We updated our research report on Mack-Cali Realty Corp. on Jun 6.

Last Month, Mack-Cali reported first-quarter 2017 core funds from operations (“FFO”) per share of 56 cents, missing the Zacks Consensus Estimate by a penny. However, the figure came 14% higher than the prior-year quarter tally. The year-over-year increase was driven by higher base rents in 2017 and interest expense savings from refinancing of high rate debt.

Mack-Cali has been making solid strides in its strategic plan. This plan is aimed at transforming the company by focusing on waterfront and transit-based office holdings, and on luxury multi-family portfolio growth. It also includes planned exits from non-core markets.

Further, so far in 2017, with its non-core property sale proceeds and other resources, the company has closed over $700 million of property acquisitions, with a focus on three core markets. This included Roseland’s acquisition of its partner’s 85% stake in Monaco, which is a 523 unit high rise community in Jersey City, NJ.

Moreover, the company purchased three office buildings (aggregating 575,000 square feet) in the high demand, affluent Short Hills, NJ market, and three office buildings (totaling 525,000 square feet) in the Giralda Farms campus in Madison, NJ.

Per the company, this transaction helped Mack-Cali practically own 100% of the class A office market in Short Hills, where the rents ranked the highest in the state. The company also intends to upgrade its present amenities and improve offerings with major capital investment programs. Such efforts augur well for the company’s long-term growth.

However, as part of portfolio streamlining efforts, Mack-Cali has been aggressively disposing its assets. In fact, the company anticipates to dispose of a total of $800 million for full-year 2017. While such measures are a strategic fit for the long term, the earnings-dilutive impact of huge asset sales cannot be bypassed. Also, rate hike add to its woes.

Also, shares of Mack-Cali underperformed the Zacks categorized REIT and Equity Trust – Other industry over the past three months. In fact, the company’s shares descended 0.6% over this time frame, as compared with 3.3% growth recorded by the industry. Nevertheless, the Zacks Consensus estimate for second quarter and full-year 2017 funds from operations (“FFO”) per share remained unchanged, over the past 30 days, at 61 cents and $2.33, respectively.



Mack-Cali currently has a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the REIT space include Equity LifeStyle Properties, Inc. (ELS Quick QuoteELS - Free Report) , Prologis, Inc. (PLD Quick QuotePLD - Free Report) and PS Business Parks, Inc. . All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Equity LifeStyle Properties currently has a long-term growth rate of 4.7%.

Prologis’ estimates for 2017 funds from operations (“FFO”) per share moved north nearly 3.8% to $2.76, over the past 60 days.

PS Business Parks’ estimates for 2017 FFO per share inched up 1.8% to $6.09, over the past 30 days.

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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