Mack-Cali Sheds Office Assets, Reuses Cap in Multi-Family


In order to reap capital and redeploy into the more promising multi-family residential sector, Mack-Cali Realty Corporation (CLI) disposed 3 New Jersey office properties to a joint venture led by Keystone Property Group for around $71.6 million.

The 3 properties  - 30 Knightsbridge Road in Piscataway, 470 Chestnut Ridge Road in Woodcliff Lake and 530 Chestnut Ridge Road in Woodcliff Lake - are listed among 11 properties, positioned in Northern New Jersey, New York, and Connecticut, that Keystone would acquire.

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).

In the next several weeks, Keystone expects to accomplish the acquisition of the rest of the properties within the Tri-State portfolio.

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.

As a matter of fact, Mack-Cali has been divesting a substantial part of its office portfolio amid continued weakness in the company's core office markets. This has helped the company to reap decent capital, which it is redeploying to expand its holdings in the multi-family residential sector that has traditionally been more of a stable product type. Moreover, the deal arrangement permits the company to join in the upside produced through reinvestments in these properties.

While Mack-Cali’s venture into the multi-family residential sector is expected to drive long-term growth, in the short run, the aggressive disposition of office assets is anticipated to continue to lead to earnings dilution.

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

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