and I think even sort of had a process that was running. Is this the entire 3.7 million square feet that you sort of outlined in the supplemental, is this a subset of it? And is this something that you think will close by year end or is this more about 1Q 2019 event?

Michael J. DeMarco -- Chief Executive Officer

Have some questions, as always, Steve. What we did is, we put the portfolio out with HFF, we did in seconds because you want to see if you could sell it in one piece, sell it in multiple pieces. We will sell a piece in 2018, we feel comfortable that was the industrial side, we're going through a final board approval tomorrow, the board is also will be discussing the rest of the sale. We have a bit of that we think we can accomplish that with to do a strategy with us that allows us to enable us do a 1031.

Just to be and reiterate what we've expressed before. We will hit our NAV number that we targeted in the presentation, there will be no discount which as we think today. So we used $300 million to basically pay down debt, which has been alluded to John as one full time, the other $259 that we put into a replacement asset, because we have launched 1031 in our assets, we identified that excellent multifamily asset that people do purchase in our core market that'll make our Waterfront strategy much stronger. So we have an exit on the Flex business and do order subject to Board approval tomorrow and I don't want to show it, my Board, you will have a replacement asset, you will have a pay down of debt and I think here we well on to accomplish the goals that we articulated early when we were speaking.

Stephen Sakwa -- Evercore ISI -- Analyst

Okay. And then if we sort of just turn to the multifamily business, just sort of trying to look at kind of broad figures here, if you sort of look at 2019, what are your expectations in terms of number of projects and sort of capital to be spent on the multifamily development business in 2019?

Michael J. DeMarco -- Chief Executive Officer

So let's look at that question in segments, if you gave it. The composition should be as a percentage of Mack-Cali's total business just slightly less than 40%, somewhat to high 30s, may even touch 40% depending upon the growth in income which is a far change of 2015 when it was less than 7% or 8% swap 5 times albeit obviously we put on leverage in order to do that.

We will be selling and have us contract out of one of our projects for Park Square, which will start to trim the bottom of the multifamily portfolio as we've proven we can trim on the Office size. We have a couple of joint ventures in the DC market that we'll be looking to exit over time, we'll also be selling some of the sites that we've identified as suburban -- true suburban sites as a portfolio as we complete the land application process.

That leaves you with a very core strategy, which we think we can effectively seize the highest results, that is, the continuation of the development of Portside more than we'll be able to get excellent results. We will obviously have New York -- West New York and Jersey City. The capital needs on those projects have been laid out in the presentation. We will be -- we'll be doing all the equity raise at Roseland in order to satisfy those, we will have enough capital to go forward to complete the next 30 months or 36 months of the projects, which is what we normally do.

So, you will get it from a competition point of view, these companies going to dramatically change, used to be in 297 assets, where 122 of them booked today and even in the Flex business you gone to 40 and change a value of -- a number of buildings in the multifamily business that has gone from partial subordinated joint venture, the plethora of ownership entities to really just consolidate it essentially wholly owned or controlling and it's going to be a much cleaner story. Does that answer your question, Stephen?

Stephen Sakwa -- Evercore ISI -- Analyst

Well, I just want to -- I'm just trying to just maybe and I'll pin you down to an exact number, but just in rough figures, where do you think you'll stand next year in multifamily development?

Michael J. DeMarco -- Chief Executive Officer

I think in the book -- in the book, I'm going to get the page for you now. One second. It's actually we have the capital for it. But next year is not a big for us. The big thing is when we start the jobs for the projects in Jersey City. So on Page 47, there is a page on -- in construction, what we expect to spend and capital and projects going forward. So 2019 it is $39 million left. Total capital development cost is $180 million, that's $141 2020 is $149 almost all are debt, no equity. Besides that will start in 2018, in the fourth quarter at Canoe Brook, and then, Christopher Columbus Drive which is going to be a long-term job. And in 2019, is Plaza 8 which is outside our window and the second phase of Urby. If you want it, we can give you a detailed number after the call, if you like.

