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Mack-Cali (CLI) Sells Industrial Park to Transform Portfolio

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In a strategic effort to transform portfolio, Mack-Cali Realty Corporation (CLI - Free Report) recently concluded the $70.25-million sale of Elmsford Distribution Center in Westchester County, NY. The disposition is aiding the company to pay down its debts that it made while growing the multifamily platform.

The sale of this six-building industrial park, comprising more than 386,000 square feet of warehouse/distribution space, to Realterm Logistics, follows the company’s recent dispositions of industrial properties in Moorestown and Totowa, NJ. The efforts come as part of the company’s plan to exit the flex-warehouse business.

Such steps offer the dry powder to invest in its strategic plan of transforming the company’s office properties in Jersey City and building the multifamily platform on the waterfront. Notably, in New Jersey, Mack-Cali is in the middle of a $75-million multi-phase improvement plan for its Harborside office and retail portfolio. Further, the company recently accomplished a $50-million capital transformation program for its portfolio of transit-oriented suburban office properties. Such efforts comprised revamp of building exteriors, installation of advanced amenities, and modernization of common areas.

The company’s portfolio-repositioning strategy is focused on capturing the attention of people who prefer to live, work and play in the same area — a trend that drove development in several other cities in the United States. This group also gives much importance to transit options, and hence, focusing on such areas remains a strategic choice for the company.

Moreover, Several Fortune 500 companies have their headquarters in New Jersey, while others have a significant presence in the region. Armed with a skilled workforce and a well-established transit network, the region remains a top choice for the company to expand its business.

In addition, the company enjoys debt-free ownership for the bulk of its portfolio. Also, it has been aggressively disposing assets. Though such measures are a strategic fit for the long term, the dilutive impact on earnings from huge asset sales cannot be bypassed in the near term. Further, the company’s transforming efforts could restrain its profit margin in the near term. Rate hikes add to its woes.

Mack-Cali currently has a Zacks Rank #3 (Hold). The company’s shares have lost 2.4% of its value in three months’ time compared with the industry’s decline of 5.1%.

Stocks to Consider

Better-ranked stocks from the real-estate space include Lamar Advertising Company (LAMR - Free Report) , PS Business Parks, Inc. (PSB - Free Report) and Cousins Properties Incorporated (CUZ - Free Report) . Each of these stocks carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lamar’s FFO per share estimates for 2019 has been revised 1.4% upward to $5.89 in the last 30 days.

PS Business Parks’ Zacks Consensus Estimate for 2019 FFO per share moved 0.5% north to $6.58 in the past two months.

Cousins Properties’ FFO per share estimates for 2019 has remained unchanged in a month’s time at 64 cents.

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

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