Good day, everyone, and welcome to the Mack-Cali Realty Corporation First Quarter 2021 Earnings Call. Today's call is being recorded. I would like to take a reminder to 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, I will now hand the call over to Mahbod Nia, Mack-Cali's Chief Executive Officer.

Good morning, and welcome to our first quarter 2021 earnings call. I'm joined today by David Smetana, our Chief Financial Officer. I'd like to start by acknowledging the impact that the past 12 months have had on everyone's professional and personal lives, with the COVID-19 pandemic forcing a reevaluation of the most fundamental aspects of how we live and work. We anticipate that U.S. economic growth will begin to accelerate this year, fueled by the sizable government stimulus, pent-up demand and recovering labor markets. It certainly appears that we may be at an inflection point and at the start of an economic recovery. Nearly a third of New Jersey's inhabitants are fully vaccinated, which should also help the reopening of the economy and return to office life in our backyard in the months ahead. While these are optimistic signs, we are cognizant that significant uncertainties persist, and the path ahead represents largely unchartered territory. As such, we remain focused on the initiatives that are within our control. These include simplifying our business, strengthening our balance sheet, and optimizing our operational efficiency. Despite the unprecedented challenges of 2020, we had an active quarter and solid start to 2021. We advanced Mack-Cali's strategic transformation while generating value for our shareholders by continuing to monetize suburban office properties, signing a number of leases at Harborside and further developing our multifamily platform by advancing our two construction projects: RiverHouse 9 and The Charlotte, while capturing leasing momentum at The Upton and The Capstone, more about these later. Our asset portfolio was 74.2% occupied as of March 31. The drop in occupancy compared to 78.7% as of year-end was driven primarily by the previously announced departure of TD Ameritrade, who vacated 140,000 square feet in Harborside 6, formerly known as Plaza 4A. This move was partially offset by the 78,900 square feet of new leases or lease extensions completed during the quarter, 58,200 square feet of which relates to our waterfront assets. While the office leasing market throughout the country remains subdued, including the New Jersey market, which during the quarter recorded historically high vacancy rates, we are cautiously optimistic and have started to see a marked improvement in tenant inquiries. Next week, we'll be unveiling the latest update to our Harborside campus, where we have been working hard to develop a premier destination for employees, locals and visitors alike, by introducing smart design solutions that meet tenant demand for high-quality office space and amenities. We believe we are well-positioned to secure new tenants amidst the market recovery, increasing vaccinations and the reinvigoration of office life. During the first quarter, we also made significant progress toward simplifying our portfolio through the continued disposal of suburban office assets, having sold over $547 million or 1.9 million square feet year-to-date, representing approximately two-thirds of our year-end 2020 noncore assets by value. We exited the Princeton office market with the $38 million sale of 100 Overlook Center and completed the $254 million sale of the Metropark portfolio. Subsequent to the quarter, we sold our 843,000 square foot Short Hills office portfolio for $255 million, generating approximately $100 million of net proceeds after retirement of the loan and costs. These sales were concluded substantially in line with our internal net asset values and pre-pandemic valuation of the properties. In total, these sales have provided us with approximately $370 million of net proceeds, which were used toward repaying our outstanding corporate bonds, further strengthening our balance sheet through the repayment of recourse debt. Turning to our multifamily portfolio, since the start of the year we've seen an improvement in leasing momentum. Our operating multifamily portfolio finished the quarter 93% leased, up from 90% as of year-end. We've seen strong leasing activity across a number of our assets, which we anticipate will allow us to continue reducing and eventually eliminating concessions. On the development front, we're pleased to have opened two residential communities in January: The Upton, a 193-unit upscale community in Short Hills, targeting affluent renters in Northern New Jersey, and The Capstone, a 360-unit project in Port Imperial. The Upton achieved 37% occupancy at quarter end and was 54% leased as of May 3. The Capstone is 39% leased, up from 25% at quarter end. Our remaining development projects comprising 1,063 units include RiverHouse 9 in Port Imperial, a 295-unit apartment building scheduled for delivery in the second quarter, and The Charlotte, a 750-unit tower located on Jersey City's waterfront. I'd like to now turn to highlighting the evolution of our ESG efforts, and the ways in which we have renewed our commitment to operating in a more responsible, sustainable, inclusive and equitable manner across our portfolio. Last July, our Board of Directors, including myself, formed an ESG Committee that formally endorsed several global sustainability initiatives, including the 10 principles of the United Nations Global Compact and the Task Force on Climate-Related Financial Disclosures. As a result of our enhanced ESG efforts and disclosure improvements, including the introduction of new internal policies, Mack-Cali was awarded an ISS quality score of 3 for environmental, up from a 9 in October 2020, and a score of 1 for both social and governance, up from 8 and 2 in October 2020, respectively. We are also one of only seven REITs out of approximately 250 REITs benchmarked to achieve a score of 1 across all subcategories within the social segment. These scores are based on a scale of 1 to 10, with one being the highest score. While there is still work to be done, I'm pleased with the tremendous progress we've made to date, and would encourage those interested in learning more to review our 2020 CSR report, which is available on our website. With that, I'm going to hand it over to David Smetana, Chief Financial Officer, who will update you on our financial performance during the quarter. David?

