Mack-Cali Focuses on Multi-Family Assets: Should You Hold? - Analyst Blog

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On Feb 20, 2015, we issued an updated research report on Mack-Cali Realty Corp. ( CLI ). The Edison, NJ-based real estate investment trust ("REIT") focuses on expanding multi-family community portfolio over key markets and at the same time shedding off office and office/flex assets. Further, the company's strong commercial tenant base, coupled with a rise in demand for apartments driven by 'echo boomers,' children of the baby boomer generation, promise bright prospects.

Amid persistent weakness in core suburban office markets, Mack-Cali has been selling its office and office/flex assets and deploying the sale proceeds to fund multi-family apartment investments. Consequently, in fourth-quarter 2014, the company opened a new luxury multi-family community, Portside, at East Pier in East Boston, MA.

This portfolio repositioning initiative is expected to benefit the company going forward. Further, the multi-family residential sector has traditionally been more of a stable product type and therefore, expansion into this sector served as a strategic fit for Mack-Cali.

On Feb 19, 2015, Mack-Cali reported fourth-quarter 2014 FFO of 47 cents per share which exceeded the Zacks Consensus Estimate by 2 cents, but came in lower than the prior-year quarter figure of 52 cents.

As part of its long-term strategy, Mack-Cali continues to pursue multi-family residential investments, which involves significant upfront operating expenses and hence, limit its growth momentum. Further, aggressive disposition of assets causes a dilutive impact on the company's earnings.

Over the past 7 days, the Zacks Consensus Estimate for both 2015 and 2016 edged down by a cent to settle at $1.71 and $1.85, respectively.

Mack-Cali currently carries a Zacks Rank #3 (Hold).

Investors interested in the equity trusts-others industry sector may consider stocks like CareTrust REIT, Inc. ( CTRE ), Sotherly Hotels Inc. ( SOHO ) and Summit Hotel Properties, Inc. ( INN ). All these stocks sport a Zacks Rank #1 (Strong Buy).

Note: 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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