Mack-Cali (CLI) Q3 FFO Beats Estimates on Solid Revenues

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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.

Portfolio Activity

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.

Our Take

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

MACK CALI CORP Price, Consensus and EPS Surprise | MACK CALI CORP Quote

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

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

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