Good day, everyone, and welcome to the Mack-Cali Realty Corporation Fourth Quarter 2020 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Ashley Cotton. Please go ahead.

Good morning. Thank you, operator. I'd like to remind everyone that certain information discussed on this call may constitute forward-looking statements within the meaning of the federal securities law. Although we believe the estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. We refer you to the company's press release, annual and quarterly reports filed with the SEC for risk factors that impact the company. With that, please allow me to introduce MaryAnne Gilmartin, Mack-Cali's Board Chair and Interim Chief Executive Officer.

Good morning, all. Thanks for joining us. I want to start by once again thanking the entire team for their continued dedication to the company during a very difficult year. We have remained focused on executing our strategic initiatives while navigating the challenges of the pandemic. In 2020, we made meaningful improvements in our noncore asset sales and have continued to work to strengthen our balance sheet. We absorbed the pandemic-led market disruption on the residential side and are beginning to see signs of stabilization. We've made exciting headway repositioning our Harborside campus. Across the company, we showed a willingness to embrace change, both in leadership and in the alignment of the company's priorities to ensure continued progress in the years ahead. Following the completion of the work of our Strategic Committee, of which I was a charter member when I first joined the Board in 2019, we embarked on a diligent plan to sell all of our noncore office assets and to exit a number of land positions and residential properties outside of our core markets. This initiative was successful in generating $352 million in gross proceeds from noncore office and $437 million in gross proceeds from land and select residential sales all in 2020. We remain on track to complete the sale of the majority of our remaining noncore office properties by the end of the second quarter, thanks to the hard work of Ricardo and his team. At that point, Mack-Cali will be the owner of six large waterfront office properties, strategically located in an office campus setting and a solid residential portfolio that generates the majority of the company's revenues and net operating income. Regarding our commercial portfolio, we are increasingly optimistic about the strategic repositioning of our Harborside holdings. We believe the corporations will be returning to the office later this year and that employees are eager to give up their Zoom existence and reconnect with old friends and colleagues. On the residential front, we now believe we are at or close to an inflection point, and we are seeing leasing velocity ahead of plan in our newest delivery, The Emery in suburban Boston. We just began two lease-ups in attractive new residential communities, The Upton in Short Hills and The Capstone in Port Imperial. We are very pleased with the early traffic and the interest in both. With that, I will pass the call now to Dave Smetana. Dave?

