Mack-Cali Realty Corp

F:WY4

Earnings Call Transcript 2021-Q3

[Operator]

Good day, everyone, and welcome to the Mack-Cali Realty Corporation Third Quarter 2021 Earnings Conference Call. Today's conference is being recorded.

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, I will hand over to Mahbod Nia, Mack-Cali's Chief Executive Officer.

[Mahbod Nia, executive]

Good morning, and welcome to our third quarter 2021 earnings call. I'm joined today by David Smetana, our CFO.

I'm pleased to share that we had another active quarter during which we further simplified the business and continue to enhance our operational platform while capitalizing on the positive trends in the multifamily sector. We're encouraged by the steady progress we've made thus far. And today, I listed a handful of office assets away from transitioning into a pure-play multifamily company.

Our results for the quarter are a testament to the quality and appeal of our multifamily portfolio. Despite the continued economic uncertainty, we maintained strong leasing momentum throughout the quarter, increasing occupancy to above prepandemic levels.

Specifically, as of October 24, our 5,825-unit operating portfolio was 96.5% occupied, up from 92.3% as of June 30 and 2.7% above prepandemic levels.

As I mentioned last quarter, we removed concessions across most assets and started increasing rents, positively impacting net operating income, which is up 4% this quarter compared to the prior quarter. The positive performance across our multifamily portfolio was further fueled by strong leasing across all three of our recently completed lease-up properties, which are collectively now more than 95% leased and performing well ahead of our internal expectations with respect to both leasing velocity and rent level achieved.

The Upton in Short Hills and the Capstone at Port Imperial, both of which began securing meters during the first quarter, were 99.5% and 96.4% leased, respectively, as of October 24. Riverhouse 9 at Port Imperial is already about 95% leased despite having only launched in May. We anticipate initial occupancy of Haus 25, our newest 750-unit apartment building at 25 Christopher Columbus in Jersey City to commence in the first quarter of 2022 and look forward to updating you on the leasing momentum there in the coming quarters.

Since announcing our strategic plan to simplify the business and strengthen the balance sheet, we have sold approximately $1 billion of suburban office assets as part of our suburban office disposal program, including the sales of 7 Giralda Farms and 4 Gatehall Drive for $29 million and $25 million, respectively. The proceeds of which were used to reduce corporate debt.

Consistent with our ongoing efforts to transition to a pure-play multifamily REIT, we've also entered into a separate definitive agreements to sell 2 office properties located in Jersey City and Hoboken, totaling approximately 1.8 million square feet for a combined sale price of $590 million. Upon completion of these sales, our multifamily assets will account for approximately 70% of our net operating income pre-stabilization of Haus 25 and assuming all else is held constant.

Turning to office portfolio. The Waterfront assets are now 73.3% leased. As COVID-19 cases in the Northeast decline and many employees return to the office, we believe our live, work, play office proposition on the Waterfront presents an attractive option to a varying cross-section of tenants across industries, including a wide range of spaces, including outdoor space, workplace solutions and the comprehensive amenity offering.

Overall, we're pleased to report strong operating results during the quarter and excited about the strategic direction of the company.

With that, I'm going to hand over to David, who will update you on our financial performance during the quarter.

[David Smetana, executive]

Thanks, Mahbod. We reported core FFO per share for the quarter of $0.17. The year-over-year reduction in core FFO per share was primarily due to the impact of our suburban office asset sales program, which is now complete. This quarter, we continue to see positive trends throughout our multifamily operations.

As Mahbod mentioned, our occupancy now stands at 270 basis points above prepandemic levels, which has allowed us to begin to grow net effective rents through the reduction of concessions and increases in market rents. On a sequential same store basis, we reported a revenue increase of 4.3% and an NOI increase of 4%. We see these trends underpinned by a tight labor market and strong wage growth continuing into the fourth quarter.

