Mack-Cali Sells Another Office Property to Keystone - Analyst Blog

Mack-Cali Realty Corporation ( CLI ) closed on the sale of 412 Mt. Kemble Avenue in Morris Township, N.J. for around $45.4 million to Keystone Property Group, a real estate investor, manager and developer of office and industrial properties. The move would help Mack-Cali reap capital for investing in its strategic growth initiatives.

This property comprises 3, three-story buildings spanning 475,100 square feet. Keystone has plans to spend around $5.9 million in this property so as to improve its infrastructure, amenities and building systems.

This office property is part of the tri-state area portfolio that Keystone has planned to acquire from Mack-Cali. Notably, Keystone and Mack-Cali inked deals to form various joint ventures earlier this year for a number of property sales (Read: Mack-Cali Continues to Trim Office Assets ).

As part of that deal, Keystone acquired 3 New Jersey office properties - 30 Knightsbridge Road in Piscataway, 470 Chestnut Ridge Road in Woodcliff Lake and 530 Chestnut Ridge Road in Woodcliff Lake - earlier this quarter (Read: Mack-Cali Sheds Office Assets, Reuses Cap in Multi-Family ).

Keystone will take part in these properties through reinvestment in redevelopment, management and upgrades to each site, while Mack-Cali will take part in the portfolio management fees, lease handling as well as value creation over certain hurdle rates.

We believe this deal with Keystone offers Mack-Cali the opportunity to join in the upside produced through reinvestments in these properties. Moreover, reaping of decent capital and redeploying them in its growth strategies such as the expansion of its multi-family residential platform is a prudent one amid weakness in its core office markets. However, the aggressive disposition of office assets is anticipated to continue to lead to earnings dilution.

Mack-Cali currently carries a Zacks Rank #4 (Sell). However, investors interested in the REIT industry may consider stocks like Chatham Lodging Trust ( CLDT ), Parkway Properties Inc. ( PKY ) and Terreno Realty Corp. ( TRNO ). All these stocks carry a Zacks Rank #1 (Strong Buy).

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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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