Mack-Cali's (CLI) Q4 FFO Beats, Revenues Miss Estimates

Mack-Cali Realty Corp’s (NYSE:CLI) fourth-quarter 2019 core funds from operations (FFO) per share of 44 cents surpassed the Zacks Consensus Estimate of 41 cents. However, the figure compares unfavorably with the year-ago quarter’s reported tally of 45 cents.

The company’s same-store cash net operating income (NOI) for the office portfolio increased year over year. However, there was a slowdown in leasing activity in its office portfolio.

Quarterly revenues of $86.7 million missed the Zacks Consensus Estimate of $138.7 million, as well as came in lower than the prior-year quarter’s $90.3 million.

For full-year 2019, Mack- Cali reported core FFO per share of $1.62, displaying a decline of 11.5% from the prior year’s $1.83. Revenues for the year came in at $350.9 million, down 4% year on year.

Quarter in Detail

As of Dec 31, 2019, Mack-Cali’s consolidated core office properties were 80.7% leased, reflecting a decline from 83.2% as of Dec 31, 2018. Notably, Class A suburban portfolio was leased 89.7%, while Suburban and Waterfront portfolios were leased 79% and 77.8%, respectively, as of the same date.

Same-store cash revenues for the office portfolio inched up 0.9%, and the same-store cash NOI was up 3.5% year over year.

During the reported quarter, Mack-Cali executed 21 lease deals, spanning 169,333 square feet, in the company’s consolidated in-service commercial portfolio. This comprised 30.5% for new leases, and 69.5% for lease renewals and other tenant-retention transactions.

In addition, for the core portfolio, rental rate roll up for fourth-quarter 2019 transactions was 6.5% on a cash basis. For new transactions, rental rate roll up was 5.8% on a cash basis, while for renewals and other tenant retention deals, it was 6.7% on a cash basis.

Moreover, Roseland's multifamily stabilized operating portfolio was 95% leased at the end of the quarter, shrinking 170 basis points (bps) from the prior quarter’s end. Same-store NOI climbed 5.4% year over year.

Portfolio Activity

During the fourth quarter, Mack- Cali concluded the sale of its 1386-unit residential community in Malden and Revere, MA for $411.5 million. Further, the company sold an 180,000-square-foot fully-leased office building — 3600 Route 66 — in Neptune, NJ for $26.05 million. The company also sold a 317,000-square-foot office building — 5 Wood Hollow Road — in Parsipanny, NJ for $29.3 million.

Balance Sheet Position

Mack-Cali’s net debt to adjusted EBITDA was 9.7X for the fourth quarter compared with 9.3X in the prior-year quarter.

Finally, the company exited fourth-quarter 2019 with $25.6 million in cash, down from $29.6 million as of Dec 31, 2018.

Guidance

Mack-Cali expects 2020 core FFO per share of $1.24-$1.36. The Zacks Consensus Estimate for the same is currently pinned at $1.45.

The company projects office occupancy (year-end % leased) of 79-81% and dispositions of $1.0-$1.2 billion for the ongoing year.

Mack-Cali currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Prologis, Inc. (NYSE:PLD) currently carries a Zacks Rank of 2. The company’s FFO per share estimate for 2020 has been revised 2.5% upward to $3.72 in a month’s time. The stock has rallied 30% in 12 months’ time.

Highwoods Properties’ (NYSE:HIW) Zacks Consensus Estimate for the current-year FFO per share has moved marginally upward to $3.63 over the past month. Shares of this Zacks #2 Ranked company have gained 7% over the past year.

Piedmont Office Realty Trust, Inc. (NYSE:PDM) also carries a Zacks Rank of 2, currently. The company’s ongoing-year FFO per share estimate moved 3.2% north to $1.96 in a month’s time. The stock has rallied 13.21% in the past 12 months.

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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