Mack-Cali Beats Estimates

Mack-Cali Realty Corp. ( CLI - Analyst Report ) , a real estate investment trust (REIT), reported FFO (funds from operations) of $65.0 million or 65 cents per share in the third quarter of 2012, compared with $72.9 million or 73 cents in the year-earlier quarter. The reported FFO per share in the quarter beat the Zacks Consensus Estimate by 3 cents.

Total revenues during the reported quarter were $173.2 million versus $175.4 million in the year-ago period. Total revenues during third quarter 2012 fell short of the Zacks Consensus Estimate of $174 million.

Mack-Cali executed strong leasing activities during the quarter. The company executed 121 leases at its consolidated in-service portfolio spanning over 0.9 million square feet, including 0.5 million square feet of office space, 0.3 million square feet of office/flex space, and 0.1 million square feet of industrial/warehouse space.

Of the total leased space, 0.4 million square feet were for new leases and 0.5 million were for lease renewals and other tenant retention transactions. The consolidated in-service portfolio of the company was 87.5% leased at quarter end compared with 87.6% in the previous quarter.

Subsequent to the quarter-end, Mack-Cali acquired the real estate development and management businesses of Roseland Partners, L.L.C., a leading multi-family residential community developer and operator in the Northeast. The transaction worth $134.6 million was funded through a combination of cash on hand and debt under its $600 million unsecured revolving credit facility.

The acquired portfolio included ownership interests in six multi-family properties totaling 1,769 apartments; one condo-residential property totaling four units; four commercial properties totaling approximately 212,000 square feet; and nine multi-family properties totaling 2,149 apartments. The list also included two garages totaling 1,591 parking spaces; two retail properties totaling approximately 35,400 square feet; land parcels which may support approximately 5,980 apartments; about 736,000 square feet of commercial space; and a 321-key hotel. The properties were primarily located in New Jersey.

During the reported quarter, Mack-Cali authorized a share repurchase program under which it might purchase up to $150 million worth of shares over a period of time in open market transactions or through privately negotiated transactions. The company maintained its quarterly cash dividend of 45 cents per share, which equates to an annualized distribution of $1.80.

At quarter-end, the company had total debt of $2.0 billion, with a debt-to-undepreciated assets ratio of 34.4%, an interest coverage ratio of 3.1x, and cash and cash equivalents of $21.5 million. For full year 2012, the company has increased its FFO guidance from the earlier range of $2.52 -$2.62 to $2.63 -$2.67 per share. For full year 2013, Mack-Cali expects FFO of $2.40 -$2.60 per share.

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

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.