Q3 2020 Mack-Cali Realty Corp Earnings Call
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Good day, ladies and gentlemen, you're currently on hold for today's conference, where we see additional participants and should be starting shortly thank you for your patience and piece continue to.
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Good day, everyone and welcome to the Mack Cali Realty Corporation third quarter Twentytwenty earnings Conference call.
Today's conference is being recorded.
At this time I would like to turn the call over to Ashley Kaufman piece.
Please go ahead.
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 assurances that the anticipated results will be achieved we refer you to the company's press release annual and quarterly reports filed with the FCC for risk factors that impact the company.
With that please allow me to introduce Maryanne Gilmartin Mack Cali Board Chair and interim Chief Executive Officer.
Good morning, all thanks for joining US today, we hope you are all safe and healthy.
Today marks my one hundreds day on the job I had the pleasure of getting to know the team and the properties in my short time looking under the Hood has reinforced my belief that Mack Cali has great assets and great people.
I want to thank all of our associates for their dedication commitment and humanity throughout these difficult months.
Special Shout out to the folks who have tended to our properties in our occupancy each and every day since the start of the pandemic you our frontline workers and we appreciate all you do.
The board is on track to announce a permanent CEO in the first quarter of 2021. The board's search process has not stopped us from moving forward aggressively with strategies to unlock shareholder value. The recently reconstituted board of directors and current leadership are fully aligned in this pursuit.
No we cannot control the macro environment real estate operators across the country are facing due to the global pandemic. We are laser focused on three key initiatives number one noncore asset sales as Ricardo Cardoso, our chief investment officer will share today, we are making impressive progress executing our noncore.
Asset sales since the end of 2019 at the conclusion of the prior Board Strategic review Mack Cali embarked upon a program to exit its non waterfront commercial assets. We are now in varying stages of negotiations on all remaining suburban office assets. These sales will continue to be executed out or.
Close to our pre Covidien Navy for these assets with the proceeds being used to repay corporate debt and bring down our leverage in.
Initiative number two waterfront commercial asset focus in terms of leasing for the quarter, we renewed 154000 square feet of space predominantly in the suburbs as we had very little space Rolling on the waterfront, we realized increases in our core portfolio of 12.3% on a cash basis and 22.3%.
GAAP basis, and we committed to $5.94 per square foot per year of lease term.
We are hard at work at repositioning the Harborside campus sharpening, our leasing message and bolstering our talent to drive results the opportunity at Harborside is aligned with what users are looking for in a post covered work environment. A campus that brings unique level of control in an uncertain time easily accessible throughout the region with multiple.
Nation modes essential retail right here on campus, many attractive residential options within walking distance and the ability to spread out a workforce in are user controlled setting.
To bring the campuses value proposition to light, we have aligned ourselves with top regional performers at Seabee already led by Maryann tie end, Mark rather nicely and we are moving quickly to reposition our assets and strategically target new tenants since.
Since our last quarter, we also onboarded a significant leasing tell Ed Gilligan, who has joined US today for this call. He is our new head of leasing and was formally with the Rockefeller group, where he was the firm's head of leasing in New York executing millions of square feet of deals during his tenure.
It is a hiring coup for Mack Cali worth noting at work here from 1997 to the year 2000, and we're happy to have his talents back at the company.
A moment now on our repositioning thesis for the waterfront even.
Even before COVID-19, there was growing demand for business districts outside of Manhattan, We expect that trend to accelerate now post coded people increasingly want to live near where they work they want access to open space during the workday and they want manageable density that's convenient without feeling overcrowded places that have those.
Elements without compromising on commuting convenience are going to be successful. There is no place that brings all of that together better in Jersey City.
Because mack Cali controls the entire harborside campus, we can provide a consistent level of first class service amenities convenience and security as well as a sense of community across all of our buildings, which is unique to an integrated campus environment, We're aggressively targeting New York City users, including tech companies that have been looking.