Thanks, MaryAnne. We reported core FFO per share for the quarter of $0.16 per share versus $0.44 per share in the prior year. The year-over-year reduction is due mainly to the impact of our suburban asset sales program and impacts from the pandemic on our hotel, parking and multifamily operations. The Waterfront office portfolio had a cash same-store NOI decline of 4.4%, largely attributable to less parking income and expense recoveries on the revenue side. Real estate taxes in the fourth quarter of 2020 compared against a low fourth quarter 2019, resulting from lower real estate tax assessments in the Waterfront portfolio in 2019. As Marshall will go into in more detail, the multifamily portfolio experienced similar operating pressures in the New York City metropolitan area that others have reported, but we have seen indications that we may be close to a bottom. Rent collections remained stable in the quarter, averaging 97.1% in our office portfolio and were 99% in the multifamily portfolio. Bad debt expense remained in good shape. Bad debt expense in the quarter totaled $489,000, half of which related to retail tenants in the Roseland portfolio. And we also took a $200,000 write-down of straight-line rents with $131,000 relating to discontinued operations properties and $69,000 to Roseland retail tenants. On transient revenues, our hotel operations remain limited to the Residence Inn portion of our dual-flagged hotel, which is running above EBITDA breakeven. However, including the closed EnVue Hotel, the fourth quarter EBITDA loss was $838,000. We expect both the EnVue and Hyatt Hotels to remain closed for the first quarter and will evaluate reopening later this spring. Parking revenues were off by $800,000 sequentially and remain subdued early in 2021. On the office leasing front, we have 408,000 square feet set to expire on the waterfront in 2021. As we have mentioned at Plaza 4A, TD Ameritrade moved out of 140,000 square feet of space in January and will vacate the remaining 44,000 square feet of space at the end of September. That will leave Whole Foods grocery as the only tenant in the building, and we are already marketing the asset for potential life science use, keeping in mind a wide range of structures to limit our need to make material capital commitments to the project. Our second-largest move out is in Plaza 5 with Natixis, which leases 75,000 square feet of office and 26,000 square feet of storage and ancillary space, all of which is expiring at the end of July. The balance of 123,000 square feet is in various stages of leasing, which Ed will update us on. Turning to the balance sheet. In the quarter, we reduced our line balance to $25 million outstanding with proceeds from the $204 million of asset sales we executed in the quarter. In September, we exercised the first of two six-month extension options on our line of credit, extending our maturity date to July of 2021. We plan to execute our second six-month extension to January of 2022 later in March. We have only one mortgage maturity in 2021, a $3.9 million mortgage on a small retail condo within Roseland. Ricardo will discuss our asset progress shortly. The proceeds after debt and defeasance payments from the three remaining parks will be targeted for corporate debt repayment and provide the basis for the formation of a new credit line tailored to our go-forward asset mix of predominantly multifamily assets. The net debt-to-EBITDA metric was 15.8 times at quarter end, reflective of our vacancy, hotel and parking disruptions and a nearly funded $906 million development pipeline that is in the process of coming online this year. The metric in isolation does not tell our complete story of the progress we have made towards derisking our balance sheet. When I joined the company three years ago, we had $1.4 billion in corporate debt with recourse to the company, supported by 146 mostly suburban office properties. Today, our only remaining corporate debt consists of an $8 million balance on our credit line and our two bond issues totaling $575 million outstanding, which are earmarked for redemption as we complete our suburban asset sales. The execution of this plan has come with dilution to FFO per share, but now positions the company to grow from a smaller base with 24 residential assets and six office buildings, all with locations that have superior access to mass transit and will have an appropriate capital structure. Upon completion of the suburban asset sales in the second quarter, we expect we will derive approximately 55% of our NOI for multifamily and 45% from our office portfolio. Now on our outlook for 2021. With the current pandemic uncertainty affecting our hotels, parking, volatility in our multifamily operations and the timing of our suburban asset sales, we feel it is prudent to provide our outlook only for the first quarter of $0.12 to $0.15. We will continue to evaluate the merit of providing a longer-term outlook as we move throughout the year.

Thank you, David, and good morning, everyone. I am pleased to announce that we have completed another busy quarter executing our strategy of selling noncore suburban office and residential assets. Sales in the fourth quarter for both office and residential totaled approximately $520 million. Despite the early impacts of COVID on the capital markets, the state of New Jersey finished 2020 with just over $2.3 billion in office sales, which is in line with historical volumes. Sales of our suburban office assets in the fourth quarter totaled $94 million, comprised of four office properties and a land parcel. We successfully closed out the year with total sales of $350 million on our noncore office assets. Subsequent to year-end, we exited the Princeton office market with the sale of 100 Overlook Center for $38 million. On the residential side, in the fourth quarter, Roseland completed the sale of three noncore residential properties totaling 1,025 units and two land parcels. The gross value of those assets totaled $428 million. In total, the company generated close to $83 million of net sale proceeds from its interest in the residential assets after mortgage debt retirement. As David mentioned, most of our sale proceeds from the past year have been used to pay down our credit line with future sale proceeds earmarked for paying down our unsecured bond debt. In furtherance of this plan, as of today, we have four transactions under contract totaling over $600 million on 14 suburban office assets. This group of properties under contract comprises over 2.6 million square feet. We anticipate closing two of these transactions, our Short Hills and Metropark portfolios, by the end of the first quarter with a gross price in excess of $500 million. The two remaining transactions total approximately $100 million and are scheduled to close in the second quarter. The completion of these sales is expected to provide over $440 million in net proceeds after payments and selling costs. In summary, we are pleased with our progress in monetizing our noncore assets at a rapid pace, but most importantly, without sacrificing value. We also continue to make progress on finalizing sale terms on the remainder of our noncore commercial assets, including joint venture interests in several office properties, retail assets and land parcels in our noncore markets. And with that, I would like to turn the call over to Ed Guiltinan.