Stephen Sakwa -- Evercore ISI -- Analyst

Yes. Now, I'll circle back. Thank you.

Michael J. DeMarco -- Chief Executive Officer

I can do as best, thank you.

Operator

We will now move to a question from Michael Lewis of SunTrust.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

Great, thank you. Mike, you gave a very clear answer to John Guinee's first question about a bid or I guess, more accurately, no bid. It's a delicate topic, but can you comment or give a little more color maybe on what you think Mack-Cali will be two years from now? I mean, do you think it will still have a multifamily subsidiary? I know you've talked in the past about that maybe not being ideal. Do you think the company will still be public? Do you think you'll still be working there?

Michael J. DeMarco -- Chief Executive Officer

Mike, I really love your questions. I really do. Like another version of Guinee with a little softer tone. Putting that aside, that's a compliment by the way. So there are three questions. The multifamily business, I believe is becoming an integral part of the Mack-Cali business. We're trying to create a Waterfront concept. If it doesn't work out and if we don't trade within two years that of NAV, I will strongly advocate that we disembowel the company and basically sell the pieces off.

Every quarter, every day, every week, every moment we come in and basically say, how do you make a clean, indeed a more concise, because I believe that simple cells. Your second question is, I think, Mack-Cali will be public, I think, I answered the first question, because they are really tied together, right. Because the multifamily business at 40% and growing. If you really exit that business, you're doing that much left in the Office business, it will consist of probably 20 buildings, 6 to 7 on the Waterfront and probably 15 or 20 in the suburbs, which you can easily sell off, and I think we will get great results on.

The third question is, as my Board's decision what I still working on that. I actually enjoy my job. I actually love coming in, I think it's the -- there is a old phrase that John F. Kennedy once stated, happiness at work is a full use of your powers along the lines of excellence. I love coming to work. It's what I'm trying to do. Any other questions, Mike?

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

Just one more from me. You talked about the Flex portfolio sale. I was just wondering if there was any update on kind of the tax consequences and the strategy to shield those taxes. I know you've talked about splitting it over a couple of years. I mean, it probably maybe it's still early to put any numbers around when that impact might --

Michael J. DeMarco -- Chief Executive Officer

No, no, we have it covered. So we'll do a piece in 2018, that will get done. The rest will be in 2019, we won't pay taxes. The piece that we have a deep felted gain that's are followed in addition to the $1 million that's really our apartments which we've owned it for 25 years. We'll shelter, we found an asset, it's going to be a great addition to our portfolio make a full sense. That give us more meat on the Residential portfolio side. I won't be buying a suburban building that John will complain about to move-out. But it will allow us to basically have a cleaner story.

And I think when you look at us sometime in the next several months, you'll say, hey, this is a much easier story and when we do the tour in January, that people get a chance to refresh. So say, they've been spending their time well, leasings really changed, the assets have been upgraded, still New Jersey can't change that. But the quarter results which people gauzed over, we hit the ball hard this quarter, right, the cash numbers and GAAP numbers as good as anybody in our segment, the fourth quarter should be as good or better. And we have a really big built-in gain -- sorry, built in leased up numbers. Because my predecessor did a lot of deals in the low 30s, we're doing them in the mid 40s and you got to love that trade, every single day. That's why I want to go to work every day. I get to redo the urgent deals.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

All right. Thank you.

Operator

We will now take a follow-up question from Manny Korchman of Citi. Please go ahead.

Michael Bilerman -- Citigroup -- Analyst

Hey, it's Michael Bilerman here with Manny. Mike you referenced, when you said, if you still have a job, it's up to the Board. I'd like you to sort of give some views as to where do you think the Board is the right team right now to manage the company going forward? And I say that because 8 members out of the 10 members of your Board have -- on the Board for 18 years, actually a little bit over 18 years, with an average age of 75, I'm trying to be in ages, but they've been in that seat for a long time. It's outside of view and they get -- they got put on a couple of years ago. This probably the most long tenured Board in the industry. There was an article in the Journal that talked about that today in a pretty negative light. So can you talk a little bit about the Board composition and whether you think that there is risk there, if changes are not made?

