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Mack-Cali Realty Corp  (NYSE:CLI)
Q4 2018 Earnings Conference Call
Feb. 21, 2019, 8:00 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 Fourth 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

Good morning, everyone, and thank you for joining the Mack-Cali fourth quarter 2018 earnings call. This is Mike DeMarco, CEO of Mack-Cali. I'm 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 laws (technical difficulty) assumptions (technical difficulty) our press release, annual and quarterly reports filed with the SEC (technical difficulty) filed last night our supplemental for this quarter, and these should have revamped investor deck (technical difficulty) combined presentations reflect the ongoing (technical difficulty) look forward to seeing many of you at the upcoming City Conference a few weeks (technical difficulty).

As we've done before, we're going to break the -- our call down into the following sections (technical difficulty) Marshall will provide insight (technical difficulty) operating quarter (technical difficulty) office leasing results for 2018 were greater than expected (technical difficulty) on the Waterfront were greater than expected (technical difficulty) as tenants have duly come to expect (technical difficulty) Waterfront (inaudible) new cafeterias, the lobbies (inaudible) and also the improvements we've made to the Waterfront property (technical difficulty) there are more things upcoming, which we'll discuss in detail (technical difficulty) we expect to deliver quite a bit of new products (technical difficulty) fine-tuning stage (technical difficulty) looking forward, we have very, very low (technical difficulty) very, very good quarter for leasing up of our projects (technical difficulty).

Nicholas A. Hilton -- Executive Vice President of Leasing

Thank you, Mike.

We posted another good quarter to close out 2018, signing just over 358,000 square feet of transactions, resulting in our core, Waterfront and Flex portfolio finishing at 83.2% leased at year-end. Of these transactions, approximately 40% or 141,000 square feet were new leases and 60% or 217,000 square feet were in-place renewals. Across all markets, our rents on Q4 deals rolled up 2.9% on a cash basis and 15.1% on a GAAP basis. And we committed $2.99 per square foot per year of lease term.

Looking back at 2018 as a whole, our portfolio saw over 1.9 million square feet of transaction signed with overall cash and GAAP roll-ups at 7.3% and 22.5% respectively. This beat our initial 2018 guidance of 1.3 million square feet by over 40%. Further, it's important to note that the majority of these transactions were in-place renewals and were completed well in advance of the tenants' natural lease exploration.

Focusing on our results by market. In the fourth quarter, the Waterfront completed just over 43,000 square feet of transactions, with a cash roll-up of 15.9% and a GAAP roll-up of 22.7%. In addition, we currently have approximately 120,000 square feet of new transactions that are in the final stages of lease negotiations which carried over from the end of last year. So look for us to make some exciting announcements in the very near future as we bring these to a close.

Our suburban portfolio also remained active in the fourth quarter. Specifically, we executed just over 221,000 square feet of transactions, one of the most significant included the renewal of PBF Energy for over 57,000 square feet in Parsippany. We're also in active negotiations with approximately 150,000 square feet of new transactions across our suburban portfolio.

As previously reported, we are excited about the acquisition of 99 Wood Avenue in Iselin, which increases our market share to over 30% in the Metropark submarket, a market where our holdings finished the year at over 98% leased.

Focusing on the next 24 months, percentage of our core portfolio expiring will be in the single digits annually. As we continue to focus on delivering highly amenitized and upgraded assets, we believe we will continue to outperform the outdated product as corporations compete for highly skilled workers in a tight labor market. To that end, our activity level continues to be strong, especially on the Waterfront, where we are in active discussions with over 800,000 square feet of new tenants with a strong and varied industry mix, including technology for 200,000 square feet; media for 50,000 square feet; consumer products for 100,000 square feet; financial services for 400,000 square feet; and co-working for 100,000 square feet. So with our largest struggles behind us, this activity should lead to further pure net absorption in the market.

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

Marshall B. Tycher -- Chairman of Roseland

Thanks, Nick.

Roseland's stabilized operating portfolio finished 2018 95.9% leased, with same-store NOI down 0.7% for the year. This result was primarily a function of flat revenues, largely result of lease-up products adjacent to our same-store inventories in our multiphase communities and a new corporate leasing policy resulting from increased Airbnb abuse in our corporate tenants. In Washington DC and Jersey City in particular, we have changed our operating strategy to reduce these corporate tenants that allow nightly stays that have eroded the lifestyle of our communities and replacing them now with longer-term residents. We expect restabilization of the same communities by the end of the first quarter.

Operationally, 2018 was highlighted by the strong leasing success with 1,212 newly delivered apartments across five communities. Four communities are now fully stabilized, including RiverHouse 11 at Port Imperial, Portside Phase II in the East Boston Waterfront, Signature Place in Morris Plains and the Met Lofts in Morristown. The fifth community, 145 Front Street in Worcester, delivered its second phase in mid 2018. Both phases, combined, are currently 65% leased and are expected to stabilize this summer. These five communities were delivered at a 6.5% yield on cost and are forecasted to produce stabilized NOI of $26 million.

