Real estate investment trust (REIT)
Mack-Cali Realty Corp.
) reported fourth quarter 2012 FFO (funds from operations) of 66
cents per share, beating the Zacks Consensus Estimate by 3 cents.
This fell short of the prior-year quarter figure by 2 cents.
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For full year 2012, Mack-Cali reported FFO per share of $2.67.
This marginally surpassed the Zacks Consensus Estimate of $2.65
per share but decreased from $2.80 per share reported a year ago.
Total revenues during the reported quarter were $177.0 million.
Though the figure marginally missed the Zacks Consensus Estimate
of $178 million, it was slightly ahead of the prior-year
quarter's revenue of $175.5 million.
For full year 2012, Mack-Cali booked total revenue of $704.7
million, slightly up from the Zacks Consensus Estimate of $703
million, but below $709.1 million reported a year ago.
Mack-Cali executed strong leasing activities during the quarter.
The company executed 120 leases at its consolidated in-service
portfolio spanning over 1.1 million square feet, including 0.9
million square feet of office space, 0.1 million square feet of
office/flex space and 0.1 million square feet of
Of the total leased space, 0.4 million square feet were for new
leases and 0.8 million square feet were for lease renewals and
other tenant retention transactions. The consolidated in-service
portfolio of the company was 87.2% leased at quarter end compared
with 87.5% in the previous quarter.
Acquisitions and Developments
In Jan 2013, Mack-Cali acquired Alterra at Overlook Ridge IA in
Metro Boston for approximately $61.3 million. In addition, the
company inked a deal to purchase Alterra at Overlook Ridge IB for
roughly $88 million, which is expected to close in Apr 2013,
subject to the opening of prepayment option of the property's
The properties, which collectively comprise 722 rental units in
the master planned community of Overlook Ridge in Revere and
Malden, Mass., were acquired from a joint venture of Prudential
Insurance Company of America, an operational arm of
Prudential Financial Inc.
). The properties are currently 97.2% leased.
In Oct 2012, Mack-Cali acquired the real estate development and
management businesses of Roseland Partners, L.L.C., a leading
multi-family residential community developer and operator in the
Northeast. The transaction worth $134.6 million was funded
through a combination of cash on hand and debt under its $600
million unsecured revolving credit facility.
In December, Mack-Cali's Roseland subsidiary started construction
of the following key multi-family communities in the Northeast:
RiverParc at Port Imperial - a joint venture (JV) with Prudential
Insurance, with the project cost expected to be around $96.4
million; The Highlands at Overlook Ridge - a JV with a fund
advised by UBS Global Asset Management of
) and the anticipated project cost is about $79.4 million.
In addition, the company commenced the development of Portside at
Pier One - a JV with Prudential Insurance Company and the
estimated project cost is approximately $66.3 million. Following
completion, Roseland will manage the leasing and management for
the above-mentioned properties.
Moreover, Mack-Cali sold 3 of its office buildings at Moorestown
Corporate Center totaling 0.2 million square feet in Moorestown,
N.J. The net sales proceeds were about $19.4 million, and it
incurred a loss of around $0.1 million from the sale.
As of Dec 31, 2012, Mack-Cali had total debt of $2.2 billion,
with a weighted average annual interest rate of 5.86%. Its
debt-to-undepreciated assets ratio was 36.7%, an interest
coverage ratio of 3.2x, and cash and cash equivalents of $58.2
For full year 2013, Mack-Cali expects FFO per share in the range
of $2.40-$2.60 per share, unchanged from the prior issued
During the reported quarter, Mack-Cali announced a quarterly cash
dividend of 45 cents per share, which equates to an annualized
distribution of $1.80. The dividend was paid on Jan 11, 2013 to
shareholders of record as of Jan 4.
We are encouraged with a better-than expected results at
Mack-Cali. The company is one of the largest office REITs in the
U.S., primarily focusing on high-barrier markets in the suburban
areas of the Northeast and Mid-Atlantic regions. It has a
conservative balance sheet with a high ratio of debt-free assets
and strong debt service coverage ratios, and is comparatively
better equipped than its competitors to sustain the economic
Moreover, the recent acquisitions are a quality addition to the
company's multi-family properties portfolio and accretive to its
earnings upon completion. Yet, Mack-Cali will have a difficult
time holding occupancy and increasing rents due to volatility in
the office sector.
Mack-Cali currently retains a Zacks Rank #3 (Hold). Another REIT
stock that is performing better and is worth a look is
Terreno Realty Corp.
), carrying a Zacks Rank #1 (Strong Buy).
FFO, a widely used metric to gauge the performance of REITs,
is obtained after adding depreciation and amortization and other
non-cash expenses to net income.