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Mack-Cali (CLI) Sells Two Residential Assets, Refinances Another

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Zacks Equity Research
·4 min read
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Mack-Cali Realty Corporation CLI announced multiple transactions across its residential portfolio. These include the sale of interest in two properties and the refinance of another.

Specifically, the company sold its joint-venture stake in Crystal House Apartments for $377 million. The property in Arlington, VA, is situated in the vicinity of Amazon's proposed HQ2. The 825-unit operating property was sold for $337 million, while the land held for future development was sold for $40 million.

Further, the company disposed of Riverwatch Commons for $47 million.  The asset consisted of 200 residential units across New Brunswick, NJ, 5 Dennis Street, 10 Dennis Street, and 100 Hiram Square. These properties are strategically located near Rutgers University and Robert Wood Johnson University Hospital.

Ultimately, with the two properties being the oldest ones in the company’s portfolio, the disposal reduces the average age of the company’s assets to seven years and enhances the portfolio's average revenue per home to more than $3,100.

The dispositions aside, Mack-Cali has also taken out a construction refinance loan for The Emery at Overlook Ridge in Malden, MA. Specifically, it refinanced the existing $60-million construction loan with a $72-million mortgage from New York Community Bank.

Per management, "securing permanent financing of The Emery, a building that has nearly stabilized since its 1Q 2020 opening, provides the company with excess financing proceeds."

The property comprises 326 luxury rental apartment units across three elevator-serviced, five-storied buildings. Apartment unit format consists of a mix of studio, one- and two-bedroom units, with varied sizes, spanning from 529 square feet of space for studios to 1,342 square feet of space for larger two-bedroom units.

Notably, despite the pandemic-borne challenges, the property is witnessing strong demand since leasing activities commenced last February. In fact, it is currently 93% leased. Also, these efforts are in line with its focus on becoming a regional owner of waterfront luxury multi-family residential properties.

In addition, as part of its long-term strategy, Mack-Cali continues to pursue multi-family residential investment in development projects. While this strategy will enable the company to capitalize on value creation and is encouraging from the long-term perspective, it involves significant capital investments.

Moreover, the multifamily portfolio continues to witness an overall decline in leasing traffic and occupancy due to the coronavirus pandemic. Hence, with no near-term EBITDA benefit and the pandemic-borne occupancy pressures, the move limits the company’s growth momentum in the near term.

Shares of this Zacks Rank #4 (Sell) company have declined 45.8% over the past year, wider than the industry's fall of 5.7%.

 

 

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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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