For large blocks of contiguous space in an integrated ecosystem. We're encouraged by the Westside migration of many tenants in Manhattan and believe that story continues across the Hudson River to Jersey City.
By doubling our focus rebranding our leasing message modernizing our waterfront assets and diversifying our product offerings, we have a plan come.
Coming soon will be targeted marketing to large single user tenants from Manhattan meeting sizable contiguous spaces, a robust prebuilt program for small to medium size users, who favor plug and play arrangements and exploring the life sciences offering right here at Harborside to take advantage of Jersey's dominance in this space.
And the lack of viable waterfront options for this growing sector. These moves will be strategic impactful and timely value drivers for our business.
Our third initiative.
As our strategy to optimize Roseland, we believe in the long term value proposition offered by Roseland and our team is diligently working to improve the portfolio's performance, including current occupancy the short term disruptive impact of the pandemic has not diminished the value of this portfolio or our platform in fact.
It's quite clear that there is strong demand for both our multifamily assets and our vertically integrated Roseland platform with its development capabilities. This is true despite the challenges faced in the near term by all residential operators across the region, including us.
And the last 100 plus days, we have honed in on our approach brought together the 18 to aggressively implement a well conceived creative and thoughtful strategy to drive value.
This is a challenging time for our industry and there is no clear sense of when we will all feel safe and secure again, but our work is clear.
One continue to sell our suburban assets at or close to end Avi by marketing into the story of the suburban Renaissance to these strategic proactive and aggressive on repositioning our commercial waterfront assets and three optimize the performance of Roseland by focusing on tenant retention dry.
I think new traffic to our properties and maintaining operational excellence.
These efforts will position us to take advantage of all potential alternatives for both the company and specific business. When the time is right and as the market evolves I will now turn the call over to our CFO, Dave Smith, Tana, who will walk us through the third quarter results Dave.
Thank you Marianne.
We reported core FFO per share for the quarter of 30 cents versus 38 cents per share in the prior year period with the year over year reduction through mainly through asset sales and pandemic related disruption to our hotel in parking operations.
The office portfolio continues to benefit from low portfolio turnover unfavorable comparisons on free rent periods and produced a plus 2.1% GAAP same store NOI increase in the quarter and a 15.2% cash increase for same store NOI in the quarter.
As Mark will go into in more detail the multifamily portfolio was experiencing the same occupancy pressures that our peers are experiencing in the New York City Metropolitan area.
As a reminder, we calculate same store data on a GAAP basis in our multifamily portfolio, which generally results in straight line rent treatment for concessions.
No charges in the quarter included a 590000 charge related to reserve allowances.
And a 444000 charge related to additional straight line rent receivable reserves.
Collections in the quarter averaged 96.9% in our office portfolio and were 99.5% and our multifamily portfolio.
For October thus far we have collected 96.5% of office rents and 99.5% on the multifamily side or.
Hotel operations remain limited to the residence Inn portion of our dual flag Port Imperial Hotel property, which contributed a $1.3 million EBITDA loss in the quarter.
Historic losses that this asset and a range of $1 million to $1.3 million or a decent benchmark for the fourth quarter we.
We do not have any current plans to reopen the are you in port Imperial and the high in Jersey City in the near future.
On parking it came in better sequentially this quarter at $4 million driven by a slightly better transient revenue result, and a $500000 collection from a disputed parking contracts.
Other income included approximately $2 million of lease term restoration fees in the quarter, which we don't expect to repeat in the fourth quarter.
We had a number of one time items NRG in a line item. This quarter. They included a $6.9 million lightening for proxy fight costs.
And $8.9 million of severance relating to senior executive departures as well as a reduction in force.
The net DNA savings benefit, including recent hires should fall in the range of $4 million to $4.5 million a year.
Looking ahead to the rest of this year on the office leasing front, we have just under 24000 square feet expiring on the waterfront in the fourth quarter of 2012, approximately 19000 square feet of this in an amount that has been renewed by our current tenant in an expansion at our water one Hudson property.
