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Mack-Cali's (CLI) YTD Suburban Office Disposals Reach $270.35M

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Mack-Cali Realty Corporation is making solid strides with its suburban New Jersey office portfolio sale. Recently, the company announced the disposition of 7 Campus Drive, an office building situated in Parsippany, NJ, to Birch Group for $12.75 million.

The office building spans 154,820 square feet of space and the sale brings the company’s year-to-date suburban office dispositions to $270.35 million.

Notably, the disposal comes as part of its efforts to sell the entire suburban New Jersey office portfolio, spanning 6.6 million square feet. In fact, during the third quarter, Mack Cali concluded the Phase 1 sale of its portfolio of Parsippany and Giralda Farms for $167.6 million. The portfolio comprises 11 office buildings and spans 1.6 million square feet.

Additionally, the company completed the sale of 9 Campus Drive, the first asset of its Phase 2 sales tranche in the same portfolio for $21 million. The office property spans 156,495 square feet.

During the third quarter, Mack Cali completed the sale of 325 Columbia Turnpike for $25.8 million. The office property is located in Florham Park, NJ, and spans 168,144 square feet. Subsequent to the third-quarter end, the company disposed of 5 Vaughn Drive, a 98,500-square-foot office building located in Princeton, NJ, for $7.5 million.

Such sales by the company are intended to increase the focus on its Hudson County Waterfront portfolio. Notably, with a significant presence in the high barrier-to-entry Hudson River waterfront region, it is well-positioned to benefit from de-densification trends. Hence, the company’s aim to revitalize leasing and improve occupancy on the back of repositioning and rebranding is a strategic fit.

Further, it intends to use the proceeds from the suburban property sale to repay the remaining unsecured corporate debt and complete its transition to a secured borrowing strategy. Although such moves will enhance its high-leveraged balance sheet, the earnings dilution, resulting from large-scale asset dispositions, cannot be avoided.

Shares of this Zacks Rank #5 (Strong Sell) company have edged down 0.5% over the past six months against the industry’s rally of 12.7%.

 

 

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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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