Mack-Cali Realty Corp.CLI reported third-quarter 2016 core funds from operations ("FFO") per share of 56 cents, beating the Zacks Consensus Estimate by a penny. It was also up 16.7% from the prior-year quarter tally of 48 cents.
The better-than-expected result at Mack-Cali was supported by increased base rents in 2016.
Moreover, total revenue registered growth of 7.8% year over year to $157.5 million and exceeded the Zacks Consensus Estimate of $152 million.
Quarter in Detail
During the quarter, Mack-Cali executed 62 lease deals, spanning around 0.7 million square feet, at its consolidated in-service commercial portfolio. This included 216,205 square feet of core properties, 150,454 square feet of Waterfront properties, 241,634 square feet of flex space and 56,197 square feet of non-core properties. Of the total leased space, 289,991 square feet pertained to new lease deals; while 374,499 square feet consisted of lease renewals and other tenant-retention deals.
The company's consolidated commercial in-service portfolio was 87.7% leased as of Sep 30, 2016, up from 86.7% at the end of the prior quarter and 85.8% at the year-ago quarter end. Core/Waterfront/Flex properties were 90.3% leased at quarter end.
Mack-Cali exited third-quarter 2016 with cash and cash equivalents of $21.6 million, down from $37.1 million recorded at the end of the prior year.
Moreover, at quarter end, the company's $2.5 billion of total debt had a weighted average interest rate of 4.48%, down from 4.79% at Jun 30. This was achieved through strategic execution of financing activities. Its interest coverage ratio was 3.3 times for the third quarter.
Notably, in July, Mack-Cali acquired 111 River Street, a 566,000 square-foot office property in Hoboken, NJ for $235 million. On the other hand, the company completed $465 million in property sales year to date and further has contracts out for another $265 million of office sales.
Mack-Cali has raised its 2016 core FFO per share outlook to $2.14-$2.16, from $2.07-$2.13 per share guided earlier. The Zacks Consensus Estimate for the same is currently pegged at $2.15. Further, its initial guidance for 2017 core FFO per share is $2.25-$2.40. The Zacks Consensus Estimate for the same stands at $2.20.
Mack-Cali's better-than-expected performance in the third quarter is encouraging. In fact, the company is making solid strides in its 20/15 strategic plan. This plan is aimed at transforming Mack-Cali by focusing on waterfront and transit-based office holdings in the Northeast, and on luxury multi-family portfolio growth. It also includes planned exits from non-core markets and capital improvements in core assets.
Such transformations and diversification into the apartment sector are expected to drive growth and improve cash flow. Yet, earnings-dilutive effects of disposition and any rise in interest rate remain potential headwinds.
Mack-Cali currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
MACK CALI CORP Price, Consensus and EPS Surprise
Let us now look forward to the earnings releases of Essex Property Trust Inc. ESS , Apartment Investment and Management Company AIV and The Macerich Company MAC , all of which are slated to report on Oct 27.
Note: All EPS numbers presented in this write up represent funds from operations ("FFO") per share. 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.
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