Our suburban office portfolio posted a strong third quarter as well in our core suburban portfolio, we executed over 107000 square feet of transactions with rental increases of 11.8% on a cash basis and 23.7% on a GAAP basis for.
For the remainder of the year, we have over 32000 square feet expiring in our suburban portfolios all of which pertain to assets better slated for disposition.
I will touch briefly now on our updated any disclosure.
Last night, we updated our navy disclosure in our supplement on pages, seven and eight which now follow a components of any v. methodology.
The change seems appropriate now now that the Roseland portfolio has matured from a collection of subordinated JV interests with land and development to an operating portfolio with a development capability, making it much easier to value. Additionally, the majority of our suburban office portfolio has no either been sold or is under.
Contract prices consistent with our last published values in our second quarter any the table.
We believe that providing this new disclosure in one place and allowing the user to apply his or her own cap rates and discount rates to arrive at any b is in line with Blue chip practice.
Turning to the balance sheet.
In the quarter, we reduced head line balance to $156 million outstanding with the proceeds from $213 million of asset sales that we executed in the quarter.
In September we exercise the first of two six month extension options on our line of credit effectively extending our maturity date out to July of 2020 wells.
Our priority use of capital continues to be corporate debt repayment.
The net debt to EBITDA metric was 12.1 times at quarter end the metric remains elevated as we continue to carry all the multifamily development debt with no EBITDA benefit. Additionally, the metric continues to be negatively affected by an increase by 1.2 turns from negative hotel in park and impacts.
Lastly, we.
We announced in September that we have suspended our third and fourth quarter dividends to preserve liquidity as we have already met our taxable income distribution requirements for the year.
With that I will now turn it over to Ricardo Cardoso, our Chief investment Officer.
Thank you, Dave and good morning, we continue to execute on our disposition program. Despite the initial slowdown and delay in transaction activity caused by the pandemic office.
Office sales in the state of New Jersey remains on track with year to date sales totaling approximately $2 billion compared to calendar year 2019 of $2.1 billion in a historical five year average of $2.3 billion.
Investment demand for suburban office in New Jersey remained healthy and has largely been dominated by private buyers being.
Being one of the more active sellers in the New Jersey market for several years, we have a very good understanding of the market dynamics, resulting in inefficient disposition process.
I would like to further discuss the company's NPV value disclosure beyond David's comments, the company's net asset value estimate at June Thirtyth 2020 continue to be a fair barometer of the company's view on an AG for the suburban office assets as we crystallize the value via sales.
The extent to which COVID-19 impacts our net asset value will depend on developments going forward many of which are highly uncertain and cannot be predicted despite the magnitude of such uncertainties under today's climate pricing for assets. Currently in negotiations remain closely in line with our previous.
Actually published and Abby estimates.
Turning to our results this quarter, we sold 12 of the 15 buildings within the Parsippany and draw the portfolio for $187 million comprised of 1.75 million square feet. This represents the largest transaction in the suburban Tri state market since the beginning of Covance.
In addition, we closed on the sale of 325, Columbia Turnpike, 175000 square foot building and Floren Park, New Jersey for $25.6 million.
In total we executed $213 million in office sales during the third quarter.
In the fourth quarter. We also sold five foreign drive in nearly 100000 square foot office building within the Princeton Submarket for 7.5 million, bringing our year to date total to approximately 258 million.
As of today, we have nine suburban assets under contract totaling 395 million comprised of 1.85 billion square feet.
We anticipate closing three of these nine properties prior to year end generating approximately $100 million in unencumbered asset sales.
As Maryann mentioned since new leadership was announced we have moved quickly and today. We are in negotiations for all the remaining suburban assets. We remain optimistic on the execution of our disposition strategy, assuming the financial markets do not take a drastic turn given the rise of covert concerns with that I would like.
The turn the call over to Marshall.
Thanks, Ricardo Roselands portfolio finished the third quarter, and 91.7% lease as compared to 92.6% last quarter. The reduction was primarily a function of a continued decline in leasing traffic due to COVID-19, primarily in our urban locations the occupancy and leasing traffic decline is consistent with that.