Looking ahead, and mostly from our 2017 deliveries, we expect our 2019 same store stabilized pool to grow 79% from 3,162 units to 5,673 units. We continue to transform the residential platform and forecast continued growth in earnings by these recent transactions. First, the third quarter acquisition of Prudential's majority ownership in the 412 unit Marbella in Jersey City, which eliminated Roseland's last significant legacy subordinated interest.

Second, in January of this year, we closed on the assignment of Prudential's 50% membership interest in M2, a 311-unit high rise that adjoins Marbella. The acquisition was based on gross asset valuation of $195 million and after refinancing, was a net capital requirement of approximately $36.5 million.

Third, and subsequent to quarter-end, we entered into a contract to acquire Soho Lofts, a 377-unit community, for approximately $264 million. The recently stabilized asset is located in Jersey City's emerging Soho West neighborhood near the Hoboken border. At closing, our Jersey City portfolio of stabilized units will comprise of 2,385 apartments and our average ownership will be 87.4%.

In addition to our stabilized operations, Roseland construction pipeline is comprised of 370 hotel keys and 1,949 apartments. These construction activities, representing total cost of $1.15 billion, are forecasted to generate NOI of $75 million. This portfolio includes two -- portfolio includes two recent strategic starts. 25 Christopher Columbus, a 750-unit signature development in Jersey City, this project includes a 36,000 square foot on-site elementary school, which we believe will be a significant addition to the neighborhood. As they have a long-term below market tax abatement fixed for 20 years at 7.5%, it will enhance its terms.

We also started construction on 233 Canoe Brook in Short Hills, one of the premier suburban towns in New Jersey. The 200-unit repurposing project is located adjacent to Mack-Cali's 150 JFK, a mall at Short Hills, and Canoe Brook Country Club. While we actually didn't expect any residential deliveries until year-end 2020, we have recently completed and commenced operations at Port Imperial of a 164-key Residence Inn. And we anticipate a June opening of its dual-flag counterpart, the 208-unit -- 208-key, sorry -- full-service Marriott Autograph Collection. These hotels will serve as a cornerstone amenity for Port Imperial, offering excellent access to Hudson Yards with exceptional views of the Manhattan skyline. Upon stabilization, the hotels are projected to generate $14 million in NOI.

As highlighted in our recent Investor Day and evident from our -- growth of our residential division, Mack-Cali continues its transformation into a dual-platform company with a waterfront focus. To that end, 64% of residential NAV is along the Hudson Waterfront, a figure that will grow with the closing of Soho Lofts. Future supply in our Waterfront submarkets is constrained as only substantial deliveries in Jersey City and one (inaudible) through 2020. Moreover, we control approximately 6,000 units in the most desirable construction and development sites in this corridor.

Finally, we estimate a residential NAV of approximately $1.86 billion. After accounting for Rockpoint participation, Mack-Cali's share of NAV is approximately $1.58 billion or $15.70 per outstanding Mack-Cali share.

With that, I will now turn the call over to Dave.

David J. Smetana -- Chief Financial Officer

Thank you, Marshall.

I've a few brief highlights before turning the call back over to Mike for closing remarks. We reported core FFO per share for the quarter of $0.45 versus $0.50 in the prior year. The year-over-year decrease is due mainly to move-outs of tenants on the Waterfront and lost NOI from asset sales executed as part of our disposition program. Same store cash NOI declined by 2.1% and GAAP same-store NOI declined for the fourth quarter by 4.5%, with the year-over-year declines once again driven by move-outs in our Waterfront portfolio, offset by favorable adjustments to real estate tax expense.

Jersey City completed its first tax revaluation since 1988 in the fall of 2018. Given our current vacancy in Jersey City as well as other successful tax appeals across the portfolio, our 2018 tax expense was reduced. The blended impact of these tax adjustments improved NOI by almost $3 million in the quarter. We see the real estate tax expense line item normalizing in Q1 2019 in the $16 million to $17 million range.

Now touching for a second on dispositions. As noted in the press release and in Mike's remarks, our 2018 disposition activity combined with subsequent to year-end activity marks the formal end to our non-core disposition program. We sold one vacant office property and a land parcel from our former office site during the quarter for a total of $48.7 million of proceeds. We also executed the sale of the first of our five Flex portfolios called Elmsford Distribution Center for $70.3 million in proceeds at a 4.5% cap rate.

Subsequent to year-end, we sold two office properties for $22 million or $137 per square foot and a 4.1% cap rate. We also disposed of a non-core multifamily asset for $35 million. This asset carried a $25 million mortgage balance. There are an additional four non-core assets totaling $83 million under contract to be sold. Our 2019 non-core disposition guidance range of $155 million to $180 million, therefore, only includes an additional $15 million to $40 million of sales on top of the $57 million of closed transactions and $83 million of assets under contract. These additional sales will be weighted toward the second half of the year.