Our three newly stabilized developments in Short Hills and Port Imperial, New Jersey continue to outperform our expectations, generating $2.7 million of NOI at share in Q3, a $3 million increase over their NOI contribution in the second quarter.

Office leasing was modest in the quarter, with only 3 small noncomparable leases signed for 8,600 square feet. As anticipated, TD Ameritrade has moved out of its remaining 44,000 square feet at Harborside 6 in October. We placed 2 of our 6 remaining Waterfront office assets under contract in the quarter at a combined sales price of $590 million or $325 per square foot. In the suburbs, we completed the previously announced $29 million sales of 7 Giralda Farms. And post quarter end, our last suburban office asset held in discontinued operations, 4 Gatehall for $25 million in proceeds.

Excluding the contributions from the held-for-sale Waterfront assets and suburban assets in discontinued operations, multifamily operations accounted for approximately 70% of the company's NOI in the third quarter. All else remaining constant, we anticipate that the multifamily NOI contribution will increase to approximately 75% upon stabilization of our newly developed properties in Haus 25.

Upon closing of the Waterfront asset sales under contract, our operations will be driven by our 21 Class A multifamily operating assets, with sector-leading average monthly rents of $2,930 per unit and sector-leading average portfolio age of only 7 years. Additionally, we have one multifamily project in construction, Haus 25, with budgeted total cost of $469.5 million and with no remaining equity requirements. This asset is expected to receive tenants in the first quarter of 2022.

Our remaining portfolio includes 4 office assets totaling 3.1 million square feet, all located within our Harborside complex in Jersey City. 2 hotels and the prime land bank comprising 14 development sites, the majority of which are located one transit stop from Manhattan.

We are excited about our competitive position. Our streamlined portfolio focused on Class A multifamily assets, improves our NOI growth outlook and our cash flow growth profile as we move forward, especially when accounting for capital expenditures. We see continued tailwinds from concession burn-offs, anticipated growth in market rents and the upcoming delivery of our Haus development, all contributing to cash flow growth in the quarters ahead.

This concludes our prepared remarks. Operator, can we open the call for Q&A?

[Operator]

[Operator Instructions] Our first question comes from Manny Korchman from Citi.

[Emmanuel Korchman, analyst]

In terms of the asset sales in Jersey City and Hoboken, are those -- do you have hard money deposits on those? And when do you anticipate that those would close?

[Mahbod Nia, executive]

Manny, thanks for the question. Yes, we do have hard money deposits on those, and the expected timing for close is Q1 next year.

[Emmanuel Korchman, analyst]

And then, Mahbod, just thinking further out, is the plan meant to sell down the rest of the Harborside office holdings? And if so, does that require lease-up of those holdings? Or are you running sort of at least soft or hard inquiries out there to see if there's interest in them as is? Or what's the plan for the rest of the Harborside?

[Mahbod Nia, executive]

Yes. I think what we've made clear the strategic direction for the company is to further simplify our focus and enhance operations around the multifamily side of the business, and you're really seeing that now come to fruition. We made a comment in the prepared remarks about how with the expected sale of these 2 assets, everything else held constant, approximately 70% of our NOI would come from multifamily and then with the stabilization of the development assets in Haus 25, then it moves up from there. So I think we've been pretty opportunistic and considerate, I think, about asset sales, and we'll continue to approach it in the same way going forward as we make this transition. But no specific time frame on that. It will be in a very measured and balanced way with the aim of maximizing value for shareholders.

[Operator]

Our next question today comes from Jamie Feldman from Bank of America.

[James Feldman, analyst]

I guess can you just -- I know your leverage ticked up to about 15x in the quarter. Can you just walk us through the glide path here for bringing leverage down based on the asset sales in the pipeline and how we should think about timing?

[David Smetana, executive]

Thank you, Jamie. It's David. So on a net debt-to-EBITDA basis, as we've talked about before, I think the glide path really is to remain about constant in the teens now as we wait for our largest development to come online, Haus 25, where we continue to fund all the debt. We're almost done there. That should begin receiving tenants in the first quarter.