Northeast focused portfolios substantial portion of which are our comps notwithstanding oxy decline as Dave mentioned the collection rates remained robust in the third quarter, 99.5% to.
To come back the traffic decline and stay competitive in our Submarkets, we placed an even greater focus on existing resident retention enhanced our marketing campaigns and implemented more competitive pricing, which has rolled down our net income revised pricing includes expanded leasing concessions and adjusted face rents to generate higher capture rates in our markets.
These collective efforts have led to an increase in capture rate and traffic statistics in July through September the trend has continued into October.
In the quarter, our same store portfolio, excluding two assets under active renovation experienced an 11.7% decrease in Hawaii generated by a 3.3% loss in revenues and a 10.3% increase in expenses. The expense load was abnormally high primarily due to covert related staffing and supplies material income.
Recent insurance rates and an increase in turn costs related to greater turnover in the third quarter.
On a year to date basis, the same portfolio experienced a negative NOI of three tenths of a percent generated from a 1.5% increase in revenues and a 4.6% increase in expenses.
With respect to our hotels in port Imperial beyond you remain closed in the third quarter. So we opened at six or dining operation in the third quarter, we averaged $550000 and monthly revenue at this covert comfortable outdoor setting the residents and continue to operate and finished the quarter with average occupancy of 63% the Emery our lease up.
In Malden, Massachusetts is currently 84% leased and is forecasted to stabilize by year end. This 326 unit project commenced leasing activities in early 2020 as achieved the highest rents in that Submarket. The asset is forecasted to reach a stabilized yield of 6.3% projected NOI of $6.1 million.
The company's remaining for construction projects, representing 1600 16 units are projected to achieve development yield above 6% on stabilized NOI of $55 million. Moreover, we have now fully funded our equity obligations for these projects. We are actively preparing the initial deliveries and lease up strategies for three of the four development projects delivered.
In the first quarter 2021, including 673 units into port Imperial communities and the upturn in short Hills 193 unit luxury community in one of our new Jersey's premiered municipalities adjacent to the short Hills Mall, our fourth project. The 750 unit Charlotte in Jersey City is scheduled for delivery in the first quarter 2022.
This signature project is a beneficiary of a below market pilot fix for 20 years at 7% from.
From a financing perspective, we are scheduled to close our $165 million Monaco take out facility next week and are targeting a take out of our Emory construction loan in December finally.
Finally, though we have no immediate plans for new construction starts we have two priority shovel ready projects. The park parcel at Port Imperial 298 unit mid rise development to be constructed overlooking a 17 acre city park with unencumbered views of Manhattan, and Harborside, eight 679 unit highly amenitized tower, which will be adjacent to our corporate head.
Quarters next door at Harborside, three I will now turn the call back to Marianne.
Thank you Marcia I will close by emphasizing that the value we continue to build with our multifamily platform is considerable we're pursuing opportunities within our portfolio to unlock incremental value by leasing repositioning and ensuring that our projects are at the cutting edge with respect to amenities and offering the most sought after fees.
Shares in a luxury rental home.
As we move ahead, we believe these assets will continue to shine and our position to outperform overtime.
With that we will now open the call for questions operator.
Thank you if you would like to ask a question on the call today. Please signal now by pressing star one on your telephone keypad.
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We can now take our first question from many Clos.
From Citi. Please go ahead.
Hi, good morning, everyone.
Marianne Thanks for your comments on on sort of your first hundred days on the CEO search for replacement just wondering now that you've been there 100 days do you have any more interest in putting yourself permanently in Nazi yossi.
Hi, Manny Super focused on the job and doing as the interim and as you know I'm not on the search committee at the board. So it is entirely a board matter and I'm here day to day doing the interim job and that's where I want to be.
And I have a question for Riccardo as you're out there talking to these parties are looking at the suburban.
New Jersey assets.
