We have reiterated our Neutral recommendation on
Mack-Cali Realty Corp.
(
CLI
), a real estate investment trust (REIT), as we expect the stock to
perform in line with the broader market.
The company reported first quarter 2012 FFO (funds from
operations) of $74.5 million or 74 cents per share compared with
$67.3 million or 70 cents in the year-earlier quarter. Fund from
operations, 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, while adjusted FFO excludes
impairment and restructuring charges.
Mack-Cali is primarily engaged in owning, leasing, managing, and
developing Class A office and industrial/flex properties. The
company focuses on high-barrier markets mostly in the suburban
areas in the northeast and mid-Atlantic regions in the U.S., and
derives most of its annualized base rents from New Jersey
With debt-free ownership of the bulk of its portfolio, Mack-Cali
offers faster and more streamlined leasing process. In addition,
Mack-Cali is structured as a vertically integrated company,
providing a full range of leasing, property management,
construction, legal, space planning, and architectural services
under a single platform. This augurs well for its long-term
profitability.
The company has a conservative balance sheet with a high ratio
of debt-free assets and strong debt service coverage ratios.
Consequently, the company is comparatively better equipped than its
peers to sustain the challenging macroeconomic environment. For
fiscal 2012, the company expects FFO in the range of $2.50 -$2.60
per share.
However, as a part of its long-term strategy, Mack-Cali
continues to pursue the acquisition of properties in New Jersey,
New York, Pennsylvania and in the Northeast. The continuous
acquisition spree involves significant upfront operating expenses
with limited near-term profitability. New properties usually take
time to generate revenues, and will continue to drag down margins
till they get established.
Mack-Cali currently retains a Zacks #4 Rank, which translates
into a short-term Sell rating. One of its competitors,
Vornado Realty Trust. (
VNO
)
currently has a Zacks #3 Rank, which translates into a Hold
rating.
MACK CALI CORP (CLI): Free Stock Analysis
Report
MACK CALI CORP (CLI): Free Stock Analysis
Report
VORNADO RLTY TR (VNO): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research