Thanks, Ricardo. I've had a busy first four months back at Mack-Cali. Despite the pandemic, we've begun to successfully implement new approaches to unlock the potential of Harborside. Based on discussions I've had with tenants, prospective tenants, brokers and other business leaders, especially since the first of the year, I expect the vast majority of companies will return to their offices later this year, with many returning over the summer or shortly after Labor Day. People miss camaraderie, mentorship and collaboration working remotely, and companies are frustrated by their inability to establish and maintain their corporate culture via Zoom. The layout of office space may change and the work week may evolve, but people generally appear to be eager to get back to the office. Harborside is in a terrific position to capitalize on this trend. Mack-Cali has great assets in the best location in Jersey City. With the assistance of our CBRE leasing agency team, we are proactively engaging the market. In addition, we anticipate the state of New Jersey's new incentives program will provide additional support to our leasing efforts and make Jersey City even more competitive compared with New York. Upon completion of the renovations to Harborside 1, the building will have a new, attractive and energy-efficient facade with larger windows. The building will also have a reimagined lobby, modernized elevators and new HVAC electric and other infrastructure. The building will look great from the outside and have floors filled with sunlight, but as importantly, it will have modern and robust mechanical systems for tenants. We are still facing challenging market conditions, but we are optimistic with the return to work in sight, the desire of employees to return to the office, the state's new incentives program, the renovations at Harborside 1 progressing well, and of course, the vaccine being more widely distributed, we are well-positioned for the future and look forward to keeping you all updated on our progress. Thank you. I'll now turn the call to Marshall.

Thanks, Ed. In the fourth quarter, Roseland's operating portfolio finished at 90.2% leased as compared to 89.5% last quarter. Leasing traffic exceeded the same period in the prior year. This leasing momentum continued through January as well. The improved metrics have been a result of the following initiatives: we prioritized capturing more leasing traffic with added concessions, which increased occupancy at the short-term expense and net effective rent. We implemented more competitive pricing. We continued our increased online marketing campaigns. And we increased incentives to improve existing resident retention. Whereas percentage lease and occupancy statistics have improved, the recently seen momentum will be realized in the second quarter as prior quarter concessions burn off and cash flow will improve. Moreover, as a result of leasing momentum, we are strategically reducing specials in select properties. In the quarter, our same-store portfolio, excluding two assets under renovation, experienced a decrease in revenue of 9.5%. NOI, however, decreased 24.1% as a result of increased expenses, and in particular, an $850,000 from a pilot burn-off in Jersey City. For the entire year, the same portfolio generated negative NOI of 6.2%, driven from a 1.1% decrease in revenues. With respect to our Port Imperial Hotels, the EnVue remained closed in the fourth quarter, though Marcus Anderson's dining operation remained open, having generated gross sales in excess of $1 million in the quarter. Despite slowing in the New Jersey lodging market, there is no immediate plan to open the EnVue guestrooms. The Residence Inn continued to operate and finish the quarter with average occupancy of 60% and positive EBITDA. The Emery, a 326-unit community in Malden, Massachusetts stabilized in the fourth quarter. This asset leased up entirely in 2020 amidst the pandemic and achieved the highest rents in its submarket. At year-end, Roseland had four remaining construction projects comprised of 1,616 units. The company has fully funded its equity commitment to these projects, which are projected to generate a stabilized NOI of $56 million on the 6.15% leverage yield. Subsequent to quarter end, two of the communities opened: The Upton and Short Hills, a 193-unit upscale community targeting affluent empty nesters in Northern New Jersey. In its first month of leasing, the property signed 49 leases, representing 25% of the overall project and 30% of its market rate inventory. We also opened the 360-unit Capstone in Port Imperial. This property has achieved initial leasing success of 44 units or 12% in its initial three weeks since opening. The remaining construction projects include the RiverHouse 9 at Port Imperial, a 295-unit apartment house scheduled for delivery in the second quarter, and in Charlotte, a 750-unit tower located in Jersey City's Waterfront, which will open in the first quarter of '22. Roseland secured two significant financing transactions in the fourth quarter, $165 million refinancing at Boulevard 75, which have been the platform's most significant short-term maturity at a rate of 2.9%, and a $72 million construction takeout facility for The Emery at a rate of 3.2%. Furthermore, the operating properties we sold in the fourth quarter resulted in a blended 12-month trailing capitalization rate in the low 3s. This pricing further underscores the continued strength in the multifamily NAV in spite of COVID impacts. We have no immediate construction starts scheduled but have two shovel-ready development projects, The Park at Port Imperial and Harborside 8 on the Hudson Waterfront in Jersey City. Both are fully planned and permitted to start when the company elects to initiate new construction starts. While 2021 will still present challenges to both occupancy and net income recovery, we do believe the last 90 days reflect a turn and noticeable improvement in our marketplace and should continue to demonstrate steady income and occupancy growth going forward. With that, I will turn the call back to MaryAnne.