Thanks, Mahbod. We reported core FFO per share for the quarter of $0.18 per share versus $0.33 per share in the prior year. The year-over-year reduction reflects the impact of our suburban asset sales program as well as the impact from the pandemic on our hotel, parking and multifamily operations. Lower-than-expected asset sales timing, lower interest expense due to capitalized interest and better-than-budgeted expenses on both the office and multifamily platforms led to a $0.03 per share better result compared to the high end of our Q1 guidance range of $0.15 per share. Please note that our adjustment to core FFO included a $0.025 one-time G&A expense related to management restructuring and the CEO change. The waterfront office portfolio had a same-store cash decline of 10.9%, largely attributable to less parking income year-over-year and the previously announced move-out of an anchor tenant at Harborside 6, offset by expense savings of 3.8%. We have 201,000 square feet of our waterfront office campus leases remaining to expire in 2021, including 44,000 square feet related to the remaining TD Ameritrade move-outs at Harborside 6, and 100,000 square feet related to the Natixis move-out at Harborside 5. As Mahbod detailed, our multifamily portfolio is showing positive trends across a number of metrics. Although revenues were off 12.2% on a year-over-year basis as we anniversaried the last pre-COVID quarter, our occupancy increased by 330 basis points sequentially from the fourth quarter, and net effective rents stabilized due to lower concessions. We showed only a slight sequential same-store revenue decrease of 30 basis points and a sequential NOI increase of 7.3%, as real estate taxes and repair and maintenance expenses normalized from the fourth quarter. Transient revenues remained depressed for the quarter as our hotel operations were again limited to the Residence Inn portion of our dual-flagged hotel at Port Imperial, which continued to run near EBITDA breakeven. Notably, both the Envue and Hyatt hotels are now fully operational, with the Hyatt opening in April and the Envue in May. We anticipate the contribution from these operations to be subdued for the remainder of the year. Turning to the balance sheet, in the quarter we reduced our line balance to zero and carried $261 million of cash on the balance sheet at quarter end. These proceeds, along with the proceeds from the sale of the Short Hills portfolio, will be used to repay corporate debt and will remain on our balance sheet until our bonds are retired on June 6. We have only one mortgage maturity remaining in 2021, a $3.9 million mortgage on a small retail condo within Roseland, which we intend to refinance. Yesterday, I'm happy to announce we entered into a new agreement on a $250 million revolving credit facility and a $150 million term loan. This facility provides us with the flexibility to lease and invest in our waterfront portfolio while continuing the growth efforts surrounding our multifamily platform. I now would like to provide a couple of highlights on our outlook for the remainder of 2021. First, we would like to remind everyone that we held our Metropark portfolio for nearly the entire quarter and it was sold at a 7.0% cash cap rate on March 25. Shortly thereafter, on April 20, we sold our Short Hills portfolio at a cash cap rate of 8.5% based on our Q1 annualized cash net operating income. As a condition of calling our bonds, we will be required to hold cash for 30 days in the second quarter to fund the bond redemption and make-whole payments. Importantly, upon completion of the remaining suburban asset sales, we expect to derive approximately 55% of our NOI from multifamily operations and 45% from our office portfolio in the back half of the year. We believe this is a notable accomplishment, not yet recognized by the market. Finally, we'd like to take a moment to touch on guidance. With both the economic recovery and our company transformation evolving, we will not be providing guidance at this time. And with that, that will conclude our prepared remarks. Operator, can you please open up the line for Q&A?

