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Mack-Cali Realty Corp  (NYSE:CLI)
Q1 2019 Earnings Call
May. 02, 2019, 11:00 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 First Quarter 2019 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. Thank you for joining the Mack-Cali First Quarter 2019 Earnings Call. I'm going to try to speak more clearly and louder than I did the last time. This is Mike DeMarco, I am joined today by my partners Marshall Tycher, Chairman of Roseland and Multi-Family operation, David Smetana, our CFO and Nick Hilton, our EVP of Leasing.

On a legal note, I must remind everyone that certain information discussed in this call may constitute forward-looking statements within the meaning of the Federal Securities Law. Although we believe the estimates reflect to these statements are based on regional assumptions, we cannot give assurance that the anticipated results will be achieved. We will offer you our press release, annual and quarterly reports filed with the SEC for risk factors that could impact the company. We have filed our supplement of this quarter and as always please contact David in any further suggestions. We look forward to seeing many of you, if not all, at the upcoming NAREIT Conference.

As we've done before, we're going to break our call down into the following sections. I will make some opening comments. Nick will discuss our office leasing performance and our view of the markets going forward. Marshall will provide insight into our multi-family operations. David will recap our operating results and I will close with some comments regarding our upcoming annual meeting. As indicated, we had another successful operating quarter as we delivered very positive results for the quarter. We had a great deal transaction activity that we completed on plan if not a little early. I thought our teams performed brilliantly. Our office lease results so far for '19 were expected regarding total amount of square foot leased and rates achieved. We can believe we can achieve equal results over the upcoming quarters if not more. We're also working on a number of new large deals about the suburbs, which are particularly active at the moment and on the waterfront.

Additionally, our multi-family business is really hitting on all cylinders which my partner Marshall will go into detail. So far 2019 is shaping up from a tone as well as our tenants are really accepting the new product that we built above office and multi-family. Every day our office tenants love the revamped cafeterias, lobbies and amenity packages and improvements made to the waterfront for creating sense of place. We are bringing the same excitement to our multi-family portfolio. Starting in 2020 and 2021, the new product that we deliver both Harborside Plaza 1, which is getting redone totally and 25 Christopher Columbus and the planned retail changes in the harborside with the announced inclusion of Whole Foods and several other restaurants will totally change the way our (inaudible) operations are looked at. Our three year plan of selling the bottom of portfolio is complete. We are now in the process of creating portfolio by selected dispositions and occasional acquisitions that we can truly focus on to achieve the highest results.

Our sale of the Flex business this past quarter is an example of that strategy, as is the consolidation of the ownership of the Jersey apartment towers M2 at Marbella and the purchase of Soho Lofts. Regarding multi-family, my partner Marshall will go over on its points but we had a very, very good quarter for leasing at all our projects. 145 Front Street, our last delivery in 2018 is close to being fully stabilized. The second phase should be fully leased by June 30th. The same-store numbers is on a show of strength which we expect will continue until 2019. And Marshall and his team as we expressed the last time we're in a process of creating some (inaudible) projects inclusive of (inaudible) substantial public space that will really help us complete the sense of place here on the waterfront. In Port Imperial, the Residence Inn opened in 2018 in November. It's actually doing above plan for for flex system this year. The second phase which is the Marriott Autograph will open in the second quarter of this year. Also we'd like to point out as Hudson Yards comes fully online, our assets in Port Imperial are going to be increasingly more valuable. We could not be more excited for our strategy there.

Lastly, the average came down from the proceeds of the Flex business that David will talk about as non-core asset sales. We will do further sales this year in the third and fourth quarter, which will be applied to our debt balance. I'll now turn over to Nick for an overview of Leasing.

Nicholas A. Hilton -- Executive Vice President

Thank you, Mike. We posted another good quarter to kickoff 2019, signing just over 198,000 square feet of transactions, resulting in our core and waterfront portfolio finishing at 80.9% leased at quarter end. These transaction is approximately 60% or 119,000 square feet were new leases and 40% or 79,000 square feet were in place renewals. Across all markets our rents on Q1 deals rolled up 9.4% on a cash basis and 18.3% on a GAAP basis.

And we committed $7.13 per square foot per year of lease term, which was largely a result of our leases executed with Amazon Whole Foods for both office space and a store in our waterfront portfolio. Focusing on our results by market in the first quarter, the waterfront completed just over 114,000 square feet of transactions with the cash roll up of 13.1% and a GAAP roll-up of 19.1%. In addition, we have approximately 300,000 square feet of new transactions currently in negotiations. Our suburban portfolio also remained active in the first quarter. Specifically, we executed just over 84,000 square feet of transactions. One of the most significant included the renewal and expansion of FINRA for over 28,000 square feet at 581 Main Street Metropark. Broadly speaking, we continue to see strong momentum across the entire suburban portfolio, where we are in active negotiations with over a dozen tenants over 20,000 square feet, aggregating to more than 0.5 million square feet of new transactions. Of that total, we feel confident about executing roughly 300,000 square feet by year's end.