The tools have you've given them try to go out and find tenants are land tenants.
So I want to make sure you you heard that I said large users meeting contiguous space at a great value proposition, but I also spoke about an offering of prebuilt and possibly some life sciences space. So I think what I'm trying to touch on is with a million square feet of space available to discuss we should be offering a range of alternatives to address.
The needs of tenants both here in Jersey and across the river and should be very Frank I think the approach needs to be much more proactive much more commercial than it was previously in a deeper focus on execution and again, having been here I think what's what's extraordinary to me is that with a team here needed was a bit of.
Pulling and tweaking.
Upgrade of talent in certain areas, and then greater alignment accountability and empowerment. This is highly capable team, but they need to be unleashed and that's what's really changed I believe and the last 100 days.
Alright, thanks, everyone.
We can now take our next question from Steve.
<unk> some evercore. Please go ahead.
Thanks, Good morning, I guess, Mary and I wanted to just follow on man. He's question and maybe get edge perspective on you know trying to lure New York City tenants over.
To the Jersey waterfront I know that's been a strategy for a long long time going back several C E O's and I'm just curious Ed from your perspective, you know I know the rents are cheaper, but downtown Manhattan's also got.
Cheaper rents and that's been an alternative so just trying to understand sort of what the heck is to get you know tenants to come across the river.
Hi, Steve It's Marianne I'm Gonna start just by pointing out. The fact that success is not just where you Wanna get but hey plan to get there and I think the plan is what's important with that I'm Super proud to have add as part of the team and I'm Gonna turn it over to add.
Thanks Maryanne.
There's a couple of things that firstly my background over the last 20 years has been in Midtown Manhattan.
Many I think very valuable relationships with both tenants and with brokers that I think can help us attract tenants to come to Jersey City.
Also it's not just the rent that we are very unique space in a campus environment that offers a lot to tenants that many of whom don't have the ability to take advantage of right now in Midtown Manhattan. So I think the workplace. The users are a bobbing and we can provide a lot of opportunity to those users.
Yeah.
Okay, I guess, maybe switching gears.
I guess go into Ricardo I'm, just curious on the buyers that you are talking to for the remaining suburban assets.
What are the big issues today is it is it price is it financing.
Is it getting comfortable with the lease up I'm, just sort of curious how deep a the buyer pool is and what some of the sticking points are as you are negotiating kind of these final sales.
Sure.
With the portfolios that we have out on the market. We have actually received a great amount of interest from the private investors on these assets that we have for sale keep in mind that the the the large pools of assets. We have remaining are probably some of the better or are there better quality assets that we owned.
There are well located so they are receiving a great deal of interest. So there is demand on the equity side to invest in the suburban markets I would say that some of the challenges of course are getting through and making sure you have the right mix of tenants, which we do that have the ability to.
Get through.
The economy and get through the pandemic and I think our portfolio setup for that the other challenge the biggest challenge in getting these deals over the hump into the finish line is really on the financing side the markets.
The early second quarter.
The financial markets sort of froze up on us that they are now back open and lenders are being selective in who they want to learn to on which assets. They wanted to lend on but given the assets that we have available and that are remaining to be sold we feel optimistic we can get to the finish line and exit.
Suburban markets and we think we can do that through 2021 very confident of the team.
And without putting too fine a point on it Marianne is there sort of a expectation on sort of when the sales may get completed do you think that's a.
First half of 21 or do you think it may be drags beyond the first half of 21.
I think I'm gonna manage the expectation just say that I think.
Through the year through 2021, we think we can execute on all of it again there is activity on every piece of the suburban portfolio. So with that just given time to manage external factors depend demick and just general difficulty of getting to a closing I think it's safest to say you should assume throughout 2021.
Okay and then just last question may be for martial you talked about the I guess the for construction projects and you still expect to 6% yields are greater I guess on those does that sort of take into account the softness that you're seeing in the market today or is that more on a stabilized sort of post pandemic in more of a return to.
Kind of normal environment, or does that kind of pricing and the declines you've talked about.