Thank you. We will now take our first question from Steve Sakwa from Evercore. Please go ahead.

Thanks. Good morning. I guess with the suburban sales now kind of largely in the rearview mirror, maybe there's $200 million or so left to sell. Maybe we can just focus on the waterfront leasing. You guys made some comments about changing some programs and seeing more demand. Can you speak to the types of tenants that you're seeing? Are these native New Jersey companies just moving to the waterfront? Are these Manhattan companies looking at Jersey as a cheaper alternative? And maybe you could update us on the Grow New Jersey incentives.

Hi, Steve, thank you for the question. It's a good one. We have high-quality assets in a great location that we've been investing in, and through the rejuvenation of Harborside Waterfront we feel the appeal will be enhanced by the quality of the office offering and the amenities that will be on offer. We have a best-in-class internal and external leasing team in place now focused on leasing that vacant space. The pace of the vaccine rollout has been progressing extremely well, and there is a planned return to the office. We feel the worst is behind us. Regarding the tenant incentive package, it can be significant; we understand it could be potentially $10 to $34 per square foot for qualifying tenants. We think the appeal of the waterfront is only going to improve from this point on. The comment we made about tenant inquiries: it's been quite a varied set. Some are incumbents, some are looking to move into the area, but it's been a very encouraging early sign and validation of the effort that's gone into positioning the waterfront portfolio for leasing.

Okay. Thanks. And then maybe second, just turning to the residential portfolio. You obviously saw a nice uptick sequentially. Maybe just talk about what you guys are seeing on the demand front as folks are coming back to the New York area. Folks are leaving their parents' homes. What kind of demand uptick are you seeing? Is that trend continuing into April and May? And what's happening with concession packages today versus maybe two to three months ago?

Yes. The return of demand and the uptick seems somewhat broad-based but is linked, we believe, to the beginning of a return to more normal life with the vaccine rollout and a return to more ordinary living and working conditions. We're optimistic. It's been a good quarter, and we're hopeful that will continue. We have great assets. What's been interesting in the first quarter is we've actually been able to continue to increase occupancy while cutting back concessions, and on certain assets completely eliminating concessions. These are positive signs and testament to the quality of the assets we have.

Great. Thanks. That's it for me.

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

Thank you. A follow-up on Steve's question. Can you provide a little more granularity in terms of the interest in the waterfront assets? Who's looking and what kind of tenant sizes possibly? You have talked about life sciences in the past. Is that still something you're thinking about?

Not really looking to give specific guidance at this stage; it's too early. What I would say is that with the package between what we are doing on Harborside to reposition those assets and the planned return to the office, we feel the worst is behind us and that's where tenant inquiry is coming from. It's quite a varied group and fairly varied in size, but all positive early signs. In relation to life sciences, that's an area with considerable demand at this time. We've been looking at and continue to evaluate the conversion potential of some of that space to feed into that strength.

We will now take our next question from Manny Korchman from Citi. Your line is open. Please go ahead.

Hey, everyone. Good morning. Mahbod, as you speak to the new leasing team in place, what specific changes have they made over the last few months to find new tenants that before the pandemic weren't necessarily looking at Jersey City? What are they doing now to attract those tenants to that market?

Manny, thanks for the question. From my experience, when assets are stubborn to lease, something in the chain between prospective tenant and landlord is broken. Usually it means the landlord is not providing the right product or it's not at the right price point. We've gone a long way to reestablishing relationships with the brokerage community, proactively reaching out to tenants who could benefit from moving to this location, and reestablishing that chain. We've got the right outreach and we're improving the product. We believe we're creating a product that will be in demand at competitive rent levels. Leasing has been happening; we just haven't been capturing our fair share historically, which we hope to change going forward.