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

Marshall B. Tycher -- Chairman, Roseland Residential Trust

Thanks Nick. Roseland stabilized operating portfolio finished the quarter at 96.3% leased as compared to 95.9% leased last quarter. Our strong leased momentum continued in April and we are currently 97.6% leased as we enter into our historically strong spring season. Roseland's same-store portfolio, which has now grown to 5,673 units experienced a 3.9% increase NOI with first quarter 2018. Over the same period, revenues grew 3.1% with the most substantial growth experienced in our Alterra, Chase and M2 communities. The same-store portfolio excludes 1,212 units delivered in 2018. This lease up portfolio is collectively 94% leased and was delivered at a 6.5% yield on cost and is forecasted to produce stabilized NOI of $26 million.

Our last remaining lease up 145 Front Street in Worcester as Mike mentioned is currently 82% leased, but Phase 1 is stabilized at 95% and we expect to finish lease up by the end of June. On the last quarter call, we referenced a corporate objective to limit Airbnb in corporate tenant abuses in our communities. The eviction process led to temporary vacancies in our Washington D.C. and Jersey City communities. All have been restabilized and finished the quarter above 95% leased. Strategically, the select transactions have led to increased ownership with a more focused geography. First, 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 our gross asset valuation of $195 million and after refinancing had a net capital requirement of approximately $36.5 million.

Second, subsequent to quarter end, we acquired Soho Lofts, a 377-unit community for $264 million. This recently stabilized asset is located in Jersey City's emerging Soho West neighborhood near the Hoboken border. These collective transactions have reduced Jersey City portfolio of 2,385 stabilized apartments with average ownership of 87.4%. Lastly, in the first quarter, we closed on the disposition of the non-strategic parks where in Rahway, New Jersey for $35 million and approximately 5% cap rate. Additionally, Roseland's active construction and process pipeline is comprised of 372 hotel keys and 1,947 apartments representing total cost of $1.16 billion. These assets are forecasted to generate NOI of $75 million upon stabilization. The 164 key residents in Port Imperial opened in December 2018 and completed April with an average occupancy of 90% and an ADR of $172 . We anticipate this success will continue with the third quarter opening of the dual-flag full service component on view, Marriott Autograph Collection Hotel. Upon stabilization of the combined hotels are projected to generate $14 million in NOI. The construction portfolio was highlighted by 25 Christopher Columbus, 750-units signature development in Jersey City now called the Charlotte. The project will include construction of a 36,000 square foot onsite Elementary School which will be a significant meaning to the Jersey City waterfront neighborhood.

This project has a long-term below market tax abatement fixed for 20 years at 7.5%. In the first quarter, we launched a common area renovation program at Marbella and Monaco in Jersey City. These renovations will modernize the building's common area amenities and update the apartments to current market specs and should generate substantial rent premiums. Additionally in the first quarter, we initiated disposition efforts of our suburban Philadelphia land holdings as we target greater geographic focus of our residential portfolio.

Finally, we estimate a residential NAV of approximately $1.9 billion after accounting for Rockpoint participation, Mack-Cali share of NAV will be approximate 1.6 billion. Consistent with the company's waterfront focus and highlighted on page 8 of the supplemental, 62% of residential NAV is located on the Hudson waterfront, actually 66% of the Soho Lofts acquisition in April. Moreover we control 6,500 units of the most desirable development sites along the waterfront in Jersey City and Port Imperial.

With that, I turn the call over to David.

David J. Smetana -- Chief Financial Officer

Thank you Marshall. I have a few brief highlights before turning the call back over to Mike. As Mike said, overall we saw a solid quarter operationally with an earlier than expected closing on our $488 million Flex portfolio sale.

We reported core FFO per share for the quarter of $0.40 versus $0.50 in the prior year. The year-over-year decrease is due mainly the move outs of tenants on the waterfront and a shift in timing of the receipt of proceeds from the sale of our early tax credit of $0.03 per share as well as lost NOI from asset sales executed as part of our disposition program. Our core office portfolio excluding Flex was 80.4% leased at year end and was 80.9% leased at this quarter end, a pick up of 50 basis points. Cash same-store NOI in our office portfolio declined by 5.4% and GAAP same-store NOI declined by 7.5% in the first quarter. With the year-over-year declines once again driven by move outs in our waterfront portfolio.

We still see GAAP same-store NOI turning positive in the fourth quarter this year, and note cash same-store NOI performance came in better than expected in the first quarter due to slightly later free rent commencement dates on some of our 2018 blend and extend deals which have now begun in April. We also had a 125,000 square foot tenant in the suburbs move out at the very end of the first quarter, which in isolation will have a minus 1% impact on year-over-year cash and GAAP same-store NOI. Residential same-store NOI improved by 3.9% this quarter in our newly expanded same-store pool. In addition to the property as Marshall highlighted, we saw some benefits from lower concessions in some of our newer properties and lower operating expense increases due to favorable prior year comps. We will be watching our lease up season closely before making any adjustments to full year multi-family same-store NOI. I will now highlight some of the transactions that we've talked about for a while now that closed in the quarter and post-quarter closed.

We finalized the sale of the remaining Flex portfolio of assets for $488 million and five other office buildings for $75.3 million. We also disposed of a non-core multi-family asset for $35 million and its net proceeds after repayment of debt will be recycled into development. We currently have another $41 million of assets under contract to be sold this quarter, representing a total of $116 million of dispositions versus our guidance midpoint of $168 million. The remaining sales will be weighted towards the fourth quarter of this year. With our nine core assets sales substantially complete, our incremental sales will be driven by tax planning where the pay down of debt is involved and we will continue to look to rationalize the portfolio swapping from micro markets where we do not have substantial share to those where we have a platform and more influence in the market.