And then from there, as you note, the combination of debt repayment from asset sales, the lease-up of office at Harborside and, hopefully, possibly some recycling of land into yielding assets, we see a glide path that brings us down, not all the way to where the market is in multifamily, but into the lower teens in approaching single digits. But you'll need all of that to happen, and it'll take some time for us to approach those levels.

I would note as I have on past calls that when we seek to finance our multifamily, these are 55% loan-to-value loans on multifamily assets. We consider our debt extremely safe on the assets, and we don't have any major maturities over the next 3 years.

[James Feldman, analyst]

Okay. But I guess if you're going to be kind of a going concern, even if it's just an apartment company, I mean, how do you get to that final level, bring it down? Is it -- hopefully the stock is in a place where you can raise equity or more asset sales? What gets you to that over the goal line?

[Mahbod Nia, executive]

Yes. I can take that. I think it's one step at a time. So there's no silver bullet to everything, but I think we're making good progress moving in the right direction. As Dave mentioned, actually, there are a few different tools potentially available to us to be able to bring the leverage down to what may optically be more consistent with the multifamily market. But certainly, look at where we were a year ago with 2 looming corporate debt maturities of a significant quantum. I think we've gone a long way during the past 12 months to -- as we are strengthening the balance sheet. And the debt that we have right now, albeit on a net debt-to-EBITDA basis, is elevated, and that is a function of the disproportionate amount of equity that we have in a fully equity funded land bank and constructions in progress that are not yielding any EBITDA yet, plus vacancy on the Waterfront as sort of a capital allocation point there. But ultimately, the leverage is -- like there are no looming maturities of concern and overall leverage on a loan-to-value basis, particularly given the quality of the assets and the cash flows, doesn't present any kind of real financial risk to us. So I think it's more about the optics of coming into line over time, and we do have a few tools at our disposal to allow us to do that.

[James Feldman, analyst]

Okay. That's very helpful. And then a lot of news in the press about potential large leases at Harborside 1. Can you just talk about the leasing pipeline? And if you were to get that building leased up, does that move you closer to selling that one as well?

[Mahbod Nia, executive]

So as I'm sure you'd appreciate, it's not our policy to comment on rumor and speculation. But what I will say about leasing generally is that, well, during the quarter, leasing was quite muted. And our feeling is that, that was somewhat really related to the Delta variant. If you think back a few months and the fear that, that cause and the postponement of leasing decisions during the quarter, it's not a complete surprise. And in fact, office leasing over the last 18 to 24 months across the board has been muted, and the Waterfront is not an exception.

But to put it into perspective, year-to-date, there's been something around 375000-square-foot of leasing on the Waterfront, about 2/3 of that is renewals, and that's the second lowest volume in 10 years. It's 80% below the 2016 peak, and it's about 30% below the 5-year quarterly average. So in what has been a relatively tough leasing period with the investments that we've made in the Harborside complex, with the investment that we've made in our leasing efforts, we still managed at least 176,000 square feet year-to-date, which is around 60% of the total leasing activity year-to-date despite only earning about 1/4 of the total stock in that market.

So I think the market isn't strong on the leasing front, but we are making the most of it. And I continue to believe that we are the best position we've been for a very long time as a company to capture more leasing demand as we now start to see, particularly with the booster jab, a greater return to the office along that whole market on the East Coast.

[James Feldman, analyst]

Okay. Can you quantify the size of the leasing pipeline? I think you've done that in the past.

[Mahbod Nia, executive]

Not during my tenure. I think my stance is very much that we will announce leases as and when they become leases and we sign them. So I don't -- we're not going to provide guidance on leasing pipeline going forward. And I haven't done that.

[James Feldman, analyst]

Okay. And finally for me, the buyers of the Waterfront assets you have under contract, is there interest in Harborside as well from the same buyers?

