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

Mack-Cali Realty Corp’s (NYSE:CLI) fourth-quarter 2018 core funds from operations (FFO) per share of 45 cents came in line with the Zacks Consensus Estimate. The figure compares unfavorably with the year-ago tally of 50 cents.

Quarterly revenues of $132.9 million missed the Zacks Consensus Estimate of $133.7 million. The reported tally also declined from the year-ago number of $143.5 million.

For full-year 2018, core FFO per share came in at $1.83, in line with the Zacks Consensus Estimate. The figure declined from the prior year’s $2.23. Revenues for full-year 2018 declined nearly 14% year over year to $530.6 million. The revenue figure also missed the Zacks Consensus Estimate of $531.3 million.

Q4 Highlights

As of Dec 31, 2018, Mack-Cali’s consolidated core office properties were 83.2% leased, which shrunk 100 basis points (bps) from the prior-quarter end. Same-store cash revenues for the office portfolio descended 5.2%, while same-store cash net operating income (NOI) was down 2.1%.

During the reported quarter, Mack-Cali executed 34 lease deals, spanning around 358,624 square feet of space, at the company’s consolidated in-service commercial portfolio. This comprised 39.4% for new leases, and 60.6% for lease renewals and other tenant-retention deals.

In addition, for the core portfolio, rental rate roll up for fourth-quarter 2018 deals was 2.9% on a cash basis. For new transactions, rental rate roll up was 2.1% on a cash basis, while for renewals and other tenant retention deals, it was 3.2% on a cash basis.

The company’s residential stabilized operating portfolio was 95.9% leased at the end of the quarter. Also, same-store NOI edged down 1.9% in the quarter under review.

Guidance

Mack-Cali reiterated its 2019 projected core FFO per share of $1.57-$1.67. The Zacks Consensus Estimate for the same is currently pegged at $1.74.

The company projects office occupancy (year-end % leased) of 79-83% and dispositions (excluding flex) of $155-$180 million for full-year 2019.

Our Take

Mack-Cali executed non-core asset sales of $384 million, including the initial phase of its flex portfolio sale for $70.3 million in 2018. While the measures are a strategic fit for the long run, it has likely impacted the company’s bottom-line performance.

Additionally, as it continues to pursue multi-family residential investments, this results in material near-term capital needs, thereby impacting its liquidity position.

Mack-Cali Realty Corporation Price, Consensus and EPS Surprise

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.

Performance of Other REITs

Ventas, Inc. (NYSE:VTR) reported fourth-quarter 2018 normalized FFO of 96 cents, beating the Zacks Consensus Estimate of 95 cents. However, the figure came in lower than the year-ago tally of $1.03.

Host Hotels & Resorts, Inc. (NYSE:HST) recorded fourth-quarter 2018 adjusted FFO of 43 cents per share, which outpaced the Zacks Consensus Estimate of 41 cents. Adjusted FFO per share also increased from the year-ago tally of 42 cents.

Welltower Inc. (NYSE:WELL) posted normalized FFO per share of $1.01 for fourth-quarter 2018, which missed the Zacks Consensus Estimate of $1.03. Moreover, the figure compared unfavorably with the year-ago tally of $1.02.

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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