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Mack-Cali (CLI) Continues Suburban Office Asset Disposition

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Zacks Equity Research
·4 min read
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Shares of Mack-Cali Realty Corporation CLI rallied 1.4% during Friday's trading session as it continues to make solid strides with its suburban office portfolio sale. Recently, the company announced the disposition of 581 Main Street in Woodbridge Township, NJ. The office building spans an area of 203,335 square feet of space. The building was purchased by 581 Main Street, LLC, a subsidiary of the Plymouth Rock Group of Companies for $61 million.

Notably, Mack-Cali has decided to sell the entire suburban New Jersey office portfolio, spanning 6.6 million square feet. Last month, the company completed the sale of 7 Campus Drive, an office building situated in Parsippany, NJ, to Birch Group for $12.75 million.

Moreover, during the third quarter, Mack Cali concluded the Phase 1 sale of its portfolio of Parsippany and Giralda Farms for $167.6 million. The portfolio comprised 11 office buildings and spans 1.6 million square feet. Additionally, the company completed the sale of 9 Campus Drive, the first asset of its Phase 2 sales tranche in the same portfolio for $21 million. The office property spans 156,495 square feet.

Also, during the third quarter, Mack Cali completed the sale of 325 Columbia Turnpike for $25.8 million. The office property is located in Florham Park, NJ, and spans 168,144 square feet. Subsequent to the third-quarter end, the company disposed of 5 Vaughn Drive, a 98,500-square-foot office building located in Princeton, NJ, for $7.5 million.

The dispositions carried out by the company in the suburban New Jersey office portfolio are in line with its strategic shift announced in December 2019. The company intends to use the sale proceeds to repay corporate-level, unsecured debt. Though such non-core asset dispositions are a strategic fit for the long term, the dilutive impact on earnings in the near term cannot be bypassed.

The company has made concerted efforts in recent years to focus on the Harborside repositioning. It has shifted focus to the New Jersey Hudson River waterfront and transit-oriented office properties. The company’s Harborside portfolio-repositioning strategy is focused on capturing the attention of people who prefer to live, work and play in the same area — a trend that drove development in several other cities in the United States.

Shares of this Zacks Rank #5 (Strong Sell) company have declined 24.1% over the past six months compared with the industry's fall of 1.8%.

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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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