[Mahbod Nia, executive]

Well, I mean, look, we're contractually restricted from disclosing the identity of those buyers for assets, which is why you saw them lumped together. No, those buyers had an interest specifically in those assets, not beyond them. And we didn't partly explore that.

[Operator]

Our next question comes from Steve Sakwa from Evercore ISI.

[Steve Sakwa, analyst]

Mahbod, I was just wondering if you could talk a little bit about the apartment business. And clearly, the rebound has been sharp. We've seen that with many of your peers in the area up here. I'm just curious, what are you sort of now sending out in terms of renewal increases given that you're roughly 96% occupied, and clearly, pricing powers move back in your favor?

[Mahbod Nia, executive]

Yes. So Steve, thanks for the question. Yes. Look, it's been a pretty sharp or aggressive rebound. We are now 2.7% above pre-COVID levels, and occupancy concession are being tapered right back. There are some concessions still on the lease-up properties. But for the most, outside of that, it's pretty much been scaled right back. So we're at that point now where one would expect to start to see some rental growth. We're starting to see that rental growth. And we have -- as I've mentioned this actually once before, we still have constituents of demand out there that are not even back yet. The most notable one being the student community, but -- the overseas student community. But with borders now opening up potentially, that just adds further field to demand going forward, and we're pretty optimistic about our ability to be able to capture rental growth. We have really high-quality assets that attract premium rents and are renting extremely well. It's a sought-after demand. Sorry, it's a sought-after asset that we have across the portfolio. They're sought-after assets for the portfolio, and we expect to see that translate into some rental growth over the coming quarters.

[Steve Sakwa, analyst]

Okay. But you can't -- I guess you're not willing to quantify maybe where you're sending out renewal notices kind of looking out 60 days. Like I'm just curious how much that's changed or moved in your favor in the last 2 months.

[Mahbod Nia, executive]

I think it's -- the first step has been really the tapering of concessions, and we are starting to see the impact on the rent that you saw net effective rents up. But I think it's a little bit early to -- the data points are not sufficient yet for us to give you that level of color quite this quarter. Hopefully, next quarter, we'll be able to give you more color on that. But it -- great position to be in. The market fundamentals are strong. The assets performed really well relative to competitors, and we're optimistic about what that means in terms of rental growth and pricing power going forward.

[Steve Sakwa, analyst]

Okay. And then maybe a second question. Look, I realize the balance sheet is sort of constraining your ability to start new development on multifamily. You have a lot of land sites. Maybe just kind of talk us through your desire to find JV partners that you can contribute land, they can come in and be a capital source. How do you sort of put that land to work? And are there things that you've got in the mix today that could allow you to start some new projects over the next 12 to 18 months?

[Mahbod Nia, executive]

Yes. Well, it's a great question. I think it's really a capital allocation and capital redeployment question. So the balance sheet is somewhat constrained. But as we look to sell assets like the 2 office buildings that we announced that does release equity, and we will, as we make closing on those transactions, evaluate all options for the redeployment of that equity or use of that equity, really, and ultimately put it to its highest and best use. What that quite is, I couldn't tell you today because no decision has been made.

But certainly, when it comes to the land bank, I've been pretty open about this before. I think we have a disproportionately large and pretty inefficiently funded land bank. It's a great land bank, don't get me wrong. They're -- We own great sites, but it's a lot of equity to have tied up that has sort of back-ended return and no current income. And as a REIT, part of what we're trying to do is simplify and go back to the basics of what REITs were intended to do. So potentially, some of that land could get recycled as well, with the equity being reallocated to a higher and better use within the business.

But all things that we're looking at, at the moment, and I think it's a great question, but it's one of the areas where I think there is some inefficiency. Sitting on land that you ultimately are not developing and is just burning a hole in the balance sheet, it's not a great spot to be in.