A couple notes on acquisitions. As previously disclosed on the fourth quarter call, we closed on buying out our partners 50% share of M2 at the end of January. Both M2 and Marbella are now consolidated joint ventures and we have updated our disclosure to reflect the change and they are now both in the top section of our residential NAV under a wholly-owned and consolidated. We closed on the acquisition of Soho Loft in New Jersey for $264 million on April 1st, that's post-quarter closed. I will note the proceeds from our Flex sale earmarked for Soho Lofts are in our 1031 balances section of the NAV. Lastly on February 6, as part of the tax planning around our Flex sale through a 1031 exchange, we purchased a 272,000 square foot office property 99 Wood, adjacent to our 101 Wood property in Metropark.

Turning briefly to the balance sheet, we reported net debt to EBITDA of 9.5 times this quarter. We used $70 million from the sale of our Elmsford Flex portfolio on December 31 to repay outstanding balances on our line of credit and another $210 million from the recent sale of the balance of our Flex holdings to pay off credit line balances and pay down our 2016 term loan by $90 million to a current balance of $260 million. There's approximately $30 million remaining in 1031 escrows, which may be used to pay down additional corporate debt. We have identified a group of unencumbered assets and are working with lenders to finance these assets with proceeds going to retire the balance of our first term loan and other corporate debt outstanding.

Lastly, shifting to guidance, as we stated in the press release, we are reaffirming our core FFO guidance given at our Investor Day of a $1.57 to $1.67 a share. I also noted earlier that we now plan on receiving our early tax credit in the second quarter versus receipt at the very end of the first quarter in 2018. We are maintaining all of our ranges in our initial guidance. We still see same cash -- same-store cash NOI coming in a range of minus 14% to minus 10% despite the better than expected quarter on a cash basis and minus 7% to minus 3% on a GAAP basis. And we will maintain our 1% to 3% same-store NOI guidance for our apartments segment until completion of the leasing season ahead.

With that, I turn the call back over to Michael.

Michael J. DeMarco -- Chief Executive Officer

Thank you David. In closing, as my colleagues have outlined, we continue to believe we're set up to have a good 2019 from execution point of view with the results showing up in 2020. Our focus is really 100% on the waterfront for future transactions. For example as Marshall has laid out before, we intend to exit our D.C. joint ventures, land sites in Philadelphia and land sites in Suburban New Jersey due to the pay down debt to fund our development. You can expect us to also have additional suburban office sales in the third and fourth quarter as outlined earlier. We are excited about our operating portfolio and how we will continue to grow with excellent new projects. The key is creating a sense of place on a waterfront for us to execute our strategy, I am confident the total effect of our corded efforts in office retail with the hope route additions and other restaurants we're adding, multi-family projects that we currently own and will construct will produce excellent returns in the short and long term.

Before we turn to the Q&A portion of today's call, I want to write a brief update regarding the unsolicited proposal to acquire Mack-Cali suburban and waterfront office assets that we received from Bow Street and David Werner Real Estate Investments as well as the related board nominations that we separately received from Bow Street. We love Bow Street as we would any other shareholder. As I've said before, my door is always open to shareholders and my phone an email work. We listen carefully and ran what I would honestly say is a thorough process. They may not agree with the decision, but I take my personal reputation on that statement. Prior to Bow Street's overture, we already had BAMO (ph) reviewing strategic alternatives. We started with the decision to sell our Flex portfolio last November. So effectively BAMO (ph) has been working with us for about nine months.

Therefore, we have and will continue to be very thoughtful in our approach on every opportunity to increase and realize our NAV. Upon receiving the unsolicited proposal in February, the Mack-Cali board of directors, which I am a part of thoroughly validated it -- thoroughly evaluated it in consultation with substantial legal advisers. Following its careful review, the board unanimously rejected proposal as grossly inadequate on price, usually on terms unworkable and not in the best interests of the shareholders. Further the board concluded the Mack-Cali strategic plan as outlined by us previously, we do value shareholders as far superior without just sent to course risks and uncertainties associated with the proposal. We met with both groups several times, myself personally.

They now question whether we were open to any deal. I'd like to answer that. The answer is yes. We are and continue to be receptive to all offers. One could wonder what it would be to step into the void. The answer simply is one that is real, has certainly execution, lives in the best interest of the shareholders. A long time ago, I defended my board about their intentions. I like to repeat that comment today. I firmly believe without any reservation that they hold their positions as directors because they are talented and have the best interests of shareholders and for no other reason. Following the decision to reject the proposal, Bow Street nominated essentially six directors, two of which are the principals plus the four they've actually outlined for the public, to stand for election to the Mack-Cali board at the annual meeting. We firmly believe these nominations are simply means to an end intended to advance Bow Street's interests, self interest to acquire Mack-Cali's office assets in inadequate price.

It's worth noting that we met with the board and management so as to avoid a costly distracting proxy fight by proposing to add two of the Bow Street directors. Two of the any other four other than the principals.

