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Mack-Cali's (CLI) Q2 FFO Misses Estimates on Low Revenues
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Mack-Cali Realty Corp’s second-quarter 2019 core funds from operations (FFO) per share of 40 cents missed the Zacks Consensus Estimate by a whisker. The figure also compares unfavorably with the year-ago quarter’s reported tally of 45 cents.
The company’s results indicate a slowdown in leasing activity at its office and residential portfolio. Further, same-store cash net operating income (NOI) for the office portfolio declined year over year.
Quarterly revenues of $130.5 million missed the Zacks Consensus Estimate of $131 million. The reported figure also came in lower than the prior-year quarter’s $126.6 million.
Q2 Highlights
As of Jun 30, 2019, Mack-Cali’s consolidated core office properties were 79.8% leased, which shrunk 110 basis points (bps) from the prior-quarter end. Notably, class A suburban portfolio and Suburban portfolios were 92.5% and 79.4% leased as of the June-end quarter, while Waterfront portfolio was 74.7% leased.
Same-store cash revenues for the office portfolio descended 4.3%, while same-store cash NOI was down 7.3% year over year.
During the reported quarter, Mack-Cali executed 18 lease deals spanning around 226,646 square feet, at the company’s consolidated in-service commercial portfolio. This comprised 31.4% for new leases, and 68.6% for lease renewals and other tenant-retention deals.
In addition, for the core portfolio, rental rate roll up for second-quarter 2019 deals was 8.7% on a cash basis. For new transactions, rental rate roll up was 9.1% on a cash basis, while for renewals and other tenant retention deals, it was 7.6% on a cash basis.
The company’s residential stabilized operating portfolio was 97.7% leased at the end of the quarter. Also, same-store NOI climbed 5.1% in the reported quarter.
Mack-Cali completed purchase of land at 107 Morgan in Jersey City, NJ, for $67 million during the quarter. Moreover, it sold 650 From Rd. in Paramus, NJ, for $42 million.
Guidance
The company narrowed its 2019 core FFO per share guidance to $1.58-$1.66 as compared with $1.57-$1.67 estimated earlier. The Zacks Consensus Estimate for the same is currently pegged at $1.60.
Additionally, the company projects office occupancy (year-end % leased) of 79-83% and dispositions (excluding flex) of $165-$235 million for the ongoing year.
Our Take
Mack-Cali’s second-quarter results were disappointing. Although the company has been focusing on waterfront and transit-based office holdings, softness in the New Jersey market resulted in low office leasing activity.
The company has also started disposing assets for early 2020. While 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 future.
Mack-Cali Realty Corporation Price, Consensus and EPS Surprise
Cousins Properties Incorporated (CUZ - Free Report) reported second-quarter FFO per share (before TIER transaction costs) of 71 cents, missing the Zacks Consensus Estimate by a whisker. Nonetheless, the figure came in higher than the prior-year quarter’s reported tally of 60 cents.
SL Green Realty Corp. (SLG - Free Report) delivered second-quarter 2019 FFO of $1.82 per share, surpassing the Zacks Consensus Estimate of $1.73. The tally includes promote income from the sale of 521 Fifth Avenue of $3.4 million or 4 cents per share. Results also compared favorably with the year-ago quarter’s $1.69.
Crown Castle International Corp. (CCI - Free Report) posted second-quarter adjusted AFFO per share of $1.48, up from the prior-year figure of $1.31. Furthermore, the reported figure outpaced the Zacks Consensus Estimate of $1.43.
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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Mack-Cali's (CLI) Q2 FFO Misses Estimates on Low Revenues
Mack-Cali Realty Corp’s second-quarter 2019 core funds from operations (FFO) per share of 40 cents missed the Zacks Consensus Estimate by a whisker. The figure also compares unfavorably with the year-ago quarter’s reported tally of 45 cents.
The company’s results indicate a slowdown in leasing activity at its office and residential portfolio. Further, same-store cash net operating income (NOI) for the office portfolio declined year over year.
Quarterly revenues of $130.5 million missed the Zacks Consensus Estimate of $131 million. The reported figure also came in lower than the prior-year quarter’s $126.6 million.
Q2 Highlights
As of Jun 30, 2019, Mack-Cali’s consolidated core office properties were 79.8% leased, which shrunk 110 basis points (bps) from the prior-quarter end. Notably, class A suburban portfolio and Suburban portfolios were 92.5% and 79.4% leased as of the June-end quarter, while Waterfront portfolio was 74.7% leased.
Same-store cash revenues for the office portfolio descended 4.3%, while same-store cash NOI was down 7.3% year over year.
During the reported quarter, Mack-Cali executed 18 lease deals spanning around 226,646 square feet, at the company’s consolidated in-service commercial portfolio. This comprised 31.4% for new leases, and 68.6% for lease renewals and other tenant-retention deals.
In addition, for the core portfolio, rental rate roll up for second-quarter 2019 deals was 8.7% on a cash basis. For new transactions, rental rate roll up was 9.1% on a cash basis, while for renewals and other tenant retention deals, it was 7.6% on a cash basis.
The company’s residential stabilized operating portfolio was 97.7% leased at the end of the quarter. Also, same-store NOI climbed 5.1% in the reported quarter.
Mack-Cali completed purchase of land at 107 Morgan in Jersey City, NJ, for $67 million during the quarter. Moreover, it sold 650 From Rd. in Paramus, NJ, for $42 million.
Guidance
The company narrowed its 2019 core FFO per share guidance to $1.58-$1.66 as compared with $1.57-$1.67 estimated earlier. The Zacks Consensus Estimate for the same is currently pegged at $1.60.
Additionally, the company projects office occupancy (year-end % leased) of 79-83% and dispositions (excluding flex) of $165-$235 million for the ongoing year.
Our Take
Mack-Cali’s second-quarter results were disappointing. Although the company has been focusing on waterfront and transit-based office holdings, softness in the New Jersey market resulted in low office leasing activity.
The company has also started disposing assets for early 2020. While 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 future.
Mack-Cali Realty Corporation Price, Consensus and EPS Surprise
Mack-Cali Realty Corporation price-consensus-eps-surprise-chart | Mack-Cali Realty Corporation Quote
Mack-Cali currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other REITs
Cousins Properties Incorporated (CUZ - Free Report) reported second-quarter FFO per share (before TIER transaction costs) of 71 cents, missing the Zacks Consensus Estimate by a whisker. Nonetheless, the figure came in higher than the prior-year quarter’s reported tally of 60 cents.
SL Green Realty Corp. (SLG - Free Report) delivered second-quarter 2019 FFO of $1.82 per share, surpassing the Zacks Consensus Estimate of $1.73. The tally includes promote income from the sale of 521 Fifth Avenue of $3.4 million or 4 cents per share. Results also compared favorably with the year-ago quarter’s $1.69.
Crown Castle International Corp. (CCI - Free Report) posted second-quarter adjusted AFFO per share of $1.48, up from the prior-year figure of $1.31. Furthermore, the reported figure outpaced the Zacks Consensus Estimate of $1.43.
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.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
See 7 breakthrough stocks now>>