[Steve Sakwa, analyst]

Okay. And my last question. Just -- can you just remind us about the Rockpoint JV? And are there any put rights or capital calls or just financial obligations around that just to make sure we're thinking about how that might unwind? Or any key dates coming up maybe in '22 or '23 that we should be mindful of?

[David Smetana, executive]

Yes. Thank you, Steve. It's David. So all the equity has been funded by Rockpoint on their end. Our current business plan doesn't call for any -- for us to call any additional equity from them nor are we required to. So over the next couple of quarters and years, the next main date in the agreement would be March 2, 2023, where there is a put call between both partners. At that point, either partner can exercise a 1-year extension. So you're really one year off that on kind of rationalizing the JV, finding net asset value, market value for both and exchanging. So the JV will continue on over the next quarters, as I described, and I don't think you'll see anything really different on that end.

[Operator]

We'll go to our next question now from Tom Catherwood from BTIG.

[William Catherwood, analyst]

Mahbod, you've talked about in the past the restructuring that you guys have done. Obviously, we've seen the positive impact on earnings. How is that restructuring impacting the operating side of the business? And did that kind of contribute at least in part to some of that residential occupancy pickup? Or was that more driven by stronger market fundamentals?

[Mahbod Nia, executive]

Thanks for the question, Tom. So I think it's probably a combination. I do believe the restructuring, going back to what we really did, was we had 2 almost independent, almost relatively autonomous organizational structures underneath one, which created financial inefficiency, also operational inefficiency in the way I thought the business was being run. So what we've done is collapsed all of that into one streamlined org. structure and then reconfigured it. We did bridge areas where we felt like we could be stronger. And so it's been partially cost-driven, it's been partially just more real kind of true operational level changes that we've made. We brought in a couple of really seasoned multifamily experts as well that we've hired. And I do believe that, that's made a difference. But the market has also been extremely strong, and you've seen that in our competitors' results as well.

So it's -- there's efficiency on the cost side, but the revenue side has also been driven by the changes that we've made and by the market. I really think it's a combination of all those things, and you're starting to see some of the early rewards of making those changes, I think.

[William Catherwood, analyst]

Got it. Appreciate that color. And kind of following up on the impact on the revenue side that you mentioned, it was good to see the sequential pickup in both parking and hotels revenue this quarter, especially given concerns around the Delta variant and delayed return to office. I think this was the first time the Hyatt Regency is inflected in the positive NOI territory since 2019. Can you speak a bit about the trajectory in those line items, what you're kind of expecting from parking and hotels going forward and kind of the drivers of that sequential improvement?

[David Smetana, executive]

Tom, it's David. So I'll start on that, and Mahbod can add. So on parking, we did see some sequential improvement, and it was really towards the end of the quarter. As you know, return to office at Labor Day got pushed back. Anecdotally, I don't have the exact utilization right now, but our lobbies are more full. We're sharing elevators. A lot of our food vendors have opened in and around Jersey City. So parking still probably needs, I would say, 3 to 4 quarters, maybe by the end of next year to get back to the levels that we were pre-COVID. And I think that will coincide with return to office being back 100%.

And then on the hotels, we've seen a lot of group pick up, a lot of weddings, a lot of events. But again, I would caution, let's see what happens this winter with return-to-office, the Delta variant and any other variants and flu. But we're expecting, I think, from here just modest growth. We've had a stair-step up in the hotels to a level, and I think from here, kind of more modest growth, low single-digits type of growth in EBITDA and RevPAR.

[William Catherwood, analyst]

Got it. And kind of last one for me. Mahbod, I appreciate your comments on Waterfront leasing demand in response to Jamie's previous question. Taking it from a different angle, the merged New Jersey incentive program was obviously put in place earlier this year. We understand the program made its first allocation or award a month or so ago. Are you seeing any positive change or thawing in, in tenant requirements now that, that incentive plan is in place?

