On Mar 7, 2014, we issued an updated research report on the healthcare real estate investment trust (REIT) – Mack-Cali Realty Corp. (CLI).
On Mar 3, hurt by higher expenses, Mack-Cali reported fourth-quarter 2013 funds from operations (FFO) of 52 cents per share, a penny short of the Zacks Consensus Estimate and 21.2% below the year-ago quarter figure of 66 cents. The company has also lowered its 2014 outlook.
The persisting weakness in the company’s core office markets continues to impact its business with rent on the renewals rolling down in 2013. Furthermore, with rental rates declining over the last few years in the company’s core markets, we anticipate the company to experience lower rental rates at these commercial properties on new leases than the current rates with leases expiring in the quarters ahead.
Although the company is aiming at strengthening its portfolio base through multifamily apartment buyouts and office assets divestiture as well as leadership changes, its aggressive disposition efforts would continue to have a dilutive impact on its financials in the near-to-medium term.
Analysts turned more bearish on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that decreased 7.8% to $1.90 per share for 2014 and 4.9% to $1.96 per share for 2015, over the past 7 days.
Mack-Cali currently carries a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
However, some better-ranked stocks in the REIT industry include Cousins Properties Incorporated (CUZ), Liberty Property Trust (LPT) and Public Storage (PSA). All three stocks have a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.
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