Mack-Cali Marginally Beats Estimates

Zacks

Mack-Cali Realty Corp. (CLI), a real estate investment trust (:REIT), reported FFO (funds from operations) of $62.1 million or 62 cents per share in the second quarter of 2012, compared with $69.1 million or 69 cents in the year-earlier quarter.

Reported FFO per share in the quarter beat the Zacks Consensus Estimate by a penny. Total revenue was $178.5 million during the reported quarter versus $179.2 million in the year-ago period.

Mack-Cali executed strong leasing activities during the quarter. The company executed 139 leases at its consolidated in-service portfolio spanning 0.9 million square feet, including 0.7 million square feet of office space and 0.2 million square feet of office/flex space.

Of the total leased space, 0.3 million square feet were for new leases and 0.6 million were for lease renewals and other tenant retention transactions. The consolidated in-service portfolio of the company was 87.6% leased at quarter end compared with 87.9% in the previous quarter.

Subsequent to the end of the quarter, Mack-Cali signed a ground lease with Wegmans Food Markets for a site in Hanover Township, New Jersey.

During the quarter, Mack-Cali completed the sale of $300 million worth of 4.50% senior unsecured notes scheduled to mature in April 18, 2022. The company utilized the net proceeds of $296.8 million to repay outstanding debt under its revolving credit facility.

Additionally, Mack-Cali redeemed $94.9 million of its 6.15% senior unsecured notes scheduled to mature in December 15, 2012 and $26.1 million of 5.82 % senior unsecured notes due March 15, 2013.  The company funded the redemption price of approximately $127.9 million from borrowing on its unsecured revolving credit facility as well as cash on hand.

During the reported quarter, Mack-Cali declared a quarterly cash dividend of 45 cents per share, which equates to an annualized distribution of $1.80  At quarter-end, the company had total debt of $1.9 billion, with a debt-to-undepreciated assets ratio of 33.9%, an interest coverage ratio of 3.0x, and cash and cash equivalents of $19.3 million. For fiscal 2012, the company expects FFO in the range of $2.52 -$2.62 per share.

Mack-Cali currently retains a Zacks #3 Rank, which translates into a short term Hold rating. We  maintain our long-term Neutral recommendation on the stock. One of its competitors, Boston Properties Inc (BXP) also holds a Zacks #3 Rank.

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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