Michael J. DeMarco -- Chief Executive Officer

Actually, I really like my Board. I think there are talented group of men and women. One woman, obviously my men. I was added to the Board also so that changes to little competition. Rebecca was added before me. Obviously, I have the greatest respect for my Chairman, my lead Directors or my Committee Chairman, they are really talented people and their ethics are not to be challenged, right, they really don't have a reason to be on the Board. This is a very, very wealthy group of individuals. Not everyone, but most of the people you refer to Michael are, have done very well in life. Thanks for what that god has given them.

So they are not doing for the Board face, and I think they do it because they believe they have done good stewardship. And also I think, I find a very talented, I've been representing Boards and walking in a Board room since I was at my late 20s, which is a long time ago like -- likely 30 years. This is a talented group. I've also worked for a company, which had the second longest talented group which is Vornado, they've also talented group, right. And there is number of Boards similar to that.

And notice to the subject, we talked about it. They realized I'm going to roll off in a few years and they're with it. I mean, it will be a topic we'll discuss tomorrow, because it's estimated. But if you ask me on a direct basis, which I've always proven to be a where most people say is that. very direct offer on that guy. This Board hindrance and doing what we do now. This Board talented, yes. Are they helpful, yes. Are they -- people that you can get on the phone and discuss the subject, absolutely. We admit that there is a tenant problem, right. 18 years is a long time. It's the reason why people judge me. But it's not my call. But if you ask me, I'll say this second time, no manage here perform, there a hindrance to anything I've tried and given how much we've done, Michael and how much we've changed, It's hard for us to say that they just don't embrace change.

Michael Bilerman -- Citigroup -- Analyst

Right. But ultimately, the proof is getting in the -- putting right and if the stock is where the stock is a 10 point, perhaps fresh perspectives are needed in the board room and if the board itself is not willing to do it, you obviously run the risk that someone else could come about, right and shareholders are not happy, given where the stock goes. You rather do it on your own terms than for someone else to do it, right?

Michael J. DeMarco -- Chief Executive Officer

But I would argue that the perspectives we're up about 20%, when we took over as a team, right. We are turning dividends or take three years, you got a 9%, 10% IRR, which is not exactly bad we're undervalued. But undervalued, because we created a lot of value over time. We are also over-levered. But it was a massive transformation. We hard pressed the look and say that we didn't embrace the problems that were sitting in front of us.

Now the choice is whether you sell yourself or operate yourself. And I recognize that day that truth and as I always said, my number one job is to work for the shareholders. I'm an NAV guy. That's why we talk NAV, we live NAV, because end of the day, proof is in the pudding. We start we cash, we end with cash. And you're 100% correct. There is a record in company. I recognize it. We work toward that and no one is taking that job or the responsibilities lately. But I do appreciate the comments.

Michael Bilerman -- Citigroup -- Analyst

And then, I just want make sure I understand the comments you made on this offer or not offer. I think you said there is no active bid today. Does that mean there was an approach to Members of the Board before or you're saying -- you're categorically saying, absolutely no purchase were made to any Member of the Board about a potential sale?

Michael J. DeMarco -- Chief Executive Officer

What I will say is this. My knowledge, which I attend every meeting. I'm not excluded from any conversations, I'm in direct conversation with every member. There's been no written or bid that I will tell you as an investment banker made that conversation. And someone said to us -- improve this, which you guys you go private and you just did on the phone last year, Michael. Yes, we often get that conversation. We should go private. Great, that's really lovely. I said earlier, my phone works, I answer it, my email works, right. Categorically no written off or no-verbal communication, no banker came and said, yes, I will do it, this is what goes so on and so forth. People made comments the way you did. Yes, you find them to be successful enough that we should react to it. You can dual track, Michael I can sell the company, if you want.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

So the flip side of that is that so, do you think the company should run a process. Do you think you should dual track sort of go down the road and what you're doing now, but also go out there and --

Michael J. DeMarco -- Chief Executive Officer

I was an M&A banker, I made my stock and trade. I am running a process. I list every quarter a detailed summary of the assets and cash flows, so someone can make an informed decision about what we work versus what we are trading. No one, and I mean, no one is more transparent than Mack-Cali, right. And I'm one of the more easier people to get on a phone, have a conversation with, right.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

Right.