Bow Street rejected that effort to amicably solve it which we believe is very telling of their true objective. I personally headed our negotiation. I felt we could have done a good job and the two directors was fair and reasonable given the fact we're getting two new ones today. So we'd be adding four new directors to a balance of eleven which given myself was added the year before. Rebecca Robertson was added two years before will be 6 and 11 directors turning over which is obviously a majority.

We believe that it's clear that Bow Street has a single-minded focus of forcing a sale to the betterment (ph) of the all the shareholders. Last week, we filed for the proxy statement for upcoming annual meeting and recommended shareholders vote for our qualified candidates. Important (inaudible) includes two now -- two new highly qualified independent nominees who I am very fond -- very fond of. If elected will join the board following the annual meeting demonstrating the board's commitment as we stated to refreshing its composition, reducing average age and gender and increasing diversity. We will add new board members in 2020 additionally.

In the coming weeks, the members of the board and management team will engage with all shareholders encouraging them vote to white proxy card. That said, today's call is about our first quarter earnings call. I would appreciate if you could keep your questions focused on results. But as always, I will answer all questions as best I can. I'd also like to point out if anyone would like to meet with the board at any time in the near six or five weeks from now, please let me know and I'll arrange the meeting personally. With that operator, I like to take questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) We'll take our first question from Emmanuel Korchman of Citi. Please go ahead.

Emmanuel Korchman -- Citi -- Analyst

Hey, good morning everyone. Nick thanks for giving us an update on sort of what you see in terms of leasing for the year. Can you talk about how the momentum of whether it be tours or propensity of lease has changed now versus the last time you updated us about three months ago?

Nicholas A. Hilton -- Executive Vice President

Yes, absolutely, basically activity continues to be, it continues to be strong, I mean we see a significant amount of people just actually looking and more than just kicking the tires coming in and looking at the new product. And as I mentioned before, the exciting thing is actually the diversification of the tenant base, which I like to see and it's -- we've got a fairly good mix from all size ranges and from there Mike.

Michael J. DeMarco -- Chief Executive Officer

Emmanuel, this is Mike. The other thing we've said is the suburbs are being stronger than the waterfront today. Waterfront has been steady, the tours about the same as Nick pointed out the mix is actually quite good, but the suburbs have gone up like two or three levels like from 3 to maybe a 6 in the scale of 10. A lot more activity, a lot more people appealing to our product. We wouldn't having debate on price and we're actually having some buildings that were having a tough time fitting people in that want to get in. So we're hoping to have a particularly good year in the suburbs for whatever reason we're just the choice in several markets.

Emmanuel Korchman -- Citi -- Analyst

And have you seen that as a local upgrade with another building down the street and they are reacting well to what you've done or the way you position the buildings? Or is that people from outside the market?

Michael J. DeMarco -- Chief Executive Officer

The combination of both, but to point out as we've let people know before, we invested substantially in our assets starting in '16 that can completed '18 and tail end of a little bit of '19, but they're basically done now. So going from south to north, (inaudible) has been really active for us, extremely active which we think we could fill up those complexes which had substantial vacancy maybe by as late as Labor Day or as early as Memorial Day if we get lucky. Those tenants are coming from that market and a few other people that are migrating from north to south for standard of living. Metropark is 100% full. The addition of 99 Wood will be well received by us. We ran out of choice, because of our commitment. It really comes down to the tenant experience. We will walk into a renovated Mack-Cali project, you sense that we have a commitment to the asset, which bodes well for their view of how we handle problems going forward, which makes us the part of the (inaudible). I would say that Short Hills has been solid. We think we are going to have activity in Morris County. We have a couple of expansions that should work out very well for us. So overall, it's been in and out but essentially we own 30% of most of the markets rent if not more. And it bodes well for us from an annual (ph) point of view.

Emmanuel Korchman -- Citi -- Analyst

Thanks, Mike. And realizing the US has not asked for the (inaudible) proposal, I won't, but I will ask about...

Michael J. DeMarco -- Chief Executive Officer

No, no, actually Manny, I didn't say that. I said focus on results. You can ask whatever you want as always. But I do have a question for you by the way. Do you mind? Is it true that Billman (ph) standing -- no, no, do you think Billman is really standing in for Nick this weekend at the (inaudible)?

Emmanuel Korchman -- Citi -- Analyst

We'll have to see.

Nicholas A. Hilton -- Executive Vice President

It's okay.

Emmanuel Korchman -- Citi -- Analyst

Mike, so in the past in your investor presentations, you've had a slide called valuation implied stock price in some of the parts.

Michael J. DeMarco -- Chief Executive Officer

Yes.

Emmanuel Korchman -- Citi -- Analyst

And in there, you put the NAV of multi-family segment and you sort of lead the office piece and back into multiple.

It sounds like the Bow Street proposal have sort of taken that and added a couple of other layers to it. But in essence, it's under that same framework of let's put the companies and this is what we're left with an office versus multi-family. But you sort of clearly disagree with that in your rebuttals to their proposals of how the standalone entity doesn't work. So help me figure out how I should react to this slide. You guys have had in the past in some of the parts ,where now you're telling me don't look at the some of the parts because this company needs to be helping other.