As Mike mentioned, we have the four remaining sub portfolios of our Flex division under contract to be sold for $487 million, with the closing expected early in the second quarter. As always, we will look to opportunistically prune or trade assets into our core markets, but have not budgeted for any of this activity in guidance.

I will shift now to the timing of some of our acquisitions that are part of 1031 exchanges and another joint venture consolidation. As previously announced at our Investor Day, we are under contract to buy Soho Lofts in Jersey City for $264 million, with the closing expected very early in the second quarter. On January 31st, we closed on the acquisition of Prudential's 50% interest in M2 at an equity valuation of $78 million. This asset will be consolidated in the first quarter. Lastly, on February 6th, as part of a 1031 exchange, we purchased a 272,000 square foot office property in 99 Wood, which is adjacent to our 101 Wood property in Metropark.

Turning to the balance sheet. During the quarter, we placed two permanent loans on our 2018 multifamily development deliveries. All-in rates average 4.5% and spread -- spreads to treasuries (ph) average 135 basis points. Our net debt to EBITDA was 9.3 times in the quarter. This metric had a benefit in the quarter of approximately 0.4 times due to sales timing and real estate tax adjustments. We used $70 million from the sale of our Elmsford Flex portfolio on December 31st to repay outstanding balances on our line of credit.

Current tax projections show that we will be able to pay down debt of approximately $230 million from the remaining Flex transactions, with the balance of these proceeds expected to be exchanged mainly into Soho Lofts.

Shifting to guidance. As we stated in the press release, we are reaffirming core FFO guidance given at our Investor Day of $1.60 to $1.70 before Topic 842 impacts and $1.57 to $1.67 after a $0.03 impact on both ends of the range for Topic 842. Going forward, the range of $1.57 to $1.67 will be our core FFO guidance range. We see same-store cash NOI coming in in a range of minus 14% to minus 10% on a cash basis and at minus 7% minus 3% on a GAAP basis, with current projections showing GAAP same store NOI turning positive in the fourth quarter of 2019.

We are projecting a same store NOI range for multifamily of 1% to 3% on an expanded pool of approximately 5,600 units. This expanded pool should give investors a better read through on the performance of our multifamily business in 2019. All in all, we believe we have built in a guidance range that accounts for the current protracted lease negotiation process and also gives us a chance to outperform.

As I look back at the Company, its assets and its strategy from when I started over a year ago, the transformation is striking. The team now looks to execute on our Waterfront strategy whose hallmarks are simplicity and focus. Our core market, the Waterfront, home to our headquarters, is only 73.2% leased. The 1 million-plus square feet of vacancy is an immense opportunity and has the daily focus of all senior management. The annual capital requirements to further enhance the buildings are modest and can be easily funded from current cash flow and disposition proceeds.

The second avenue of growth is our multifamily development program. Our current construction pipeline of five assets has 80% of its spend concentrated in three assets on the Waterfront, where we have recently experienced record lease-ups. We look at financing the multifamily development business through our self-funding loans. The remaining $45 million (ph) of equity commitment from Rockpoint will be drawn by the end of February and we will look to -- look at asset recycling as well as additional equity raised at NAV at either the entity level or asset level to fund the next round of starts.

With that, I turn it back over to Mike for closing comments.

Michael J. DeMarco -- Chief Executive Officer

Thanks, David.

In closing, as my team has outlined, I think we're set up to have a good 2019, even though we have a great deal of work to do on the leasing front. I really truly feel that our office strategy is being accepted by the tenants really in a huge way. I think we're (inaudible) by the brokers who understand us to be the Class A provider of office space in New Jersey. We are creating a real sense of place on the Waterfront, confident that the total effect (inaudible) office, retail and multifamily produce excellent returns in the short and long term horizon.

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

Operator

Thank you. (Operator Instructions) We will now take our first question from John Guinee of Stifel. Please go ahead, sir. Your line is open.

John Guinee -- Stifel -- Analyst

Great. Thank you very much. Nice job, guys. Two questions. With your levering up so much, your taxable income should be coming down and you should have enough room within your taxable income parameters to not have to 1031 exchange. Is that correct or incorrect?

Questions and Answers:

Michael J. DeMarco -- Chief Executive Officer

John, it's an excellent point. What we've done is use every dollar of taxable income the last several years in order to shield. This past year, for example, we -- the Flex business was done as an '18-19 trade. So in '19, we've already used substantially all of the taxable income. So in 2020 as we lease up and have more income and as the projects mature the multifamily and get greater income, we will have more room. We only do 1031s -- lets say, let's just say, really do 1031s reluctantly. We'd rather pay down debt or do something else with the money then the client assets. But the deals that we've bought recently, in particular 99 Wood is going to be an excellent buy for us. We bought it right. It sits right next to a project that we've had extremely excellent results with (inaudible) over the last three (ph) years.