[Mahbod Nia, executive]

It's a great question. I do think that having the incentive program has made a huge difference to the inquiries and the number of firms that will now consider relocating to New Jersey. There were 2 instances recent of the award actually being utilized. One was Party City, the retailer who've got a $10 million incentive package. And as a result, you'll see 350 new jobs created in Woodcliff Lake. And then the other one was a financial tech farm called Fiserv, who is investing 150 -- sorry, $105 million in Barclay Heights and creating 3,000 jobs and receiving a pretty substantial tax credit award as a result. So it's starting to make its way through actually into -- will translate into leases. And our expectation is that we'll continue to see more of that going forward as firms are attracted to the area, for sure.

[Operator]

We have a follow-up question now from Manny Korchman from Citi.

[Michael Bilerman, analyst]

It's Michael Bilerman here with Manny. Mahbod, I know the pandemic has limited your ability to actually come to the U.S. I'm just curious now as things have reopened a little bit more, sort of what your plan is in terms of geography? And I know you hired a COO in London that we used to work with. So just -- can you just update us sort of on your own plans and managing the organization?

[Mahbod Nia, executive]

Yes. Sure. Michael, thanks for the question. Look, I mean, we've -- obviously, during the last

[Audio Gap]

so we've made -- 14 months, we've made progress. All of us actually, not just me, are spending a lot of time working remotely. And so what we've done so far, I think, has been positive, and we'll continue to do that. Having said that, I'm excited because I have my One Visa, which has come through now. I have my appointment with the embassy here next week and have a flight booked to get over there in the next couple of weeks.

So -- and similarly, with our COO, we are going through a process with her. And the expectation is if everything goes as planned that she'll relocate. So excited to see the Board as we open, and I'm looking forward to coming over.

[Michael Bilerman, analyst]

So are you going to relocate and run the company? Or as you make this transition to multifamily, you want to stay CEO in London? Or do you expect to hire a permanent CEO in the U.S.?

[Mahbod Nia, executive]

I think that's really a question for the Board, the latter one. The third part of the question is really undecided. So as it stands, if I'm spending half of my time over there and half of my time away, I'm not sure if I'm living in the U.S. and [ clinging ] back to see my family or vice versa. So I will be doing what it takes to make this -- to continue to make this company and the story a success for as long as I'm in the seat.

[Michael Bilerman, analyst]

Prepandemic, you guys had indicated you had an offer that you have been mentioned Company A in one of the filings. Where the sort of corporate transaction initiative stand? And sort of take us through sort of, at least on that side, how much time you're trying to spend on a corporate level transaction given there have been interest before and you've now gone out of the suburbs. You've only have 4 office assets left. I would imagine that the interest level would be higher now that you're more clean.

[Mahbod Nia, executive]

Well, so Michael, as you know, we have a relatively new, highly competent and highly focused Board and strategic review committee who is focused on creating and unlocking value for shareholders here really in any way that they can. Our job as a management team is to focus on the operations to create value at the asset level and at the entity level. Any future strategic decision that may or may not involve crystallizing that value outside of the current structure is really a question for the SRC and the Board. But as I said, it's something that we're highly focused on, but that's not really a question for us.

[Michael Bilerman, analyst]

Okay. Thinking about the 2 office sales, can you talk a little bit about the process that you had gone through for those? Were those actively marketed? Or were they sort of off market, where buyers came to you? And then how did you think about pricing, especially given the fact that at least gross price is $590 million, looks like you have almost $20 million of cost and then another $20 million, $25 million of prepayment penalties. So you're really only netting down to like $550 miilion, $545 million. And with $400 million of debt, that's only relinquishing about $145 million of cash. Can you just sort of talk about cap rate, how you thought about the pricing net of $40 million, $45 million of cost and just sort of reconciling that for us?

[David Smetana, executive]

Michael, it's David. I'm going to start on this one, Mahbod can jump in and add color. So these assets were marketed. They have been marketed even pre-COVID. So we kind of knew where the interest lies in these assets. So we're pretty happy with the pricing given where it came in from pre-COVID. That said, we're not going to give you the exact quotes on both, and we do have confidentiality, and we're not closed yet. So we're happy with where the bids came in.

