Mack-Cali Realty Corp. reported second-quarter 2016 core funds from operations (“FFO”) per share of 55 cents, beating the Zacks Consensus Estimate of 53 cents and up from the year-ago tally of 45 cents.
The year over year increase reflects higher base rents and lower net property expense.
Total revenue edged up 0.4% year over year to $149.2 million but missed the Zacks Consensus Estimate of $155.4 million.
Quarter in Detail
During the quarter, Mack-Cali executed 74 lease deals, spanning around 0.7 million square feet, at its consolidated in-service commercial portfolio. This included 270,199 square feet of core properties, 127,745 square feet of Waterfront properties, 150,786 square feet of flex space and 111,643 square feet of non-core properties. Of the total leased space, 154,069 square feet pertained to new lease deals; while 506,304 square feet consisted of lease renewals and other tenant-retention deals.
The company’s consolidated commercial in-service portfolio was 86.7% leased as of Jun 30, 2016, down from 87.2% at the end of the prior quarter but a 4.4% improvement from a year ago. Core/Waterfront/Flex properties were 89.8% leased at quarter end.
Liquidity
Mack-Cali exited second-quarter 2016 with cash and cash equivalents of $29.5 million, down from $37.1 million recorded at the end of the prior year. The company had total debt of around $2.3 billion as of Jun 30, 2016, with a weighted average annual interest rate of about 4.79%. Its interest coverage ratio was 3.4 times for the second quarter.
Guidance
Mack-Cali expects 2016 core FFO within $2.07–$2.13 per share. The Zacks Consensus Estimate for the same is currently pegged at $2.08.
Our Take
Mack-Cali’s focus on the New Jersey Hudson River waterfront and transit-oriented office properties as well as luxury multi-family residential properties is expected to drive growth.
As part of its portfolio-repositioning efforts, Mack-Cali is aggressively disposing its assets. The company had earlier revealed its plan for non-core asset sales of $750 million. It has already completed $400 million worth of dispositions year to date and has contracts out for an additional $250 million of dispositions currently.
Of this, $200 million is expected to close in the third quarter or early fourth quarter, and the residual in early 2017. Further, the company is marketing for sale $200 million worth in assets aimed at raking total potential sale proceeds of $850 million.
Though the earnings-dilutive effects of huge asset sales cannot be bypassed, but with the sale proceeds, the company plans to repay debt and finance development and acquisition moves and are hence a strategic fit for the long term. In fact, the company’s selective acquisitions have bolstered its position in the Waterfront and Metropark submarkets, which is encouraging.
Mack-Cali currently carries a Zacks Rank #2 (Buy).
Some better-ranked stocks in the REIT industry include CoreSite Realty Corporation (COR - Free Report) , CubeSmart (CUBE - Free Report) and W. P. Carey Inc. (WPC - Free Report) . All these stocks hold the same Zacks Rank as Mack-Cali.
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. All EPS numbers presented in this write up represent FFO per share.
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Mack-Cali Realty Corp. reported second-quarter 2016 core funds from operations (“FFO”) per share of 55 cents, beating the Zacks Consensus Estimate of 53 cents and up from the year-ago tally of 45 cents.
The year over year increase reflects higher base rents and lower net property expense.
Total revenue edged up 0.4% year over year to $149.2 million but missed the Zacks Consensus Estimate of $155.4 million.
Quarter in Detail
During the quarter, Mack-Cali executed 74 lease deals, spanning around 0.7 million square feet, at its consolidated in-service commercial portfolio. This included 270,199 square feet of core properties, 127,745 square feet of Waterfront properties, 150,786 square feet of flex space and 111,643 square feet of non-core properties. Of the total leased space, 154,069 square feet pertained to new lease deals; while 506,304 square feet consisted of lease renewals and other tenant-retention deals.
The company’s consolidated commercial in-service portfolio was 86.7% leased as of Jun 30, 2016, down from 87.2% at the end of the prior quarter but a 4.4% improvement from a year ago. Core/Waterfront/Flex properties were 89.8% leased at quarter end.
Liquidity
Mack-Cali exited second-quarter 2016 with cash and cash equivalents of $29.5 million, down from $37.1 million recorded at the end of the prior year. The company had total debt of around $2.3 billion as of Jun 30, 2016, with a weighted average annual interest rate of about 4.79%. Its interest coverage ratio was 3.4 times for the second quarter.
Guidance
Mack-Cali expects 2016 core FFO within $2.07–$2.13 per share. The Zacks Consensus Estimate for the same is currently pegged at $2.08.
Our Take
Mack-Cali’s focus on the New Jersey Hudson River waterfront and transit-oriented office properties as well as luxury multi-family residential properties is expected to drive growth.
As part of its portfolio-repositioning efforts, Mack-Cali is aggressively disposing its assets. The company had earlier revealed its plan for non-core asset sales of $750 million. It has already completed $400 million worth of dispositions year to date and has contracts out for an additional $250 million of dispositions currently.
Of this, $200 million is expected to close in the third quarter or early fourth quarter, and the residual in early 2017. Further, the company is marketing for sale $200 million worth in assets aimed at raking total potential sale proceeds of $850 million.
Though the earnings-dilutive effects of huge asset sales cannot be bypassed, but with the sale proceeds, the company plans to repay debt and finance development and acquisition moves and are hence a strategic fit for the long term. In fact, the company’s selective acquisitions have bolstered its position in the Waterfront and Metropark submarkets, which is encouraging.
Mack-Cali currently carries a Zacks Rank #2 (Buy).
Some better-ranked stocks in the REIT industry include CoreSite Realty Corporation (COR - Free Report) , CubeSmart (CUBE - Free Report) and W. P. Carey Inc. (WPC - Free Report) . All these stocks hold the same Zacks Rank as Mack-Cali.
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. All EPS numbers presented in this write up represent FFO per share.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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