Mack-Cali Realty Corporation (NYSE:CLI) has great credentials as a real-estate owner and developer in the office space and multi-family residential sector. Having operated for more than sixty years in the Northeast, mainly in New Jersey, it has been public since 1994 and has well-known, reputable tenants, especially in the financial and insurance industry. However, financial results, including those from Q2 2015, have been unsatisfactory. CLI also made a significant push into the multi-family area in 2012 by purchasing the real-estate developer Roseland Partners. Should we be more patient and bet on this company, given the new management team that came aboard this June?
Management has its mind set on recycling low-performing office properties and reinvesting in core markets by acquisition or development. They expect to raise capital in Roseland as a standalone company. They also want to maintain the investment grade and narrow the gap between NAV and share price, and are looking for ways to drive down leverage ratios with sales proceeds over time. CLI’s $2 billion-dollar debt corresponds to a 51.7 percent debt-to-capitalization.
CLI being a net seller assets, its FFO per diluted share has decreased from $0.50 in Q2 2014 to $0.46 in Q2 2015. Total commercial area has decreased from 26.8 to 24.8 million square feet, and the number of consolidated properties has dropped from 239 to 227. Leased percentage has gone down from 83.7 to 82.3 percent.
The market has responded positively to the second-quarter results, bumping up share price by a hefty 6 percent. Price-to-FFO is now 11.2x, still well below its peers. Dividend yield is also below the sector median — 3.0 vs. 4.1 percent.
Looking forward to seeing how CLI’s stock pays out, I would not buy it today. There are still many moving parts, and it will take time to see results, as management said.
Source: Mack-Cali Realty Corporation, Fast Graphs
Written by Heli Brecailo
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