John Guinee -- Stifel -- Analyst

Are you doing the 1031s to protect the taxable, the REIT tax status or to protect the OP unitholder level?

Michael J. DeMarco -- Chief Executive Officer

We normally -- what happens, John, is the assets that we're selling have been held so long by this Company. As we like to point out, it's been -- this Company has been around for a lot of time. So those assets are 20 years, 23 years, 22 years old. We have gains that are significant because they are fully depreciated, literally had no tax basis whatsoever. So when we sell something for $50 million or $100 million, even if it's only $175 a square foot, all $175 per square foot is actually -- taxable (ph) to us. So we're left with the quandary of paying the income tax and having really substantial, these proceeds, if we can use the shelter in the dividend. So our first game is to shelter the dividend. Using -- sheltering the dividend, we get to keep all the money, we pass on the tax benefit to our unitholders and shareholders and they pay it from the dividend that we gave them. If not, then we do a 1031. But as I said before, it's the last step of the process, not the first.

John Guinee -- Stifel -- Analyst

Okay. And then, David, I guess you said that net debt to EBITDA is 9.3 with a 4.4 benefit, so really I think you're saying the net debt to EBITDA is about 9.7. Could you do two things, split that between the office business and the multifamily business, and then talk about how far it can come down versus how far it needs to come down to attract your core institutional investor base?

David J. Smetana -- Chief Financial Officer

Yeah, John, thanks for the question. So the 0.4 times benefit is going to be all on the office side. And so I wanted to highlight it for everyone because that's a rather large jump from 10 to 9.3 times. As we outlined in the Investor Day, taken in isolation, we believe the Flex transaction over both 2018 and '19 would reduce our net debt to EBITDA by about 0.75 times. So I think it's fair for the quarter to add back the 0.4 times, but now we have the $230 million of debt paydown coming from the balance for the Flex sale. That will take us into the low 9s and that'll be offset as we run our business and continue to fund residential construction and put a mortgage on a residential multifamily property that we're buying. So net it all together, I think we'll be right back down in the low 9s at the end of 2019. I think the second part of your question on where we need to be to attract -- and the split for the quarter would be the office portfolio 7.8 times, so if you added the 0.4 there to 8.2 (ph) and the residential at 13.7, with all the debt and 11.4 taking out our CIP activities. And then, I think the last part of the question is where we need to be. As we outlined at the Investor Day, I think in 2020, as we get full quarter benefits of our lease commencements we get below 9. And then we look at where the shares are, where we can raise equity, and the next move to get below 8 times net debt to EBITDA. I think Mike has a couple of comments as well.

Michael J. DeMarco -- Chief Executive Officer

So, John, if you are looking what we are aiming for, I think the multifamily business, the way we're currently running it, it will always likely be between 8.5 times and 10 times. We'd like to get the office business we defined as more risk in the (ph) rollover, to get below around 6, maybe say below that. The two of them together should blend below 8, which is our threshold. We may have to raise equity in order to get there. But to answer your last question, where do I think we need to be in order to attract core funds, I think we need to first of all be leased up (technical difficulty) we get that much core interest. I think you need to be leased in the upper 80s, 88, 89 (technical difficulty) two years ago. And I think your average level should be (technical difficulty).

John Guinee -- Stifel -- Analyst

Thank you. Just so you know, Mike, I think few people can hear you speaking into your microphone while David and Marshall were loud and clear.

Michael J. DeMarco -- Chief Executive Officer

I'll change the mic because I'm sitting at the same table. Thank you, John.

John Guinee -- Stifel -- Analyst

Okay.

Michael J. DeMarco -- Chief Executive Officer

John, is it coming better now?

John Guinee -- Stifel -- Analyst

We just love it. It comes in much better.

Michael J. DeMarco -- Chief Executive Officer

Thank you. You know I'm a soft-spoken person, John.

John Guinee -- Stifel -- Analyst

Okay. Thanks.

Michael J. DeMarco -- Chief Executive Officer

Next question, operator.

Operator

We will now take our next question from Emmanuel Korchman of Citi. Please go ahead.

Emmanuel Korchman -- Citi -- Analyst

Good morning, everyone.

Michael J. DeMarco -- Chief Executive Officer

Good morning, Emmanuel.

Emmanuel Korchman -- Citi -- Analyst

Hi. You talked about 800,000 (ph) of tenant discussions on the Waterfront. Can you -- and thanks for breaking that down for us. Can you compare that to where it's been over the last few months or quarters? Just give us an idea of whether that's sort of increase, decrease, same? Thanks.

Michael J. DeMarco -- Chief Executive Officer

What we saw from the first quarter of last year, it's a significant increase, just not only in volume but in the tenant mix. Quite frankly, as the year progressed, last year, we saw more and more momentum, a good amount of tours, inquiries, proposals, and it continued. Now there were dips just because of time of year, right, summer and then over the holidays, but I would say if you compare this quarter to one year ago, it's probably twice as high, at least.

