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Mack-Cali Enhances Portfolio with Multi-Family Investments

Zacks Equity Research

Mack-Cali Realty Corp. (CLI) is currently focusing on expanding its holdings in the multi-family residential sector that has traditionally been more of a stable product type. The rise in demand for apartments driven by ‘echo boomers’ – children of the baby boomer generation – promises bright prospects for Mack-Cali in this sector.

Notably, amid continued weakness in its core suburban office markets, Mack-Cali has been divesting a notable part of its office and office/flex assets and deploying the sale proceeds to fund multi-family apartment investments.

Moreover, Mack-Cali enjoys debt-free ownership for the bulk of its portfolio. As of Jun 30, 2014, the company had 215 unencumbered properties and representing 74.8% of the company’s total consolidated property count.

On Jul 24, 2014, Mack-Cali reported second-quarter 2014 results with FFO of 50 cents per share, beating the Zacks Consensus Estimate by 3 cents. The company’s total revenue of $160.3 million also comfortably surpassed the Zacks Consensus Estimate of $154.0 million. This REIT increased its 2014 FFO per guidance.

However, on a year-over-year basis, FFO per share were down by 23.1% while revenues fell 4.8% and expenses moved up 1% year over year.

While Mack-Cali’s strategy of pursuing multi-family residential investments is encouraging for the long-term perspective, the move involves significant upfront operating expenses and limits its growth momentum. Also, the aggressive disposition of office assets for repositioning the portfolio, has a dilutive impact on the company’s results in the near term.

For deeper insight into Mack-Cali, you can refer to our updated research report, which was issued on Aug 11, 2014.

Over the last 30 days, the Zacks Consensus Estimate for FFO per share for both 2014 and 2015 moved up by a penny and a nickel to $1.71 and $1.82 per share, respectively. This real estate investment trust (:REIT) currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Other better-ranked stocks are Pebblebrook Hotel Trust (PEB), W. P. Carey Inc. (WPC) and Ashford Hospitality Trust, Inc. (AHT). All stocks carry a Zacks Rank #1 (Strong Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Read the Full Research Report on CLI
Read the Full Research Report on PEB
Read the Full Research Report on AHT
Read the Full Research Report on WPC


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