Michael J. DeMarco -- Chief Executive Officer

Not exactly right but the same vein. So their proposal took two pieces and we always felt that the multi-family is a little easier to value, a little cleaner, a little bit more institutional. Right? And then we have suburban which is getting smaller, getting better quality and then we have what we think is our institutional assets on the waterfront which have vacancy issues. And we pointed out if you look at the multi-family and said could it trade at around NAV. That's great, right? But we don't trade NAV because if that was the case then the slide makes no sense because it's really sensitive for purpose which is if we do trade at let's say $16 -- $17 then you're basically getting the office business for virtually nothing. Right?

So their proposal took what we had looked as office values, discount them significantly from the low end of the range, crystallize an $800,000 to $1 billion loss, right, effectively. And then say, oh by the way we think even though you're 13 times levered and won't have the operational cash flow to basically do your business that motives on a spin out and trade. Now if they came back and said, oh listen you should sell to us and sell to someone else. Right? That might have been a better conversation. But it wasn't done that way. It was done in a sense of wouldn't it basically give you a certain price, an analysis which we keep pointing to, they just took and said here's the price minus the debt, here's the net is. Okay, Manny there's a couple of things missing. One every piece of data I have, I had to get transferred has prepayment penalties. So almost a dollar, basically you can well imagine how much debt we have. Every time we've sold assets in the state of New Jersey, which would particularly bad dept having sold over 2.1 and growing, we have about a 1.4% cost of doing business. So take that $2.2 billion and come out and tell me it's 30 million bucks or $0.30 cents. Third, with that drastic reduction of assets, I'm going to have a change of control and severance issues and other costs are not being factored in. So 8 to 10 is never, a it's never 10, just listen I'll be alive 60 years coming this August, whenever anyone who's said 8 to 10 , I never get to 10, I get to 8. You take the deductions, I'm down to like probably high 5s maybe a 6. You added to what I think the multi's is going to trade at at a site this kind of maybe it would've been better discount. And I don't have a $27 or $30 dollar number they profit it out.

Plus it was a real estate deal, it is like they said underwritten cash or US will take care of everything, it was we want to go look. And then when we rejected them on the price, they came back and said we'll buy another piece. Well the last time I called -- last time I checked and that was called green mail (ph), right. We'll buy a small piece and go away for 500. All they really wanted was to buy something for 500 down 20 points, buy for 400 and then make the differential. That's why it was rejected. I am not 100% aligned with the shelves as everyone knows that based on how I'm paid in my view and how I work my job. If it was a real bid, you know me, I would be ecstatic about having something we could work on. But so to get to a point to finish up, analysis tends to change, we really think and by the way just to refresh, we had our valuation rechecked by HFF starting about three months ago, when they first made the bid. They reconfirmed our numbers.

Emmanuel Korchman -- Citi -- Analyst

Thanks for that Mike.

Michael J. DeMarco -- Chief Executive Officer

Pleasure.

Operator

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

Derek Johnston -- Deutsche Bank -- Analyst

Good morning everyone, I'm wondering what levers are you pulling in order to ramp occupancy at the waterfront. I mean I've seen the spaces. They are lovely and I'm just wondering are you guys pushing rents too aggressively? Are you holding back on TIs? What's it going to take in your opinion to get supply and demand and balance there?

Michael J. DeMarco -- Chief Executive Officer

I think it's a couple of things, I think having Whole Foods, Derek it's an excellent question, was the first step. In that deal, we reached -- we rolled the price, we gave us some other concessions. We did a store with them as a two for one deal, which we think will be the one of the first times we'll get a full front of the house marketing company in our building, which I think will add to a certain luster. We have a co-working deal, we've mentioned to people that's actually grown in size and (inaudible) 200,000 square feet that we will do in two different buildings that will absorb occupancy, bring a certain panache to our buildings, certain sense of activity. And then we've had a number of other tenants. So when it comes down to price, we are relatively flexible and we were very good on terms and we pay a full commission. We think it's a little bit about getting the building set up. So two years ago, we were looking at something that wasn't as pretty as you saw on the last tour which actually been looks nice now that the food hall is opened. And we continue to make improvements. We've done canvassing. We have agents. We think we'll be successful in the future. We think it's lining up this year to be a good year. We hope we get great renewal rates, so our terms on both cash and GAAP have been excellent. And if we had to conses dollars in order to get tenants then we're totally rationale to answer your question.

Derek Johnston -- Deutsche Bank -- Analyst

Okay. Thank you. And just secondly, you guys have stated in the past and even in the release that 2019 will serve as a baseline for a fully repositioned Mack-Cali. So what point will we be able to move past having somewhat lackluster results, right? So to me it seems uncertain that 2020 can snap back to what would be solid growth from the fully reposition portfolio. So I guess the question Mike is what are the metrics you look toward that will be a validation of the strategy?

Michael J. DeMarco -- Chief Executive Officer

Two things. I think the -- again a very good question, the multi-family business has to start to gel the way we wanted to. So we've been adding product, that product, the new product as well. But even though you build it to a (inaudible) still to drive rents thereafter. So our same-store numbers this quarter were the first time that we've actually started to have that type of power in our numbers.

As Marshall pointed out, we have about 2,400 units of class A in Jersey City and borne away. A 2,400 units would become a factor in driving demand and price which we think we can do. We also believe we can cut some expenses out of the business. We have some synergies that we'll be doing to basically drive those numbers.