Emmanuel Korchman -- Citi -- Analyst

Great. Mike, there has been some discussions of growing (inaudible) being phased out this summer, replaced by some other programs. Have any tenants made mention of that or waiting for that to sort of finalize before making a move?

Michael J. DeMarco -- Chief Executive Officer

No. We see people come in a little earlier, as they want to get in while the program is still there. But no one's made any comment. The -- everyone knows -- I think everyone is convinced that the Governor, she is for it. The Speaker of the Senate, Steve Sweeney, who is the other (inaudible) supporting the transaction has always been for of that program. I think it will just go through the summer and then get finalized. That is what most of the legislative views are. The Governor is not backing away from it. Neither is the Speaker of the Senate. I think it's a question of the quality of the program and the amount. I think there will be a consistent (inaudible) that you wouldn't pay for. We'd pay for interstate but not interstate moves. So you won't pay for someone moving from Ashnoca (ph) Heights to Hanover. You'd pay for someone moving from Manhattan to Jersey City.

Michael Bilerman -- Citi -- Analyst

Hey Mike. This is Michael Bilerman. Hey, Mike.

Michael J. DeMarco -- Chief Executive Officer

Good morning.

Michael Bilerman -- Citi -- Analyst

Good morning. Just a question on the leverage point. You talked about -- you said the multifamily is always going to be 8.5 to 9.5. If you look at the multifamily REITs, a number of which are active developers, they all keep their balance sheets 4 times to 5 times levered. Why should Roseland be 8.5 to 9.5?

Michael J. DeMarco -- Chief Executive Officer

We started out with more leverage to begin with. We've been building this thing inside of a transformation process. So if we were starting fresh, I would agree with you 100%. But looking at where we are, we basically say to ourselves, what can we do and how can we self-fund, how can we create value. And we've done a very good job of creating true and easy and we have had some great projects that we delivered. Over time, we know we want to raise equity or all the time to have a sustainable business, we're going to have to get de-levered over time. We've taken in equity from Rockpoint. We believe we can joint venture other sales if we need to. We already started the process of trending to bottom. We sold a deal last year. We'll probably sell a few deals this year, we'll probably sell some land. So it's on a mechanism. The first risk that we had was the office business, which was over-levered at 8.5 times. So this quarter, we're getting it down lower and we got a shot at it to really get into the 5s, Michael, which I think would be somewhat bulletproof. The multifamily sort of follow its pursuit. But in the interim, if you start new project, which are excellent deals and we get great returns, we are putting on leverage. And the whole consolidation phase -- and we were a little disguised when we took over because we had basically hidden leverage in a sense of -- we had partial ownership of joint ventures that weren't fully consolidated and Green Street was (technical difficulty) through. And all we really done in a lot of our moves is basically own the other piece of a building that we already owned a piece of. And that's why generally leverage went up this quarter by consolidating M2 and Marbella, I would tell you the options of owning those assets just greatly enhance on anything we do from raising equity to whatever because now we own -- we really own 80% of each project.

Michael Bilerman -- Citi -- Analyst

Okay. Thank you.

Michael J. DeMarco -- Chief Executive Officer

Thank you, Michael.

Operator

We will now take our next question from Derek Johnston of Deutsche Bank. Please go ahead, sir.

Derek Johnston -- Deutsche Bank -- Analyst

Good morning, everyone. Mike, can you discuss where the Flex portfolio sale sits? I know we saw a small piece, but I kind of feel like the timing has been pushed back a little bit and we've been talking about it for a while. Any color there?

Michael J. DeMarco -- Chief Executive Officer

No. I think we would have liked to get both pieces done like December, January. But the second piece was four times larger than the first piece. So we did a quarter of it, maybe 20%, just before year-end. The other piece is literally on the contract. We'll close, as David said, early second quarter, early like -- like just after St. Patty's Day, literally just after March Madness and maybe National Champion won't be (inaudible) that night. And probably given the nature of -- look at that sale, it's several million square feet and has numerous buildings and that probably made it a little longer. The number of title reports, environmental reports, we can't close it all those buttoned up. But it hasn't really slipped in online (ph). We always thought it would be done maybe March and maybe now it will be in April close, so maybe 30 days, Derek, but no more than that.

Michael Bilerman -- Citi -- Analyst

Okay, thank you. That's helpful. And just another one on Amazon to pull out of Long Island City. Do you think that affected the Whole Foods lease and really what was a beautiful space that you had the Investor Day? And is there any update on that?

