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Should You Add Mack-Cali Realty (CLI) to Your Portfolio Now?

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The Jersey City, NJ-based real estate investment trust (REIT) – Mack-Cali Realty Corp. – is one third of the way through its 39-month transformation plan and has been making solid strides in this regard. This plan is aimed at transforming the company, by focusing on waterfront and transit-based office holdings as well as on luxury multi-family portfolio growth.  

It also includes planned exits from non-core markets, capital improvements in core assets, lower expenses in office operations and reduction in credit costs through refinancing options. Such transformations and diversification into the apartment sector are expected to drive growth and improve cash flow.

In fact, per its investor update in Nov 2016, the company already sold (or under contract) $700 million of assets, purchased $400 million of class A assets and commenced 2,186 multi-family units. Also, $560 million of high-cost debt was refinanced in 2016.

Moreover, the company enjoys debt-free ownership for the bulk of its portfolio. As of Sep 30, 2016, it had 196 unencumbered properties, with a carrying value of $2.2 billion. This denoted 91.2% of the company’s total consolidated property count.

Mack-Cali has also witnessed 17.03% growth in funds from operations (FFO) per share for the last three–five years against the 5.0% of the industry. Further, FFO per share are projected to grow at the rate of 16.2% for 2016, which is way ahead of the industry average of 5.2%. Additionally, FFO per share is likely to grow at a rate of 5.7% in 2017.

Further, this Zacks Rank#2 (Buy) stock has outperformed the Zacks categorized REIT and Equity Trust - Other industry year to date. In fact, over this time frame, Mack-Cali logged in a return of 22.7% against just 2.8% booked by the industry.



This price performance is backed by a solid estimate revision. The company witnessed its full-year funds from operations (FFO) per share estimates revising 1.4% over the last 30 days to $2.19. Given its progress on the fundamentals and a robust Zacks Rank, the stock should keep performing well in the quarters ahead.

Moreover, its valuation at the current level is attractive as the stock is currently trading at a forward P/E ratio of 12.88, a 17.4% discount to the industry average of 15.60.

Key Picks

Other favorably placed stocks in the real estate space include Prologis Inc. (PLD - Free Report) , Urban Edge Properties (UE - Free Report) and Seritage Growth Properties (SRG - Free Report) . All these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Prologis has been a steady performer, having beaten the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive surprise of 3.15%. Its share price is also up 21.8%, year to date.

For Urban Edge Properties, the expected growth rate for FFO per share is 37.6% for 2016 and 6.3% for 2017. In addition, year to date, its share price is up 15.3%.

Seritage Growth Properties’ current-year FFO estimates inched up 0.9% to $2.34 per share, over the past 60 days. Further, its share price is up 5.6% year to date.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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.

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