Mack-Cali's (CLI) Q2 FFO Misses Estimates On Low Revenues

Mack-Cali Realty Corp’s (NYSE:CLI) 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 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 (NYSE:CUZ) 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. (NYSE:SLG) 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. (NYSE:CCI) 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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