On Apr 18, 2013, we reiterated our long-term recommendation on
Mack-Cali Realty Corp
), an Edison, NJ-based real estate investment trust (REIT), at
Neutral. This is based on the company's decent leasing activity
and diversifying moves. Yet, holding occupancy and increasing
rents are a concern due to the current unimpressive demand for
office space. Also, disclosure of the dividend cut plan serves as
a negative catalyst in the short term.
Mack-Cali has a strong presence in high barrier-to-entry markets
in the Northeast and Mid-Atlantic regions in the U.S. However,
holding occupancy and increasing rents are a concern due to the
tough environment in the office sector. Hence, Mack-Cali has been
focusing on expanding its multifamily apartment portfolio.
The company also disclosed its plan of slashing its
second-quarter common stock dividend by a third to 30 cents from
45 cents per share paid earlier. The move comes as the company
plans to retain its cash for meeting investment needs that would
help expand its multi-family residential platform.
In the recent months, Mack-Cali acquired both Alterra IA and
Alterra IB at Overlook Ridge - in Metro Boston from a joint
venture of Prudential Insurance Company of America, an
operational arm of
Prudential Financial Inc.
). Also, the company entered the DC multifamily market, through
the buyout of Crystal House. The property was acquired through a
joint venture (JV) with a fund advised by UBS Global Asset
We believe that though the news of the dividend cut is
discouraging for the shareholders in the near term, it will
ultimately help Mack-Cali diversify its business and stay on the
growth trajectory in the long term.
Mack-Cali reported fourth-quarter 2012 FFO 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. Total revenue during
the reported quarter was $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 revenues of
Over the last 60 days, the Zacks Consensus Estimate for full-year
2013 dipped marginally by a cent to $2.55 per share while the
Zacks Consensus Estimate for full-year 2014 stood at $2.60 per
share. In addition, Highwoods has now delivered positive earnings
surprises in the past 4 consecutive quarters with an average beat
of 5.42%. Hence, Mack-Cali now has a Zacks Rank #3 (Hold).
Other Stocks to Consider
Another REIT stock that is currently performing well and deserves
a look is
Simon Property Group Inc.
) that carries a Zacks Rank #2 (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.
MACK CALI CORP (CLI): Free Stock Analysis
PRUDENTIAL FINL (PRU): Free Stock Analysis
SIMON PROPERTY (SPG): Free Stock Analysis
UBS AG (UBS): Free Stock Analysis Report
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