Well, it's interesting each each assets got a little bit of a different story, we're seeing we're.
Holding right in return.
Overlook on that as it releasing him now the Emery we expect the short hills building to open and sustain its face ran in its return as well I mean, I think the biggest challenge will report imperial's on the waterfront, it's an urban location closer to Manhattan, and we're seeing the softest market there.
Here in Jersey City, So I think what our strategy is going to be on the lease up is going to be utilization of free rent more so than face rent, we're hoping to when we have our budget has a lot of room and it under interest reserves for the free rent on the Lisa. So if we can sustain face ran just have a slower lease up then that yield on the stabilized basis will be very close to her.
Directed them, that's going to be the strategy on a liza.
Great. Thanks, that's it for me.
You bet.
We can now take our next question from Tanya settlement from Bank of America.
Thank you.
I think it's Jamie Feldman.
I guess, just sticking with the suburban asset sales.
Commented that pricing is not too far off from pre Covid can you just talk about the moving pieces to that is it is it lower rates that are offsetting lower NOI outlooks are actually with more demand for suburban space, maybe in Hawaii hasn't really come off too much. If you could just kind of talk us through what has changed and what hasn't.
So from a value perspective.
The cap right there hasn't been a cap rate compression or a widening on cap right. So they've remain the same I think.
A lot of the private buyers are buying into and I believe there is some truth behind it. It's early to say, but there is is Marianne mentioned earlier, a renaissance in the suburban office market, that's creating the demand inquiry and we were able to with that demand create a bidding process that gets us to the the right valuation at this time.
So I think given the assets that we have currently in play and and no in negotiation, we have a very good sense of value and where we think we can ultimate we execute a close.
So we feel good about completing the execution that close to the Niv numbers. We previously pledged published back in June.
I also want to say that if we can't we won't so we're determined to transact at or around an Avi. That's the plan, but again, we have optimistic and optimistic sense that we can do that.
What's your.
Who flock to the suburbs, we're not seeing it yet, but I think thats part of the driver for investors to want to be aggressive in buying in the suburbs to try to hopefully capture part of that Renaissance when people start going back to work I think right now if tenants don't need to make decisions, they're not making decision.
And that kicking that can't for the time being.
Okay. That's helpful.
And then you had talked about.
One of the potential demand drivers at the Harborside being life Science can you talk about the cost to do that and what type of upgrades to buildings might need and the demand pipeline so that type of space.
Sure I'll start there was 1 billion particular foray that has experience.
We experienced some turnover with TD ameritrade and the Texas and those turnover has let us to take a fresh look at the building at the same time explore what has been by any measure the strongest sector of leasing across the metro area and that life Sciences and when you look at the life Sciences play you recognize that in New Jersey.
There is a an ever present grouping of life science tenants. They can't always getting very close to the coast and at the same time, there's a very significant capital requirements would you point out and those requirements of both in the core and shell and the nature of the installations you build for these tenants. So we have taken a full blown study.
The capex necessary to transform that building and we're also going to go out and have conversations with.
Perspective partners in the life science space that would team up with us on that particular asset they bring not only the capital, but they bring a list of tenants within which there's latent demand for more of this space and so we're early in the process, but we've done a fair amount of leg work to look at the cost because with a life Sciences building.
You must build it and then they will come and so we know we need to invest the money and not just talk the talk and so we're looking at all the Capex. We understand you know in very conceptual way what the cost is now we're going to go talk to the dominant players in the marketplace and you'll hear more from us over the coming months about that strategy.
Okay. So how long do you think it takes even build out that space.
Yes.
First you have to design. It so I think if we forthwith jumped all over this idea I think you're talking about a four to six month process to get the plans in a position where you're hitting the market with the right offerings and then probably another four to six months to put the core and shell enhancements and but at the same time you'd be marketing. It. So I think this is a parallel.
Path approach, where you could be out marketing to tenants, having conversations so long as you can demonstrate that the capital in the know how is in place.
