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Mack-Cali Realty ([url=http://www.zacks.com/research/report.php?t=cli]CLI[/url]) reported recurring FFO [funds from operations] of $0.88 per share in 1Q09 vs. $0.88 in 1Q08. The company recorded $0.04 per share of impairments related to a joint venture. Results were $0.06 above our estimates due to lower than modeled expenses.
Operations are deteriorating fast. Both occupancy and rental rates are falling in most of the companys markets -- a byproduct of the weak US economy. There are no signs that job growth is going to get any better. As such, we think suburban office landlords will have a tough time over the next 12 months.
The company recently cut its dividend to hold more cash. After an equity raise, the balance sheet is in relatively good shape, and CLI has minimal 2009 debt maturities. We maintain our Sell rating due to macroeconomic factors.
CLI currently trades at 6.6x 2009 FFO estimates, a 26% discount to sector averages. CLI also trades at an approximate 23% discount to NAV, about in-line with sector averages. We are setting our price target at $18.00 per share or 5x 2009 estimates.
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