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Mack-Cali Enters DC Multifamily Market

Zacks Equity Research

Edison-based real estate investment trust (:REIT), Mack-Cali Realty Corp. (CLI), recently acquired a Va.-based multi-family property – Crystal House – through a joint venture (:JV) with a fund advised by UBS Global Asset Management of UBS AG (UBS). The collaborators purchased the property from AvalonBay Communities Inc. (AVB), another REIT, for roughly $262.5 million. The transaction marked Mack-Cali’s debut into the multifamily market of Washington D.C.

In addition to the Crystal House, the acquisition encompasses the purchase of land for construction of around 295 additional units, out of which 252 are currently approved. The JV obtained a mortgage loan worth $165 million from Walker & Dunlop, LLC under the Delegated Underwriting and Servicing program of Federal National Mortgage Association (FNMA). Notably, Mack-Cali's Roseland subsidiary will manage Crystal House and closely watch the refurbishment of the vacant units for upgrade of the asset to match the best-in-class standards of the Roseland.

The 828-unit Crystal House is strategically positioned in the crystal city section of Arlington and is in proximity with Metro, Reagan National Airport and upscale retail shops at Pentagon City.  The property, which is currently 95.7% leased, comprises 2 twelve-story towers with garage and surface parking.  Also, Crystal House offers its tenants various lavish amenities such as on-site retail and Olympic-sized swimming pool.

We expect the abovementioned premium acquisition to prove accretive to Mack-Cali’s earnings and likely strengthen its top-line growth. Particularly, Mack-Cali currently has around 8 multi-family properties comprising over 2,900 residential units located in the Northeast of U.S.

Lately, Mack-Cali has been focusing on expanding its multi-family apartment portfolio. In Jan 2013, Mack-Cali acquired Alterra at Overlook Ridge IA in Metro Boston for approximately $61.3 million. In addition, the company inked a deal to purchase Alterra at Overlook Ridge IB for roughly $88 million. The properties, which collectively comprise 722 rental units in the master planned community of Overlook Ridge in Revere and Malden, Mass., were acquired from a joint venture of Prudential Insurance Company of America.

Mack-Cali currently carries a Zacks Rank #2 (Buy).

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