Thanks, Marshall. When I joined the Board nearly two years ago, I believed with the right strategy and leadership, we would unlock unrealized value at Mack-Cali. Thanks to the dedicated and talented team at the company and the inherent strengths of our assets, I believe we are well on our way to achieving that vision. We'll now open up the call for questions.

We will now take our first question from Derek Johnston of Deutsche Bank.

Across all office REITs, we've seen a paucity of leasing activity. And your waterfront office really has been no exception here. How long do you think it will take business leaders to refocus again on their real estate footprint? And if they do decide to reduce New York City office footprints, do you think your waterfront assets can actually see a net benefit? Just as a quick example, I think Conde Nast was reported recently in the press to be considering a smaller office footprint and did cite the Jersey City Waterfront as an alternative. Are you seeing any of this demand from them or from others?

I'll take that first. Thanks for the question. I'll begin by saying that we have a level of activity presently in the Harborside properties that is encouraging. And it's been relatively busy, Derek, given that we don't think that there's a lot going on in the other side of the river. We think that has a little bit to do with the desire for companies to remain close to the urban core, but perhaps to be at some standoff distance, but still be well served by mass transit and all the amenities that the Harborside campus brings. So as we retool our messaging, revamp our marketing efforts and continue to reconnect with the brokerage community, we remain encouraged. And there is presently a level of activity of approximately 110,000 square feet leasing for which we are trading paper. And that is encouraging. But of course, we can't be assured that we will complete those transactions. And so we're going to be very modest and careful about predicting. And of course, I'm not in a position to comment on the Condé Nast situation as we typically would not comment on any prospective tenants or leasing transactions prior to leases being signed. Mack-Cali has the best assets in our location in Jersey City. So I think it's fair to assume that any tenant looking for office space in Jersey City would be speaking to us. Ed, why don't you comment?

Sure, MaryAnne. It's interesting. Over the last few weeks, we've seen an uptick in in-person tours and in-person meetings, which really had been very rare since the start of the pandemic. We are engaged in conversations with a number of our existing tenants and prospective tenants and have proposals outstanding. And as you mentioned, we have leases outstanding with several tenants for more than 110,000 square feet of space. It seems like the market has reached the point where tenants are recognizing that the return to work is going to happen this year, and they need to be ready for the return to work. For the first time in quite some time, it seems like tenants are more willing to make real estate-related decisions, whereas during the early stages of the pandemic, certainly, they really shied away from making any decision they had to make, except for a deadline-driven delay or some other critical need for a decision.