Thanks for that. As you've embarked on selling suburban assets, the multifamily is now a larger piece for the year than the office. Is there any discussion or plan to sell some of the more core waterfront office? Or do you think your scale is where it needs to be to keep that as a portfolio?

At this stage, would we consider something like that? Absolutely. The Board and management are highly focused on creating value for shareholders and will continue to evaluate all options to achieve that goal consistent with our fiduciary obligations. For now, we're focused on things within our control, including the value-enhancing rejuvenation of the waterfront office complex.

Thanks very much.

Our next question is from Michael Lewis from Truist Securities. Please go ahead.

Great. Thank you. Following up on the office leasing, I wanted to ask about the pipeline of inquiries. How much square footage do you think is out there for you to target? Along those lines, we talked quarter-after-quarter about a pipeline but there hasn't been leasing. To the extent prospects are looking, where are they ending up? Has it just ground to a halt because of the pandemic? Are tenants choosing Manhattan or the Sun Belt? What's the headwind there?

Office leasing across the U.S. has been subdued during the timeframe we're referring to. I don't think it's a case of significant leasing in Jersey City that we've missed because tenants chose elsewhere; it's that leasing has been subdued. How large is the opportunity? Very difficult to say at this point. What we are seeing, however, are encouraging signs that lead us to believe office is very much alive and firms are generally looking to return to some form of office. Our assets—location, quality, flexibility of floor plates—should provide a good option to tenants wanting accessibility to Manhattan at a significantly lower cost, especially when factoring the incentive package, which we believe will interest many qualifying tenants.

That makes sense. On the apartment side, do you think now is a good time to start apartment developments that might deliver into the 2023–2024 window? And if so, are you hamstrung by the rest of the company's strategy and where the balance sheet is?

We've been clear about wanting to unlock the potential within Roseland and grow multifamily. We must balance that with capital constraints and cash flow. Those considerations are being contemplated to ultimately determine the go-forward strategy. No decision has been made yet regarding future development. It will be a capital allocation decision based on capital currently available and determining its highest and best use.

Lastly, with the noncore asset sales almost done, do you have a different view on the strategy versus prior views that this playbook might be doomed? When you finish the noncore asset sales, do you focus on leasing the waterfront and then see options after that, or any different view on where the company is headed?

We continue to evaluate all options available to create and unlock value for shareholders, and our approach will be measured and thoughtful. Any decisions will be in the best interest of shareholders. Near-term, we'll focus on things within our control: further simplification over time, operational efficiency and organization, strengthening our balance sheet and focusing on leasing and tenant retention. Those initiatives will create value, and the broader direction will be determined when we have clarity on the best path forward for shareholders.

Tom Catherwood from BTIG. Your line is open. Please go ahead.

Excellent. Thank you and good morning, everyone. Dave, just a mechanical question. If I heard you right, you have to have the cash in your balance sheet for the bonds for 30 days. You have the cash from recent sales and you'll draw down the new secured line of credit and term loan. Will you pay interest on that for 30 days until you redeem the bonds? Do you redeem the bonds in June, and how does that process roll?

Thanks, Tom. Last night, contemporaneously with the close of the credit facility, we funded the entire bond redemption of both issues, $575 million, plus approximately $20 million for the make-whole payment. The trade works in a T-plus-30-days manner, so we will continue to pay our 4% interest on the combined bond issues for the next 30 days.

Perfect. If we think about it, you have cash on hand, part of the balance sheet, part from the Short Hills sale, but you'll still be carrying some on the line after you close out the unsecureds. A good chunk will get paid down as Red Bank and other assets sell. It seems most assets are under contract. Last quarter Red Bank seemed near-term, others might slip into early '22. What's your current thought on sale pace?

I think you're right. You can see in the structure of the line and the term loan there's about a $150 million term loan outstanding. The asset sales, including Red Bank which is under contract, are expected to hopefully close around the end of the second quarter. There are a couple of assets left from the noncore portfolio and those, together with some other noncore land pieces, should take care of the term loan. Over the longer period as we reduce all of our noncore, including a couple of joint ventures and some land pieces, you should focus on Monmouth and the last two assets, 4 Gatehall and 7 Giralda, as the culmination of our suburban office asset sale program with proceeds again to be used to retire the term loan.

