Mack-Cali (CLI) Q4 FFO & Revenues Miss Estimates, Stock Down
Mack-Cali Realty Corp. CLI reported fourth-quarter 2017 core funds from operations (FFO) per share of 50 cents, missing the Zacks Consensus Estimate of 53 cents. The figure also compared unfavorably with the prior-year quarter tally of 56 cents.
In addition to this, total revenues of $143.5 million missed the Zacks Consensus Estimate of $146.2 million and came in 6.6% lower than the year-ago quarter as well.
Results indicate fall in same-store revenues and net operating income (NOI).
Amid these, shares of Mack-Cali slipped nearly 7.3% to $17.01 during regular trading session on Feb 22.
For full-year 2017, core FFO per share came in at $2.23, up from the prior-year tally of $2.15. This was backed by 0.5% year-over-year growth in total revenues to nearly $616.2 million.
Quarter in Detail
Same-store cash revenues for the office portfolio for fourth-quarter 2017 descended 3.4%, while same-store cash NOI fell 5.0%.
During the quarter, Mack-Cali executed 38 lease deals, spanning around 439,070 square feet of space, at the company’s consolidated in-service commercial portfolio. This comprised 18% for new leases, and 82% for lease renewals and other tenant-retention deals. Further, rental rate roll up for the fourth-quarter transactions was 9.6% on a cash basis and 17.9% on GAAP basis.
As of Dec 31, 2017, Mack-Cali’s consolidated core office properties were 87.6% leased, which shrunk 250 basis points (bps) from the prior-quarter end.
Portfolio Activity
Mack-Cali completed $56 million of property sales in the reported quarter, bringing the tally for full-year property sales to $528 million. The figure included $416 million of property sales and $112 million of joint venture interests.
Further, the company has additional dispositions of around $400 million planned for 2018 and expects those to be completed by the end of the second quarter. This will mark completion of the company’s major disposition program. Sales in future will occur on a select one-off basis.
On the other hand, during the fourth quarter, the company accomplished the acquisition of a residential development site on the Jersey City waterfront — 25 Christopher Columbus — for $53 million. The purchase was funded with proceeds from the dispositions as part of a 1031 exchange.
Liquidity
Mack-Cali exited 2017 with cash and cash equivalents of $28.2 million, down from $31.6 million recorded at the end of the prior year.
In addition, as of Dec 31, 2017, the company had a debt-to-undepreciated assets ratio of 46.5% compared with 46.2% as of Sep 30, 2017.
Guidance
Mack-Cali provided its guidance for full-year 2018. The company projects core FFO per share in the band of $1.80-$1.90. The Zacks Consensus Estimate for the same is currently pegged at $2.11.
The company projects office occupancy (year-end % leased) in the band of 84-86% and dispositions of $375-$425 million for full-year 2018.
Furthermore, Mack-Cali expects around 889,000 square feet of tenant move-outs in its Waterfront portfolio throughout 2018.
Our Take
Mack-Cali’s lackluster performance in fourth-quarter 2017 is disappointing. Notably, it has been making progress in the 2015 strategic plan, aimed at transforming the company by focusing on waterfront and transit-based office holdings, and luxury multi-family portfolio growth. However, such plans involve significant upfront costs, which might drag down the company’s profit margins. In addition to these, it has been aggressively disposing assets. While such measures are a strategic fit for the long term, the dilutive impact on earnings from huge asset sales cannot be bypassed in the near term. Rate hikes also add to its woes.
Mack-Cali currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In addition, the stock has depreciated 24.1% in the past three months, underperforming the 13.0% loss incurred by the industry it belongs to.
Mack-Cali Realty Corporation Price, Consensus and EPS Surprise
Mack-Cali Realty Corporation Price, Consensus and EPS Surprise | Mack-Cali Realty Corporation Quote
We now look forward to the earnings releases of EPR Properties EPR, Lamar Advertising Company LAMR and Outfront Media Inc. OUT, all of which are expected to report their numbers next week.
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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