That was very helpful. Just switching to the residential sector. How has the current environment affected the residential development pipeline or outlook regarding your land bank? And how is Capstone performing compared to your initial projections? Clearly, RiverHouse 9 is right behind it. Is there demand for it? Also, considering the lower rents, how much have development yields compressed in these projects?

I'm going to let Marshall take that question.

Sure. The lease-up of the pipeline we started construction on three years ago has gone quite well. The Emery is fully leased, and Short Hills has also leased quickly at pro forma levels. In fact, the Emery has exceeded pro forma expectations. Capstone has been a pleasant surprise, as we are meeting our projected face rent and experiencing good traffic and capture rates in the opening month, although we are offering free rent, which is common in our market. Typically, new buildings offer one to two months of free rent in a normal market, but in the current pandemic environment, this is generally around three months. We aim for an average 15-month lease, which gives us nearly a full 12 months of market rent from our residents. So far, Capstone has performed according to our cash flow projections with the same 90 days of free rent that we anticipated. RiverHouse 9 will also open with 90 days of free rent on a 15-month lease. Overall, we have managed as well as we could have hoped under the circumstances with these new units. The impacts of COVID on stabilized yields will not affect new construction because free rent is accounted for in the project's capitalization and interest reserves. As long as we maintain face rent, these assets coming out of construction should sustain yields around 6% to 6.15%. Based on our sales this year and other transactions in the market, cap rates for apartment buildings are currently very favorable. The return spread between new construction and existing properties remains at least 150 basis points, which means building is still very effectively profitable compared to buying. However, regarding new construction pipeline starts, we are currently waiting for the Board to decide when to initiate new projects. We are selling some nonstrategic land holdings, and once we are ready to start again and have funding, we will move forward.

And Derek, I'll just round out what Marshall is saying by saying we believe the growth is important. And we strongly believe in the value of the multifamily assets in the markets we build. And so as we address our debt in our corporate line, we'll do it with an eye toward potential growth and unlocking the potential of our very valuable land asset. Once the market has corrected for the COVID impact, we think there's tremendous value there.

We will now take our next question from Steve Sakwa of Evercore ISI.

I just wanted to first circle back on the suburban assets to make sure I had the number straight. I think you, MaryAnne or Ricardo, had talked about, I guess, say, it's 2.6 million feet in four transactions that were a little over $600 million. In the supplemental, you list about $3.3 million between the Class A suburban and the suburban. So it leaves about 700,000 feet left to sell. Is that right? And is there a kind of a rough estimate of kind of value on that 700,000 feet?

Ricardo?

Sure. The $600 million of 2.6 million square feet are transactions that we have under a hard contract. We are working through a number of other sales transactions that we are under contract, but not quite nonrefundable and others that we are close to executing final PSAs or purchase and sale agreements.

Okay. So is your expectation, Ricardo, that, that remaining chunk would close this year, just maybe later in the year? Or do you think that spills over into '22?

The $600 million that I mentioned in my earlier will close by the end of the second quarter. We have another, call it, $100 million to $150 million of one-off single transactions that we feel will be able to capture a good portion of those sales in the latter part of the year. But some of it will trickle into '22 because it includes land transactions also where we're still working through various entitlements to maximize the value of the land before executing a transaction.

Okay. Great. And then I guess between Dave's comments on the leasing and Ed, again, if I have my facts right, you said there's about 408,000 rolling, but only about 123,000 that's still kind of up in the air. So it kind of implies 270,000 is moving out. I guess maybe, Ed, could you just comment on the remaining 123,000? And of the 110,000 where you're trading paper, is most of that for the 123,000? Or is there still kind of a lot of indecision on the kind of remaining '21 expirations?

We're actively engaging with all the tenants whose leases are rolling over in 2021. Additionally, we are also in conversations with tenants whose leases will roll over in the near future beyond 2021. We are discussing a number of the additional rollovers for 2021. However, the 110,000 square feet of lease transactions we mentioned are distinct from those discussions.

Great. And then last question, MaryAnne. I guess there were really no comments in your prepared remarks or in the press release just about the full-time CEO search. So could you just maybe update us on that process?