Michael J. DeMarco -- Chief Executive Officer

And also by the way -- I want to finish, the one thing that we do that other companies haven't done and we don't see to get enough credit for it, but I want to credit and I have a different job, right. Let me put this very simply, we handle our problems straight up every single day in a direct manner. You tell me a list of things that we have avoided or haven't done, I'll be happy to deal with it. We want to get out of the business, out of segments of lines, get out of joint ventures, take the pain of selling assets, we structure, I am down $16 million in overhead since I took over, over 325 individuals. This is not a shop that's sitting around and waiting for a phone call.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

Right. Just last question, just not related to governance. Just relating to the three big renewals --

Michael J. DeMarco -- Chief Executive Officer

I have a question by the way, since you've been on the phone. I want you to tell me what you and Manny wore for yesterday's Halloween. That's what I want to know.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

What's your question?

Michael J. DeMarco -- Chief Executive Officer

What do you wear for Halloween yesterday, Manny also --

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

I was a analyst in a suit. And I have to carry -- I carried the Mack-Cali supplemental as I was trick or treating --

Unidentified Speaker --

You are going to roll today, Mike, you are going to roll today.

Michael J. DeMarco -- Chief Executive Officer

What's your last question, please?

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

So on the three renewals. So when was E*Trade, Sumitomo and First Data when were those leases scheduled to expire originally?

Michael J. DeMarco -- Chief Executive Officer

First Data has 5 years or 6 years left on it, it was a deal that we've done, Michael, we had expanded First Data when I first got it from one floors to two floors that was like three years ago with a 10-year deal. Then he want me to go to a third floor and we took them all the way out. What E*Trade was basically have two years left, right it was 2021 expiration.

The more interesting one is Sumitomo. Sumitomo had three years to four years left and even out another 15 and then almost 18 years left but not leased now. It's a really long-term commitment to us, so which has relatively to roll up. So they all expanded and extended, but in different times. So just to summarize, First Data had 6 left, Sumitomo had 4 left, and E*Trade had 2 left. And they wanted to --

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

And these were -- you did new leases with them or you blended and extended. Just to understand the dynamics of economics.

Michael J. DeMarco -- Chief Executive Officer

It's a combination of both, you actually do a new deal, Michael on each individual space, probably gets a different commission that's just have got it differently. And then you extend in a blend, the remaining deals to cover that term. But it's done in segments, so each one of them would have like, so E*Trade had 3 different parts, Sumitomo had 2 parts and then First Data had also 2 parts to it.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

Okay. All right. Thanks guys.

Michael J. DeMarco -- Chief Executive Officer

Have a great day.

Operator

As there are no further questions in the queue, I would now like to turn the call back over to your host today for any additional or closing remarks.

Michael J. DeMarco -- Chief Executive Officer

I hope everyone had a great Halloween with your children yesterday, I know we did. And I wish everyone comes by and see us at NAREIT next week, we would love to have a conversation with you. And thank you for your time and attention today.

Operator

Ladies and gentlemen, this will conclude today's conference call. Thank you for your participation. You may now disconnect.

Duration: 47 minutes

Call participants:

Michael J. DeMarco -- Chief Executive Officer

Nicholas A. Hilton -- Executive Vice President-Leasing

Marshall B. Tycher -- Chairman

David J. Smetana -- Chief Financial Officer

John Guinee -- Stifel Nicolaus -- Analyst

Emmanuel Korchman -- Citigroup -- Analyst

Stephen Sakwa -- Evercore ISI -- Analyst

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

Michael Bilerman -- Citigroup -- Analyst

Unidentified Speaker --

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