Michael J. DeMarco -- Chief Executive Officer

That should be done -- literally, we're at the -- literally at the one foot line. It's two deals; it's a store and a lease for an office space for the Northeast headquarters. We should be announcing that hopefully. We can't guarantee anything. But they haven't pulled back. If anything, they'll move forward with it. We'd also like to discuss with Amazon (technical difficulty) around. On the Waterfront, on Hudson River versus the East River, but no about that. We think the -- we think the commitment, once that deal was announced, we'll be announcing an incubator space (technical difficulty) industry. One of the things that we're envious of -- as we got to Brooklyn today, there were a number incubator companies prominently (ph) growing in the food business. Jersey City probably has a better location and distribution and still New Jersey the home of most of the major food corporations in the East Coast, including Campbell (ph) (technical difficulty) a number of the businesses in the state (technical difficulty).

Michael Bilerman -- Citi -- Analyst

Okay, great. And then just lastly, so the Whole Foods space, would that have been in the 120,000 square foot pipeline of new transactions? Is that baked into that number or it's an addition?

Michael J. DeMarco -- Chief Executive Officer

Yes, yeah. Yes, it is.

Michael Bilerman -- Citi -- Analyst

All right, guys. Great. Thanks.

Michael J. DeMarco -- Chief Executive Officer

Thank you. Operator, next question if any.

Operator

We will now take the next question from Daniel Ismail of Green Street Advisors. Please go ahead, sir.

Daniel Ismail -- Green Street Advisors -- Analyst

Hey, guys. Good morning. Curious -- saw the announcement about some changes to the Board earlier this month. I'm curious as to will there be any other Board changes coming later this year or any other corporate governance changes as well.

Michael J. DeMarco -- Chief Executive Officer

We've taken an active view toward the Board structure and organization. That is just about refreshing. So Jon Litt was added about four years ago, then Litt came off, we replaced him with Rebecca Robertson. Then we had a chairman retire. We didn't replace him -- Roy Zuckerberg. This year, we're putting two people on for the gentlemen who are retiring. So we're bringing three women in a row, if you don't count myself because I was added as a Director (technical difficulty) normal for a CEO to be on the board. We expect, as we said in the press release, to have further changes over the next coming years, so maybe something will happen in maybe '20 and early '21. We look to have the Board reflect the society that we live in. So we're taking a very active view to it, obviously (technical difficulty). Regarding Board structure, we adopted some rules last year and ourselves (technical difficulty) best practices. We reconsider those things (technical difficulty).

Daniel Ismail -- Green Street Advisors -- Analyst

Okay, great. And just maybe staying on some Amazon news. You guys had some properties and land in Crystal City. Is it safe to assume perhaps with the lack of tax -- tax protection on those assets or the tax consequences on those assets (inaudible) 2019 dispositions?

Michael J. DeMarco -- Chief Executive Officer

We are not trying to move those, to be honest with you. We -- we like to sell on -- whatever is that we will sell (technical difficulty) on cavalry, buy the canons (ph), right. So now Amazon is coming. It's been -- we've got a lot of inquiries, a lot of inbound. We are working with our partner to exit that investment. We will have some taxable gain, which we will be able to shelter, aiming to put it into '20. But it's an asset that we've done a good job on and we can take a few dollars and use that to pay down debt and multifamily (technical difficulty).

Daniel Ismail -- Green Street Advisors -- Analyst

Okay. And just last one for me. On the land impairments, on the Pennsylvania assets, any color to share on the change in plans on those assets and the impairment itself?

Michael J. DeMarco -- Chief Executive Officer

We went through, and to Michael Bilerman's point, we realize the leverage that we have in the multifamily business and we're looking to trim it up, so we sold an asset that we had in Huawei. We are looking at selling land throughout the portfolio that we have in some inspiring (ph) locations and only really focusing, Daniel, on what we've put into the (technical difficulty), which is the 10 sites on the waterfront. Either two sites that we had acquired, put some money in, but when you got to flip them to the next guy, you're going to take a heck of a (technical difficulty) you don't want to make a few dollars on that purchase, so we took the impairment charge. We're disciplined. We just looked and said, it's something we want to build, it takes 30 months to build, get to own it for a period of time. Afterwards, we'd rather take the money out today, put it into something that you (technical difficulty). Daniel, anything else?

Daniel Ismail -- Green Street Advisors -- Analyst

No. That was it for me. Thanks, guys.

Michael J. DeMarco -- Chief Executive Officer

Welcome. Operator, next question?

Operator

We will now take our next question from Jamie Feldman of Bank of America Merrill Lynch. Please go ahead.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Great, thank you. Can -- I just wanted to ask on the cap rate on the remaining Flex sale. Did you guys provide -- is it going to be the same cap rate as what you've announced so far or is it different for the remainder?

Michael J. DeMarco -- Chief Executive Officer

David's going to do that one. David?

David J. Smetana -- Chief Financial Officer

Yeah, so, Jay, I think we announced for the entire portfolio, it would be a cash cap rate of 6.2 before EBITDA savings for us now. We think we'll get that down to a 6 flat or below. But, no, it will be slightly higher or will be in the mid to high 6s on the purest industrial piece of that portfolio already traded at -- Elmsford traded at the 4, 5, so they get to the 6.2 (ph) you have to average in the mid to high 6s on the balance.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. And then the 800,000 square feet of potential leasing on the Waterfront. I know you mentioned some of that was Amazon. I know when we were there for the Investor Day you talked about the build-to-suit site near the hotel. Can you just break out what's in that 800,000 and how much of it is purely for some of the vacancy you have in the office space and how much is for some of these other projects?