Okay. That's helpful. And then last question for me can you just remind us that.
The deepwater or that was just the waterfront expiration schedule through the end of next year.
And well known move outs or even move ins were.
Expecting.
Hey, Jamie its stays for 10 or so next year, we have approximately 375000 square feet rolling up the waterfront. The majority of that 208000 square feet is up claws, a foray, which Mary I was talking about for TD Ameritrade, it's going to move out in stages. There last piece about a third of those a third of this.
Yes, well move out at the end of September next year, and then the other big piece that is known as a move out today is 75000 square feet of from that Texas at Plaza five.
And then the rest we're in we're in discussions on on retention, but that would be roughly 280000 of that 375000 square feet Rolling next year at the waterfront.
Okay, great. Thanks, Dave appreciate it.
As a reminder, if you would like to ask a question. Please press star one now on your telephone keypad Thats.
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We can now take our next question.
From Jamie Feldman from Bank of America. Please.
All right I assume that there is no one else in the queue. So I can ask a couple more here.
Building on the last question I was going ask Dave while I had you is given.
Do you think about the suburban asset sales can you just talk us through your thoughts on kind of the glide path for leverage if you do get those done say by the end of next year. What do you think your leverage starts to look like.
Thanks, Jamie I'll take that so.
Percent, we have one joint venture there, we get $54 million of an ally.
I will start to be activated or fully activated at the end of 22, so that should be able to stabilize our net debt to EBITDA metric in the low double digits 11 to 12, and then the last piece to really take it under 10.
Is the lease up of the waterfront. So just liquidity first stabilization of the multifamily portfolio second and then really taking those metrics down below 10 is.
And and so we want to see where employees live because to the extent that there west. We think we have a competitive edge not just in the value proposition, but in pleasing the the talent base and keeping employees happy and so we have cold a list and it's the sizable list of prospects across the river for.
Walking I'm driving public transportation or ferry.
Yes, that's helpful and then as a follow up can you provide an update on the grow New Jersey program and does there need to be any action on that front to see meaningful improvements in terms of waterfront leasing.
Yeah, that's a great question. So today the spread between the leasing in the top buildings in Manhattan and in Jersey City is is wide enough for us to be competitive, but I've spoken to the governor and the governors team of more than one since coming on board and I would say that I have a high level of optimism that there is a deal to be made there and I think that they are high.
Let it work working out some of the differences between the legislature in the in the Governor's office and it's our hope that as we roll into 2021 the recognition on the part of the state that this is really important for the vitality of the commercial enterprises here in Jersey City that we will see the program come back again and the.
Reason why that's important is I would say, it's not essential today, but to the extent that the shadow sublease space grows in Manhattan and rents start to depth, we have to be ever more competitive and those incentives will allow us to stay ahead of what is likely to be a reduction in rents across the board in Manhattan.
In our bar to move forward, but at a reduced purchase price, which we were not willing to execute on with Marianne plan on the waterfront, which obviously does include 111 River, we feel confident that we can create value on 111 and at some point down the line, possibly we considered or the.
The possibility of selling the assets.
This is an example of not not transacting for the sake of transacting I mean, it's a great building and if it can achieve N a V or close to it there's no reason to dispose of it.
Are you able to sure what the level of price reduction they were looking to get.
I would prefer not.
Okay fair enough except for one.
Now take our next question how many Korchman from city. Please go ahead.
Also changed our strategy and coworkers area and actually the pandemic is proving that to be correct. I mean, it used to do large conference rooms, and in co work space and now we've we've divided into small work rooms, or one or two people you know can isolate and be comfortable working in privacy.
So we we morphed.
Pre cobot, how we design were public space and we've also increased that public space any way just as a lifestyle effort. So if anything the pandemic has shown us that directions, when the right thing and so we're continuing that Pat.
Great. Thanks all.
You bet. Thanks Manny.
That concludes todays culinary I would now like to turn the call back to Marianne I Daschle. Please go ahead.
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