So in multi, I look for both rate and occupancy. Occupancy we've already gotten. We want to maybe drive it up a little bit more. And we would have looked to push rates. That's 40% of our P&L today, right? So that's the first part. The second part and the third part which is therefore easy to understand is suburban. It's 20% of our number, give or take, but we think we're going to have relatively good year. So if we do Derek have the year I think we can as we sit here in April, sorry May 2, then we should have relatively good results in our same-store numbers for this suburban office portfolio. Class A should do really well. The bottom should get pulled up. We're going to do a little trimming on some asset sales. So when we enter into 2020, I think you're in a constituted number that should work, which could lead to a sale of those assets if the market is receptive to it. The waterfront will be more problematic. Whole Foods still had co-working to next start, now we need another deal or two. We are getting very good play for smaller tenants 5, 10, 15, who come in, love the space, love the proximity, but we need that tenant in hands, who is going to take to 250. And they've been sniffing around and poking the tires. Right now personally I think it's a little bit of a waiting game because the legislative branch of the New Jersey while have communicated they are going to renew the program for growing New Jersey, haven't finalized it. So I don't think anyone is going in today for a large deal. They will wait till July after the budgetary session is over. But those three pieces and will still drive down expenses, which were noted for as we'll trim jobs and other things, but multi, suburban has to have a good lease this year, waterfront has to have a steady year, and that will give us a good baseline for 2020.

Derek Johnston -- Deutsche Bank -- Analyst

Thank you. Good stuff.

Michael J. DeMarco -- Chief Executive Officer

Pleasure.

Operator

We will now take our next question from Thomas Catherwood of BTIG, please go ahead.

Thomas Catherwood -- BTIG -- Analyst

Thank you, morning everybody. Follow up on Derek's question on Harborside, so you've completed the atrium then the lobbies in there, the Food Hall is complete, but how much investment is left and how does it break down between the modernization of Harborside 1, the reskining of 2 and 3 and then the work that's left at 5 and 101 Hudson?

Michael J. DeMarco -- Chief Executive Officer

So each one has as a component one through it, 5 is essentially done. We did some lobby work. We added some art work. It's a beautiful building beginning with it's in superb condition. 101 Hudson is getting a restaurant. The restaurant of course it's about a million five. It's a relatively -- it's a moneymaking deal, but it's what it's cost, wouldn't have refreshed the lobby. We've probably done to put in better elevator controls which is an expense that we charge back over the years, but it's in excellent shape, but we also will add an amenity floor. We have a deck on 17 that overlooks the harbor that we think the building needs a kind of a convening space to use a term we might actually use it with convening but it's what it will be shaped after. That probably is about $4 million may be $5 million in total between both the lobby and the fit out on the 17th floor. Those are relatively too small numbers.

The rest of 2 and 3 as you pointed out for the people in the call, lobbies done, Food Hall is opened up, looks great, a little bit of cosmetic work. We would be adding another restaurant in for about $1.5 million also the moneymaker but it's what we lay out to build the space. And then the reskinning is over the next year or so. We wait out those numbers before and they haven't really changed. It's like $56 million to $58 million, actually coming in cheap because they signed the budgets we're getting better a bid than we thought to reskin 1 and then 2 is like $11 million to $15 million, give or take. Both will get done over an 18-month period.

Thomas Catherwood -- BTIG -- Analyst

Got it, so it's 1, gets completely reskinned and everything else needs to be done to that once they get it?

Michael J. DeMarco -- Chief Executive Officer

Yes.

Thomas Catherwood -- BTIG -- Analyst

And the reskinning of 2, 3 all in that $56 million to $58 million?

Michael J. DeMarco -- Chief Executive Officer

$56 million is for just 1 because we do bathrooms, we do elevators, it'll be a brand new building. And then another $11 million south to do 2 and 3.

Thomas Catherwood -- BTIG -- Analyst

Got it. Got it. Got it. How do you -- some of this spend, how do you classify this? Is this based building CapEx? is this leasing capital expenditures? How is it classified?

Michael J. DeMarco -- Chief Executive Officer

It's a combination of all three. So when you do a restaurant deal it's leasing spend. So we get a guy comes in wants to pay it $50. You build a -- build up the restaurant for them. You amortize it over the course of the deal. No different than doing a TI for a law firm. The lobby improvements are basically base building. The amenity space depending upon whether we rent it out to a company or not, they need to be a lease transaction and we run it to a building expense. The reskinning is truly just base building effective to the category. We will be happy if you're going to call us off line, we'll give you a breakdown if you like.

Thomas Catherwood -- BTIG -- Analyst

Perfect. Yes I'll do it later. One last one for me just trying to figure out the dispositions, David talked about this a little bit. But so you've guided to $168 million for 2019. You completed $110 million, but if we look at the Roseland sources, you say there's still $160 million of potential sales there. So how do we think of how those two sides tie together?

Michael J. DeMarco -- Chief Executive Officer

Well. There's two sides , I'll answer the call, because it's a top of the numbers. There's a little bit left to do in the office side and with a few projects and David does a great job of managing that. On the Roseland side we're really talking about emulated out strategy wise of redeploying capital which is we're exiting things and going into things, like we sold Park Square last year which we don't put into the same way we will look at an office disposition because that money got basically redeployed into the residential business. While the office business usually goes, sales go to pay down debt, fundamentally 1031 because we have owners tax basis. We have some dispositions in D.C. for the JV's which likely will get redeployed into other assets.

