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Mack-Cali Buys N.J. Multi-Family Assets

Zacks Equity Research

Continuing with the effort to diversify its business and venture into the multifamily apartment sector, Mack-Cali Realty Corp. ( CLI) – a real estate investment trust (:REIT) – disclosed the acquisition of 200-unit multi-family residential properties in New Brunswick, N.J. The company shelled out $41.1 million for purchasing the properties from an affiliate of Ironstate Holdings.


Known as Riverwatch Commons and Richmond Court, the three-building properties are 95% leased and includes studio, and one- and two-bedroom luxury apartments. Located near the NJ TRANSIT train station, offering accessibility to the NJ Turnpike, I-287, and Route 18, the property is in proximity to shopping centers, restaurants, nightlife, theaters, Johnson & Johnson’s headquarters, and Rutgers University. The property is offering a good amenity package and Mack-Cali's Roseland subsidiary is in charge of managing and leasing the property.


With the continued weakness in the company's core office markets, Mack-Cali has been divesting a notable part of its office portfolio and targeting to expand its holdings in the multi-family residential sector that has traditionally been more of a stable product type. The growth in the echo boomers population is particularly expected to drive the demand for these properties.


In tandem with this, recently Mack-Cali and Fisher Brothers formed a joint venture to purchase a 377-unit multi-family residential development project in Washington, D.C. Mack-Cali will shell out around $46.5 million for acquiring a 50% stake in the project.


Moreover, in November, Mack-Cali disclosed the acquisition of a 159-unit multi-family residential property – Park Square – in Rahway, N.J., for $46.5 million from Landmark Companies of Keasbey, N.J. Earlier this year, Mack-Cali also acquired Alterra at Overlook Ridge 1A and 1B – luxury multi-family properties containing 722 rental units in the master planned community of Overlook Ridge in Revere and Malden, Mass., from a joint venture of Prudential Insurance Company of America, an operational arm of Prudential Financial Inc. ( PRU).


While the portfolio repositioning efforts through multifamily apartment buyouts and office assets divestiture are encouraging, we believe that the aggressive disposition efforts are continuing to have a dilutive impact on its financials in the near-to-medium term. Moreover, with rents on the renewals rolling down in its core office portfolio, this Zacks Rank #4 (Sell) stock lacks sufficient growth momentum. But we believe that these strategic initiatives will benefit Mack-Cali in the long run. 


However, investors interested in the REIT industry may consider stocks like Getty Realty Corp. ( GTY) and Sabra Health Care REIT, Inc. ( SBRA). Both these stocks carry a Zacks Rank #1 (Strong Buy).

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