On the defeasance, you are correct. We do have defeasance, but we weren't going to let that dictate our strategy. And we came up with some creative workarounds and approaches to this defeasance. But net-net of the defeasance, we still think we came out with pricing that we're very happy with and that the market did see these assets, and they fit in with our strategic direction.

I think Manny and others pointed out and others that know our portfolio. What's also important is these 2 assets, one in Hoboken and one in Jersey City, really get us now defined down in and around our Harborside assets, which are 4 assets, if you look at them from the street but really could be considered one complex. So we weren't going to let defeasance really drive the day here. We're happy with the price we got. And strategically, this is where we wanted to go in pivoting towards multifamily.

I don't know if Mahbod had anything additional.

[Mahbod Nia, executive]

Look, I think it's a strong price across the 2 on a per square foot basis, and that's certainly been the reception as well that we've received. We think it's the right decision to move forward in this direction. As I said, we're focused not just on, at any cost, at any point, moving in this direction and destroying by -- we're very focused on moving this direction towards transitioning to a pure-play multifamily REIT in a thoughtful way and in an opportunistic way. And to us, that's exactly what we've done with these sales.

[Michael Bilerman, analyst]

Can you just walk through the sources and uses and the math? I think I was surprised that the transaction costs were so high and then, obviously, the prepayment penalties, which is the choice that you had to make to deliver the assets unencumbered, obviously, is cash out the door. So can you just walk us through sort of the financial impact of these transactions? Obviously, the extra $150 million will go towards debt repayment. We relinquished the $400 million , but I'm just trying to get a sense of how much NOI goes away when these deals close.

[David Smetana, executive]

Michael, you're asking a lot of questions there, and I think you're essentially asking for the cap rate to figure those out. So we do provide the amount of debt and the interest rate there. So what I'd say, if you go through our supplement, you can see what our rents are. You can see the occupancy in these assets. So it's still too early. These assets haven't closed. We're not going to comment on the cap rate.

You are right that when cash comes in, we do have a balance on our line. We would look just to manage our float and pay down the line. And then as Mahbod mentioned, we'll look at our capital allocation in which we have a number of different avenues we can go down, including recycling, returning capital and further repayment of debt. So we'll look at all of those. But at this point, we're not going to relinquish cap rates on these assets.

[Michael Bilerman, analyst]

Okay. Last question, just as you transition to multifamily, how much of Rockpoint is tied into the asset value and the sort of GAV of the multifamily platform?

[David Smetana, executive]

So Michael, we always disclose the Rockpoint minority interest. So they've invested $400 million, and they also have an accrual in the waterfront, which we book, it's on our NAV page, on Page 7 of our supplement. So it's currently at $466.3 million. We've never really commented on nor do we disclose the JV split percentage, but that Rockpoint interest, that would be their equity interest, and perhaps with leverage, you could kind of back into what their percentage of of GAV is there. And also on an NAV basis, you could back into their equity interest. But we continue the same disclosure. And I think Steve asked before about some of the other partnership features in the buy/sell, but nothing new to report there on Rockpoint.

[Michael Bilerman, analyst]

Can you distribute assets in relinquish? Or is the buy/sell on the complete platform?

[David Smetana, executive]

There are a number of things we can do. And listen, we have a very good relationship with Rockpoint. This is not going to be one of us rushing to a buy/sell day and surprising the other. There's lots of different things we can do, and we have a broad relationship with them. And so when the time comes, we'll have those discussions, but we don't see anything in the near future changing on that relationship.

[Operator]

Thank you. As we have no further questions at this time, I'd now like to turn the presentation back over to your speakers today for any additional or closing remarks.

[Mahbod Nia, executive]

Thank you very much, everyone, for joining us today, and we look forward to updating you on our continued progress next quarter.

[Operator]

Thank you. This will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.