Michael J. DeMarco -- Chief Executive Officer

I'll do this with Nick, Jamie. The 800,000 did include the build-to-suit site. So it's really just activity in Jersey City or in Hoboken, for say, not anything that we would construct any new building. And as Nick pointed out, it's about seven to eight tenants plus five industry groups whose size ranges 50 on the low end, probably 400 on the high end. We probably have about one 200, three 75s or one 25s, however it makes up that break. And there were everything from cosmetic company, consumer product company, bank, advertising, cannot be very specific. Those are industry groups -- so money managers, so and so forth.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. And then in your prepared remarks, you talked about enthusiasm -- I mean, you seemed very enthusiastic about leasing but then when David talked about guidance, he talked about the protracted leasing. Can you just kind of balance what those two conflicting comments and just what's realistic here?

Michael J. DeMarco -- Chief Executive Officer

David and I, it's pretty simple then. So I wake up enthusiastic every morning and David, I think, dreads the day. So to be very candid, if you look at last year versus this year, last year we did this call in February, covered with some at Baird. We didn't have a lot of activity. We were thinking about some deals that were coming on. We would instruct get going until like March Madness and (inaudible) feel good after, after St. Patty's Day. Today, in February, then in January (inaudible) much higher. So I'm more optimistic. I also like to do a few big deals, a few things running around. This year, the quality is better, the inbound is better. I think the product (inaudible) we've done some things that help shows better. I mean the tenant makes the -- the tenant makes the -- tenant gains probably 90% of their impression in the first five minutes of the tour is our opinion. So the better we can do on showing our assets in the right light in that first five minutes when the story is being formulated is our best term. And we think we've done some things. So the brokers have come back. And we constantly monitor the feedback. It feel like on the suburbs and what we completed, what we did on the Waterfront, they like the deal, like the product. It is really no new construction. It's like you're competing -- it's a brand new building you have in Manhattan (ph). And just for reference, in order to have a new building in New Jersey in the suburbs, along the waterfront, with parking built into structure, the rent as we calculate it -- we do this all the time, it's around $55 or higher. If you did a typical suburban building, which was flat, the parking was on a normal field, maybe some (inaudible) spots under the building and then this is probably $44, $45. We've got a lot of room in our markets before we ever get to a new spot. That's the (inaudible).

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

So what do you think the delay, if there is any delay, like what are these tenants waiting for to make their final decision?

Michael J. DeMarco -- Chief Executive Officer

Some of them come out -- we've had (inaudible) with four, like a 50 comes out and then moving within nine to 12 months. If they know the build-outs relatively easy and decision-making is somebody moving out of one building to another. When it flips to 100,000, you add about six months for the lead time because of this subtle (ph) division move and see what divisions you are coming out of, New York City or New Jersey it's going to consolidated. Anything with two hand or more, it's 24 month move or greater when someone is coming out and saying, we're doing a complete corporate relocation, let's get it right, we want to talk about everything. I think what -- we are doing a really solid job on selling the amenities and the lifestyle that we can offer. And the point I made earlier about every building we add to the waterfront creates a sense of place, if you look at this market pre and post Urby (ph) from us, it totally changes. The streetscape is more active, the number of people on our residential -- sorry, marketplace changed over and we think the projects that Roseland is planning with, two of them that include preschools to third grade, we have a theatre, we are putting on another building and some of the improvements we made to the base of (inaudible) is really boding well for us by way of attracting tenants. I mean (inaudible) self-entitlement max (ph) so you have to deal with accordingly.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. So based on those lead times, I mean, is it safe to assume some of these larger ones may not hit until late this year at the earliest?

Michael J. DeMarco -- Chief Executive Officer

That's a very good assumption. That's where the conservative comes in. That's why I have David around here.

David J. Smetana -- Chief Financial Officer

Yeah.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. And then some of the small ones might be, more first half leases.

Michael J. DeMarco -- Chief Executive Officer

Small ones. We get some 20s, which are meaningful, right. So you get 20,000 square feet into the $50 average rent, which is what you'd have over a 10-year term with a $47 start, 2% growth, that's $1 million. 20 times $50 is $1 million. $1 million can hit partially in -- if we get them in, if we do the deal, if we sign them up now, which we have one or two that we are doing, you get some of that in the fourth quarter (inaudible) definitely get over 20, right. If you get a guy who's 50,000 square feet and he takes until June or July to make a decision, the construction period is longer and everything (technical difficulty).

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. And do you need some of these -- do you need some of these larger leases to hit for that gap (ph) same store to turn positive in the fourth quarter or that's pretty much baked in?

