Mack-Cali Buys N.J. Multi-Family Assets - Analyst Blog


Continuing with the effort to diversify its business and venture into the multifamily apartment sector, Mack-Cali Realty Corp. ( CLI ) - a real estate investment trust (REIT) - disclosed the acquisition of 200-unit multi-family residential properties in New Brunswick, N.J. The company shelled out $41.1 million for purchasing the properties from an affiliate of Ironstate Holdings.

Known as Riverwatch Commons and Richmond Court, the three-building properties are 95% leased and includes studio, and one- and two-bedroom luxury apartments. Located near the NJ TRANSIT train station, offering accessibility to the NJ Turnpike, I-287, and Route 18, the property is in proximity to shopping centers, restaurants, nightlife, theaters, Johnson & Johnson's headquarters, and Rutgers University. The property is offering a good amenity package and Mack-Cali's Roseland subsidiary is in charge of managing and leasing the property.

With the continued weakness in the company's core office markets, Mack-Cali has been divesting a notable part of its office portfolio and targeting to expand its holdings in the multi-family residential sector that has traditionally been more of a stable product type. The growth in the echo boomers population is particularly expected to drive the demand for these properties.

In tandem with this, recently Mack-Cali and Fisher Brothers formed a joint venture to purchase a 377-unit multi-family residential development project in Washington, D.C. Mack-Cali will shell out around $46.5 million for acquiring a 50% stake in the project.

Moreover, in November, Mack-Cali disclosed the acquisition of a 159-unit multi-family residential property - Park Square - in Rahway, N.J., for $46.5 million from Landmark Companies of Keasbey, N.J. Earlier this year, Mack-Cali also acquired Alterra at Overlook Ridge 1A and 1B - luxury multi-family properties containing 722 rental units in the master planned community of Overlook Ridge in Revere and Malden, Mass., from a joint venture of Prudential Insurance Company of America, an operational arm of Prudential Financial Inc. ( PRU ).

While the portfolio repositioning efforts through multifamily apartment buyouts and office assets divestiture are encouraging, we believe that the aggressive disposition efforts are continuing to have a dilutive impact on its financials in the near-to-medium term. Moreover, with rents on the renewals rolling down in its core office portfolio, this Zacks Rank #4 (Sell) stock lacks sufficient growth momentum. But we believe that these strategic initiatives will benefit Mack-Cali in the long run. 

However, investors interested in the REIT industry may consider stocks like Getty Realty Corp. ( GTY ) and Sabra Health Care REIT, Inc. ( SBRA ). Both these stocks carry a Zacks Rank #1 (Strong Buy).

MACK CALI CORP (CLI): Free Stock Analysis Report

GETTY REALTY CP (GTY): Free Stock Analysis Report

PRUDENTIAL FINL (PRU): Free Stock Analysis Report

SABRA HEALTHCR (SBRA): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CLI , GTY , PRU , SBRA

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