Mack-Cali (CLI) Q3 FFO Lags Estimates, Revenues Decline

Mack-Cali Realty Corp’s (NYSE:CLI) third-quarter 2018 revenues of $132.1 million declined 17.4% year over year. Nevertheless, the figure surpassed the Zacks Consensus Estimate of $127.2 million.

Mack-Cali’s core funds from operations (FFO) per share of 43 cents came in lower than the year-ago figure of 57 cents. Moreover, it lagged the Zacks Consensus Estimate of 44 cents per share.

Q3 Highlights

As of Sep 30, 2018, Mack-Cali’s consolidated core office properties were 84.2% leased, which increased 100 basis points (bps) from the prior-quarter end. Same-store cash revenues for the office portfolio descended 4.8% while same-store cash net operating income (NOI) fell 6.5%.

During the reported quarter, Mack-Cali executed 52 lease deals, spanning around 833,840 square feet of space, at the company’s consolidated in-service commercial portfolio. This comprised 29% for new leases, and 71% for lease renewals and other tenant-retention deals.

Further, for the core portfolio, rental rate roll up for third-quarter 2018 deals was 9.9% on a cash basis. For new transactions, rental rate roll up was 6.5% on a cash basis, while for renewals and other tenant retention deals, it was 10.6% on a cash basis.

The company’s residential same-store portfolio remained 74.4% leased at the quarter’s end. Moreover, same-store NOI increased 1.2% in the quarter under review.

Guidance

Mack-Cali revised its projected core FFO per share to $1.81-$1.85. The estimate provided earlier was $1.80-$1.86. The Zacks Consensus Estimate for the same is currently pegged at $1.83.

The company projects office occupancy (year-end % leased) of 84-86% and dispositions of $300-$375 million for full-year 2018. This will mark completion of Mack-Cali’s major disposition program. Sales will occur on a select one-off basis in the future.

Our Take

Mack-Cali has been making solid progress, with respect to the 2015 strategic plan, aimed at focusing on waterfront and transit-based office holdings, and luxury multi-family portfolio growth. Nevertheless, such plans involve significant upfront costs, which might drag down the company’s profit margins.

In addition to these, the company has been disposing of assets. 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 term. Rate hike also remains another concern.

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 & Earnings Release Dates of Other Companies

Boston Properties Inc.’s (NYSE:BXP) third-quarter 2018 funds from operations (FFO) per share of $1.64 surpassed the Zacks Consensus Estimate of $1.63. The figure also came in higher than the company’s prior-year quarter’s tally of $1.57.

Outfront Media Inc. (NYSE:OUT) and MedEquities Realty Trust, Inc. (NYSE:MRT) are expected to release their quarterly figures on Nov 5 and Nov 9, respectively.

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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