Michael J. DeMarco -- Chief Executive Officer

It's pretty much baked in. Maybe, I'll need a little bit of help.

David J. Smetana -- Chief Financial Officer

Yeah. That's baked in, Jamie. When I talk about that I talk about that at the midpoint of our range. We understand the tenants we are dealing with and the sizes and how long it takes to build out 100,000 square foot space versus 40 and 20. So that's all baked in at the midpoint.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. And then just last question from me. In the past, Mike, you've talked about Roseland as being too small to spin. At what point do you think it has enough critical mass to spin it off?

Michael J. DeMarco -- Chief Executive Officer

I'm thinking about 18 months, to be honest with you, maybe 24. There are some things we're going to do, just to be candid. So I think you can see the strategy. We're going to exit DC and the Philadelphia. We're going to probably exit all the suburban land as it becomes entitled. We'll take those cash and we'll accumulate it, input put into Jersey City and the Waterfront assets. We have a good Boston asset. If we can trade those into something in our marketplace and then we can trade off really more cohesive Waterfront strategy. We believe with just easy to operate, better results -- Jersey City is noted among people we talk to as being one of the best multifamily markets in the country in terms of the supply/demand (technical difficulty) went up relatively well. We achieved 6.5 (technical difficulty) I think a lot of our competitors take those numbers. So at the end of the day, at some point, it's very delicate. So the whole thing, we work for the shareholders, it's all about creating the right value to getting the stock (inaudible). Or, more importantly, I have always felt, it's creating the right NAV because at end of the day, that's what really (technical difficulty). You got to have the value there to begin with.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay, all right, great. Thank you.

Michael J. DeMarco -- Chief Executive Officer

One thing (inaudible) NAV, to be a really number by the way.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay, sounds good. All right. Thanks, guys.

Operator

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

Steve Sakwa -- Evercore -- Analyst

Thanks. Well, you touched on it with Jamie, a little bit, Mike. But I guess as we're just thinking about the lease-up of the roughly 1 million feet in Jersey City, it sounds like it's probably a good three-year kind of 20, 21, 22 in terms of getting the economics, just kind of really start to hit from kind of a GAAP, and certainly a cash perspective. Is that a kind of fair timetable to think about?

Michael J. DeMarco -- Chief Executive Officer

Yeah, I think it builds up. I think if you -- will get a better view by the third quarter of this year because some things that we're working on, if they do hit, will make '20 a better year, but if they are delayed then '20 will become a good year but not an excellent year. You're absolutely right, if you look at it, if you did 300,000 square feet this year, 300,000, next, then 600,000, hits '20 -- (inaudible) in '21 and what you can do all, at the end of '20, you really wind up with '21 having a bulk of it, yes. We get back (technical difficulty).

Steve Sakwa -- Evercore -- Analyst

And I guess, circling back to kind of the discussion you had with Jamie. Even if you sign 300,000 feet of leasing, even if it happen tomorrow, the GAAP impact of those leases, it probably takes a while. And so I guess there is -- getting the lease signed and there is getting the kind of the economics to hit both GAAP and cash.

Michael J. DeMarco -- Chief Executive Officer

100%. But I would point out as a balancing, if you look at what we achieved on the renewals and new deals in last year, we did very, very good numbers compared to our peer group. Cash was excellent, GAAP was really, really excellent numbers. So we're getting the right results. It's a matter of when it comes in. I know it's been long, but we feel like we're chipping away at it. I'd rather have this scenario than a scenario where we have 1 million square feet to lease and we are leasing flat to what we built expired at or even negative, which is where we were four years ago. So right now, we have significant roll-up, we have a lot of deals that people come to us, probably renewals that are at $35 and renewing at the mid to high 40s. So instead of at $35, they're renewing at the mid to high 40s. So the cash and GAAP look good for us. Just the question is when.

Steve Sakwa -- Evercore -- Analyst

Okay, that's it for me. Thanks, guys.

Michael J. DeMarco -- Chief Executive Officer

Thank you, Steven.

Operator

It appears there are no further questions at this time.

Michael J. DeMarco -- Chief Executive Officer

And I look forward to seeing (technical difficulty) and hopefully Mack-Cali will have a nice (inaudible) this year. Have a wonderful weekend. Talk to you soon.

Operator

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

Duration: 49 minutes

Call participants:

Michael J. DeMarco -- Chief Executive Officer

Nicholas A. Hilton -- Executive Vice President of Leasing

Marshall B. Tycher -- Chairman of Roseland

David J. Smetana -- Chief Financial Officer

John Guinee -- Stifel -- Analyst

Emmanuel Korchman -- Citi -- Analyst

Michael Bilerman -- Citi -- Analyst

Derek Johnston -- Deutsche Bank -- Analyst

Daniel Ismail -- Green Street Advisors -- Analyst

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Steve Sakwa -- Evercore -- Analyst

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