Mack-Cali Realty Corp. (CLI) is dedicatedly enhancing its multi-family residential portfolio, as the multi-family sector has traditionally been more of a stable product type and rise in demand for apartments driven by ‘echo boomers’ – children of the baby boomer generation – promises bright growth prospects. In furtherance of this, the company expects to carry on with multifamily apartment developments for $103 million in 2015.
Conversely, amid continued weakness in its core suburban office markets, the company has been divesting a notable part of its office and office/flex assets and deploying the sale proceeds to fund multi-family apartment investments.
Moreover, Mack-Cali enjoys debt-free ownership for the bulk of its portfolio. As of Sep 30, 2014, the company had 207 unencumbered properties and represented 78% of the company’s total consolidated property count.
On Oct 23, 2014, Mack-Cali reported third-quarter 2014 results with FFO of 48 cents per share exceeding the Zacks Consensus Estimate by a penny. Also, total revenue of $155.5 million comfortably surpassed the Zacks Consensus Estimate of $153.0 million. However, on a year-over-year basis, FFO per share were down by 9 cents, while revenues fell 4.3%. This real estate investment trust (REIT) narrowed its guidance for 2014 FFO per share.
While Mack-Cali’s strategy of pursuing multi-family residential investments is encouraging for the long-term perspective, the move involves significant upfront operating expenses and limits its growth momentum. Also, the aggressive disposition of office assets for repositioning the portfolio, has a dilutive impact on the company’s results in the near term.
For deeper insight into Mack-Cali, you can refer to our updated research report, which was issued on Nov 11, 2014.
Over the last 30 days, the Zacks Consensus Estimate for FFO per share for both 2014 and 2015 moved down by a cent and 13 cents to $1.74 and $1.73 per share, respectively. This real estate investment trust (REIT) currently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Better-ranked stocks in the REIT sector are Duke Realty Corp. (DRE), Host Hotels & Resorts, Inc. (HST) and Public Storage (PSA).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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