Mack-Cali Marginally Beats

Mack-Cali Realty Corp. (CLI - Analyst Report), a real estate investment trust (REIT), reported FFO (funds from operations) of $68.1 million or 68 cents per share in the fourth quarter of 2011, up considerably from $64.2 million or 69 cents per share in the year-earlier quarter. Funds from operations, 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.

The reported FFO per share for fourth quarter 2011 marginally beat the Zacks Consensus Estimate by a penny. Total revenues were $179.7 million during the reported quarter versus $192.2 million in the year-ago period.

For full year 2011, the company reported FFO of $277.4 million or $2.80 per share, compared to $261.2 million or $2.81 per share in the previous year. Total revenues for fiscal 2011 were $724.3 million versus $787.5 million in 2010.

Mack-Cali executed strong leasing activities during the reported quarter. The company executed 126 leases for its consolidated in-service portfolio spanning nearly 0.8 million square feet, including 0.6 million square feet of office space and 0.2 million square feet of office/flex space.

Of the total leased space, 0.2 million square feet were for new leases and the remainder was for lease renewals and other tenant retention transactions. The consolidated in-service portfolio of the company was 88.3% leased at the end of the quarter compared with 88.2% in the previous quarter.

For full year 2011, Mack-Cali executed 572 leases for its consolidated in-service portfolio spanning 4.2 million square feet, including 3.3 million square feet of office space and 0.9 million square feet of office/flex space. About 1.2 million square feet of the total leased space were for new leases and the remainder was for lease renewals and other tenant retention transactions.

During the reported quarter, the company agreed to develop luxury multi-family rental towers on the Jersey City Waterfront. The first phase of the project includes two high-rise towers of approximately 500 apartments each. Mack-Cali anticipates ground breaking on the project in fourth quarter 2012.

During fourth quarter 2011, the company refinanced its unsecured revolving credit facility with a consortium of 20 lenders. The borrowing capacity of the $600 million unsecured facility can be extended up to $1 billion. The credit facility has a four-year term with a one-year extension option.

At year-end 2011, the company had a total debt of $1.9 billion, with a debt-to-undepreciated assets ratio of 33.6%, an interest coverage ratio of 3.3x, and cash and cash equivalents of $20.5 million.

We maintain our long-term Neutral recommendation on Mack-Cali, which currently retains a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for Boston Properties Inc. (BXP - Analyst Report), one of the competitors of Mack-Cali.