Got it. Appreciate that, Dave. Mahbod, Harborside 1 looks like it's coming along. As I step back and think about the office portfolio, it seems to lay out in different segments: Harborside 5 high-rise, Harborside 6 creative office above what's going to be Whole Foods, a few blocks in 2 and 3, and then brand-new space at Harborside 1. When marketing this, are you segmenting into these groupings and approaching tenants targeted to those different types of space?

Yes, to a large degree that's correct. One of the strengths of our offering is the flexibility and range of space available to prospective tenants. If a tenant wants small floor plates and a lower-rise building, that's available. There's a wide range of options to suit tenant needs. Fundamentally, you're in a great location and will have the amenity offering soon on offer.

In terms of Harborside 1 timeline-wise, how much longer until it's buttoned up, white-box ready and showable?

It's progressing well. I hesitate to put a firm date on these things, but toward the end of the third quarter to early fourth quarter is our expectation that it will be ready to occupy.

Excellent. That's it for me. Thank you, everyone.

Our next question is from Derek Johnston from Deutsche Bank. Please go ahead.

Hi and good morning, everyone. Sorry if I missed this, but can we get an update on the New Jersey legislative appetite for tax incentives for relocations from New York to New Jersey? Any update on possible timing or what you are hearing on the ground? We've discussed this for some time but it seems elusive. Once again, sorry if I missed comments on this.

It is already approved. It was a long time in the making, but it is available to qualifying tenants today. The incentive can be quite meaningful; we believe qualifying tenants could see incentives between approximately $10 to the mid-$30s per square foot.

Okay. So timing is thumbs up for leases to be signed right away.

Correct.

On office, New York CBD peers this quarter came off as very optimistic. Given the pipeline you see on the Jersey City side and since new leases have been a bit challenged, when do you expect we may see an occupancy inflection point? Could that be late 2021? Any thoughts would be helpful.

It's difficult to put a specific time frame on these things, but the trend has been encouraging this year in terms of inquiries and the nature of those tenants. We're cautiously optimistic. We have strong confidence in the quality and location of our assets, the work we're doing to position them and the incentive package which provides a compelling proposition to tenants.

Lastly, hotels are a small piece but as suburban shrinks and multifamily gets larger, what's the outlook for the hotels? Any bookings for return to events, maybe late summer or early fall? Any pent-up demand for weddings, which are high margin?

We only just reopened the Envue recently, but in the hotel sector the majority of revenue appears more consumer-oriented than business-oriented. With the anticipated return to office we should see that rebalance toward more business travel and related revenue toward the latter part of this year.

We will now take a follow-up question from Jamie Feldman from Bank of America. Please go ahead.

Thank you. Leasing has been pretty strong at The Upton. What types of users seem to be leasing that space? Any thoughts on pushing rents? Does that make you rethink the sale of the other site there?

The majority of leases at The Upton seem to be from empty nesters, which has been very positive for us. Regarding rents and development decisions, as I mentioned earlier, capital allocation and development decisions are to be determined. We will sit down and determine the highest and best use for available capital, and no decision has been made at this point.

So you're not marketing that second site for the hotel?

No. We are not.

David, I appreciate you providing the cap rates for the asset sales. Do you have those on a GAAP basis? I think you said cash?

Yes. On both of those, if you added 20 basis points to the cash cap rates you would arrive at the GAAP cap rates.

Back to Mahbod, this is your first conference call in the CEO seat. Any perspectives after taking over the role, things that surprised you or that are more challenging as you take over leadership of the company?

I was fortunate to be on the Board for several months prior to taking this role, so I had the ability to ease into the position. It's different level of detail being in this seat and looking under the hood, but nothing particularly surprising or troubling. Near-term focus will be on further simplifying the business over time, operational efficiency, organizational alignment, and using our human and capital resources in the best way to create value.

As there are no further questions at this time, I would like to turn the call back to your speakers for any additional or closing remarks.

Well, thank you very much, everyone, for joining us today, and we look forward to keeping you updated again in due course.

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