So that's really answer. It's really one two step -- two separate sources uses.

Thomas Catherwood -- BTIG -- Analyst

Got it. So when we think then of that $168 million that you've guided to, that's separate then what's going to be happening at Roseland?

Michael J. DeMarco -- Chief Executive Officer

Fundamentally yes.

Thomas Catherwood -- BTIG -- Analyst

Got it. All right. Thanks guys.

Michael J. DeMarco -- Chief Executive Officer

Welcome.

Operator

We will now take our final question from John Guinee of Stifel. Please go ahead.

John Guinee -- Stifel -- Analyst

Final question. Wow! Hi David, you had mentioned on the Investor Day a plan to de-lever maybe an equity event of sorts. What's your current thinking on that? And what's the goal on a net debt to EBITDA year end '19 and year end '20.

David J. Smetana -- Chief Financial Officer

Hi John, we certainly didn't mean for you to be last. So thanks, so we came in at 9.5. Never, never with us, so listen what -- what we laid out at Investor Day was we thought we could get to around 8 times with just the leasing. And then on top of that I said to go further beyond that we would have to raise equity from a couple of sources, those could be asset sales, we're taking a look at our suburban assets, that could be joint venture partners on the Roseland side. And you know if something happened, if it was a rock point specifically and then if we really did lease up or they wouldn't commence over the next two years, but had earnings growth of 15% - 20% from our our leases, we would take a look at equity markets, if we got to a price that was reasonable certainly not here. But those would be the three ways to go. You get to 8 from leasing and below you have to raise equity from outside sources at NAV.

Michael J. DeMarco -- Chief Executive Officer

John just to voice David's comment, sorry John just to voice David's comments the planned sales which will be the third and fourth quarter which will go into 2020, the tax planning could be as much as $200 million to $300 million. We're looking at currently today.

John Guinee -- Stifel -- Analyst

So do your numbers still give you the ability to get to 8.0 times by year end '19 or not?

David J. Smetana -- Chief Financial Officer

No John, we would need the waterfront to be leased up. That would be a '20 event, we would have to have at least in per EBITDA to commence, it would probably be sometime early in '21 on a truly commence basis.

John Guinee -- Stifel -- Analyst

Right. Thank you very much.

Operator

We have another question from Anthony Paolone of J.P. Morgan. Please go ahead.

Anthony Paolone -- J.P. Morgan -- Analyst

Thanks, I was hoping maybe you can just help me understand something on the tax side, as it relates to the proposal. I think you highlight in one of your rebuttals of $400 million tax liability that it would create. I'm just trying to understand if an investor buys Mack-Cali stock today in the open market at 23 bucks, and there's some sort of a deal whether it's 27, 29 or whatever the number would be. But what's the tax implication?

Michael J. DeMarco -- Chief Executive Officer

So what the bolstering proposal took into effect is a partial or total liquidation. So you're already used up your shield Tony for 2019 when we did the transactions, we saw the significant traffic in the Flex business. So we used our dividend 1031 money, kept it, bought an asset to pay down debt. That's (inaudible). They come and say let's sell the rest which is $2.2 billion, one transaction. Here's the cash. Well the questions we have which are numerous is whether or not we will still keep the Safe Harbor rules on the re-regulation because it's a fairly large transaction. We don't have any shield left in '19 you have to go into '20. There's an enormous deal in '20. So you're going to have recapture if you're a normal shareholder if you're sorry, if you are a unit holder. But putting that aside the company has taxes right. So 101 Hudson which we bought for $200 million from Lincoln Properties back in the day is worth $500 or $400, you owe $200 million in cap gains. Right? That money gets basically taken out. Right? Or you have to basically pay out enough. So when a shareholder gets your return, your dividend, will say, oh you got 8 bucks. However, if you pay taxes, if have a pension plan, you don't. But if you're a sovereign wealth plan, doing individual family office, any one of the other baskets which is anywhere from 15% to 25% of a normal normal pool, you'll be paying taxes.

And there are some other corporate liabilities that people are worried about, whether or not we would actually violate the re rules in terms of what, we laid it out. So this is -- this is just essentially -- this is like basically taking a company and saying let's go sell everything which no one's ever done in this space by the way. Right? Which has been around since the day of God. Because we've been in business for 20 some odd years and not have tax ramifications. That's why most of these deals, if not all of them are structured as corporate deals which is to your point you've bought the stock for 23. Somebody buys it for 27 and it's their responsibility for the $4 dollars or what you get -- you get the benefit that there's taxes they deal with it. Do they make it clear?

Anthony Paolone -- J.P. Morgan -- Analyst

Well yes. And that's hard to get in a tax conversation tone and a call like this. But just again make sure I'm understanding some of this is the $400 million that $4 dollars that's you know any reach would effectively have if they liquidated you know likely a gain against the depreciated basis. So is that what the $400 is or is that something just more unique to the unit holders or to (inaudible) or the specific deal?

