Mack-Cali Continues to Trim Office Assets - Analyst Blog


Mack-Cali Realty Corp. ( CLI ) and Keystone Property Group have penned a deal to form joint ventures whereby Keystone would acquire 12 office properties across Northern New Jersey, New York and Connecticut from Mack-Cali for around $230.8 million. The move comes as part of Mack-Cali's efforts to shed its office portfolio and diversify into the more promising multi-family residential sector.

This marks the fifth deal signed by Keystone and Mack-Cali and involves 2.3 million square feet of space in total. The purchase price of $230.8 million comprises $201.7 million in cash and the rest in the form of senior and subordinated equity.

Mack-Cali will take part in the portfolio management fees as well as a percentage of value creation over certain hurdle rates. It would also keep a senior pari-passu equity position at 570, 555 and 565 Taxter Road.  

Amid continued weakness in the company's core office markets, Mack-Cali has been divesting a notable part of its office portfolio and deploying its capital 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.

Notable acquisitions in this respect involve multi-family residential properties in New Brunswick, NJ, Alterra at Overlook Ridge 1A and 1B - luxury multi-family properties in Mass., and Park Square in Rahway, NJ.

While we believe that the venture into the multi-family apartment sector is expected to help in long term growth of Mack-Cali, the aggressive disposition of office assets would continue to have a dilutive impact on its financials in the near-to-medium term.

Mack-Cali currently carries a Zacks Rank #4 (Sell) stock. However, investors interested in the REIT industry may consider stocks like Cousins Properties Inc. ( CUZ ), Liberty Property Trust ( LRY ) and Public Storage ( PSA ). All these stocks carry a Zacks Rank #2 (Buy).

MACK CALI CORP (CLI): Free Stock Analysis Report

COUSIN PROP INC (CUZ): Free Stock Analysis Report

LIBERTY PPTY TR (LRY): Free Stock Analysis Report

PUBLIC STORAGE (PSA): 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 , CUZ , LRY , PSA

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