Sure. As you recall, we indicated as a Board that we would be aiming for a first quarter of 2021 announcement, and I'm happy to report that an announcement on the permanent CEO is imminent. And so you can expect to be hearing from us soon about that selection.

We'll take our next question from Manny Korchman of Citi.

We've got some questions for each of you here. Ed, can you give us some update on what the new New Jersey incentive program actually looks like?

Sure. The new program is named Emerge. It's a tax credit program that rewards new tenants and retained tenants that's been recently rolled out by the state. A number of the tenants that we're talking to are glad that there's finally been a new program put in place and are looking forward to take advantage of it.

And then I think you guys mentioned doing life science at Harborside 1. Is that based on demand you're seeing, where tenants have approached you and now you're going to make the space feasible to them? Or is that just, 'Hey, life science seems to be a good sector. Others are doing it, let's do this, too.'

Manny, thank you for your question. We have renamed Harborside 4A to Harborside 6, and our goal is to diversify the offerings available there. This includes everything from prebuilt spaces to large scale, single occupancy options at Harborside 1. In our efforts to provide more options to the market, we evaluated the life sciences capabilities of that building and explored the potential need for increased investment in infrastructure. The findings are encouraging because the floor plates are spacious, and there isn’t much of that kind of product available in the market. This has sparked interesting discussions with several joint venture partners in the life sciences sector, as the building is very well-suited for such purposes and is fully available. We will keep pursuing life science conversion opportunities with these partners. As I mentioned before, partnership is crucial due to the capital required for a robust life science offering, considering the enhanced core and shell. We recognize that funding needs to come from somewhere, which is why we are focusing on strategic partnerships.

Ricardo, where does 111 River fall into the disposition plan now?

Right now, we are focused solely on selling the suburban office assets. We continue to review our waterfront assets. 111 River is not currently being marketed for sale.

Lastly, I have a question for Dave. You mentioned considering a revision of the line of credit later this year. How are you viewing that in the broader context, especially regarding your goals for multifamily and office sectors? Will you require more equity to accomplish these goals? Is the new line likely to be smaller? Please help us understand what to expect from that new line.

Thanks, Manny. Yes, so I'll help you frame that. So I think let's first take a look at Roseland, which is where we'll mostly be up to this urban office sales. So Roseland is in a joint venture. We use mortgage financing there. When we develop, most of the equity we have is already in the land that we own and control. So a small portion of our new line would be allocated over to Roseland to help them with their general corporate purposes and needs. But the larger line one, I'll be very clear, we do not need to put any equity in. It will be secured by our six assets on the waterfront, four of which are unencumbered. It will be a smaller line, and it will be really based more on mortgage metrics and availability than corporate covenants. So I'll be sleeping better at night. Our capital needs will be much more modest when we're down to the six office assets here on the waterfront, Manny. And we'll have separate set-asides within the line for TI and CapEx. So a smaller line secured by the waterfront, with some availability for our Roseland friends and partners, if that makes sense.

We'll take our next question from Elvis Rodriguez of Bank of America.

MaryAnne, perhaps you can share your thoughts on what it would look like to spin off the multifamily business and then just keep that as core and maybe just sell off the rest of the office in the future? I know you've mentioned potentially the ability to spin off the Roseland business so you get proper valuation in the market for what that's worth. So any thoughts on that would be helpful.

Thanks, Elvis. I've got lots of thoughts on it, but I think the best way to answer that question is we're super focused on the disposition strategy in the suburbs, and we're continuing to explore all strategic alternatives, including an entire transaction or partial spin-offs of sections of the business. And so I think the best thing for me to communicate to you is that the focus today is to shore up the balance sheet and dispose of the suburban assets, while at the same time, the Strategic Review Committee at the Board is deeply engaged in exploring all strategic alternatives and responding to inbounds. Enjoy your weekend, and happy Friday.

Thank you. That now concludes the call. Thank you for your participation. You may now disconnect.