Michael J. DeMarco -- Chief Executive Officer

It's not a unit holder number. It's a corporate number for us. We would have substantial capital gains, would have recapture. Right? So the typical investor, if you're in a mutual fund, if you own a share, so if you own your family office, you own the stock, your sovereign wealth. You look at that trade and say, oh what I really should do because Anthony gave me good advice is I should sell immediately. Right? And let the next guy pick it up which then puts pressure on the stock which then drives down the value of the whole transaction. That's why Anthony all these deals are usually done as corporate deals. Right? They're not structured as asset per solution. Early one, it was done which I don't think worked out that well was New York REIT and I don't want to go down that road. Right? Which is to basically do a liquidation on partial liquidation and suffer the vagaries of that.

Anthony Paolone -- J.P. Morgan -- Analyst

So to the extent a deal were proposed the way most REIT deals have been done historically when there's just been an outright cash, take out this $400 million is a non-event for the common share holders.

Michael J. DeMarco -- Chief Executive Officer

Non-event absolutely right, and by the way we have a bigger -- by the way, we have a bigger gain, which we didn't even factor into our numbers is let's assume there was a secondary sale, because it was a secondary liquidation of Roseland, which we have a more and better gain because all those buildings that we've been building have been built that cost of statute below what the market value is. So we'd have another set of gain. Right? I mean I always thought this as a last to somebody, but when you look at the transaction the way it was proposed, and the way we simply said well you get 8 to 10 and this will trade at '19, at the end of that I thought I should get warm milk and cookies, which is a bedtime story. Right? The way it really works is guy comes in and says to you here's the price, here's the terms, we're done. Right? Finance here's my equity, we'd had none of that it was or we can put up a standard deposit, or our next bidders will buy a portion of the assets at a discount.

Look of all my skills, one of things I can't really do well is spell, but one of the words I really learned recently Tony, you know the word I've earned, is Tuscany, because I really like to spend some time there in the future. So if this was a real bid, I would've been very excited about it.

Anthony Paolone -- J.P. Morgan -- Analyst

Got it. I understand. Thanks for clarifying.

Operator

We'll now take our next question from Michael Lewis of SunTrust. Please go ahead.

Michael Lewis -- SunTrust -- Analyst

Thank you. So maybe this is the same question, Tony just asked in a different way, but you've got this $36 NAV estimate. Is there any way or any structure to kind of crystallize that and there's so much room between that and your stock price? Why is that you think there isn't -- you can't find that deal or that deal isn't out there?

Michael J. DeMarco -- Chief Executive Officer

Well I would say, this is Michael, I think if that $36 didn't exist when we took over four years ago. Right? When we were trading at $17.2 June 2nd when Marshall I formed a partnership, we weren't we didn't have a $36 NAV. Right? People thought we were at 19, 21 and we've sold two-thirds of the assets in a company that we basically took over. So that one-third will be released the higher numbers. So those assets are more valuable, which is one reason why we look at a suburban portfolio today, we think we can crystallize. The waterfront even though it's not as well rented as we like, we get substantially higher rents and obviously the multi-family business has been a deployment of capital building and reaping the benefits of development deals. We think over the upcoming quarters, and I would think less than 8 to 2 years in total will have a real shot at crystallizing our numbers. Why is that? Well I think we have a chance to get out of the suburban market sometime in the future which will create a much more crystallized company, obviously less debt. And then lastly, I think as the multi-family continues to produce value, it becomes increasingly more valuable. And then obviously the ultimate point is, if we can lease up the waterfront, you create a certain amount of value, and at that point we're probably better off. But we're having more substantive conversations today based on the fact that we continue to redo the portfolio every single quarter. The job that David Smetana always tells me is I didn't know you guys actually did this every quarter. Don't you have a normal quarter, because we don't have normal quarters. Right? We announce each quarter as some series of deals that gets us to a different place. The one number I would point out is 297 I think it's like 54. We started with 297 office buildings when we took over four years ago. We're down to like 50 something now, total change. Sometime in the future, my phone, my email, my door is going to have a good visitor.

Michael Lewis -- SunTrust -- Analyst

Thanks.

Operator

There are no further questions over the phone at this time. I would like to turn the call back to your host for any additional or closing remarks.

Michael J. DeMarco -- Chief Executive Officer

We look forward to seeing everyone at NAREIT. We'll have a full schedule if we need to we'll stand. 2, we'll be reaching out to all our investors every single one, we'll set up a meeting. We'll be bringing board members with us if you would so desire to speak to them directly. You can expect to hear from Deidre Crockett or David or myself. Anyone has any questions or concerns, please call us. We know this is interesting times and we are there for you. With that, I wish everyone a great day.

Operator

Ladies and gentlemen this concludes today's call. Thank you for your participation you may now disconnect.

Duration: 50 minutes

Call participants:

Michael J. DeMarco -- Chief Executive Officer

Nicholas A. Hilton -- Executive Vice President

Marshall B. Tycher -- Chairman, Roseland Residential Trust

David J. Smetana -- Chief Financial Officer

Emmanuel Korchman -- Citi -- Analyst

Derek Johnston -- Deutsche Bank -- Analyst

Thomas Catherwood -- BTIG -- Analyst

John Guinee -- Stifel -- Analyst

Anthony Paolone -- J.P. Morgan -- Analyst

Michael Lewis -- SunTrust -- Analyst

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