Mack-Cali Discloses 2014 Outlook

Mack-Cali Realty Corp. (CLI) came up with its guidance for full-year 2014. The company expects funds from operations (FFO) in the range of $1.90 to $2.10 per share, well below the Zacks Consensus Estimate of $2.27 per share. Shares fell 0.78% to $21.69 during the regular trading session on the New York Stock Exchange.

In the midst of continued weakness in the company's core office markets, Mack-Cali has been focusing on expanding its holdings in the multi-family residential sector that has traditionally been more of a stable product type. The growth in the echo boomers population is particularly expected to drive demand for these properties.

Mack-Cali has been engaged aggressively in strategic divestitures that are helping it to reap funds that can be efficiently deployed in its venture into the Multi-family sector. As part of this diversification, the company acquired Roseland Properties – the premier luxury multi-family developer, owner, and manager – in Oct 2012.

The company made a series of divestitures and acquisition of multi-family properties, the most recent one being the Riverwatch Commons and Richmond Court property in New Brunswick, N.J. for $41.1 million.

Notably, this real estate investment trust (REIT) reported third-quarter 2013 FFO of 57 cents per share, in line with the Zacks Consensus Estimate. However, this came below the year-ago quarterly figure by 8 cents. The quarterly results reflected the impact of a tough operating environment and declining occupancy rate. Though total revenue increased 3.6% year over year to $162.5 million, it fell short of the Zacks Consensus Estimate of $169.0 million.

At that time, Mack-Cali narrowed its FFO per share guidance for full-year 2013, and projected it in the range of $2.35–$2.39 per share (previous one being $2.32–$2.42). Currently, the Zacks Consensus Estimate for 2013 FFO per share stands at $2.39.

Although the portfolio repositioning efforts through multifamily apartment buyouts and office assets divestiture are encouraging, we believe that the aggressive disposition efforts are continuing to have a dilutive impact on its financials in the near-to-medium term. But we believe that these strategic initiatives will benefit Mack-Cali in the long run.

Mack-Cali currently carries a Zacks Rank #3 (Hold). However, investors interested in the REIT industry may consider stocks like Getty Realty Corp. (GTY), Winthrop Realty Trust (FUR) and Sabra Health Care REIT, Inc. (SBRA). While Getty Realty and Winthrop Realty have a Zacks Rank #1 (Strong Buy), Sabra Health Care carries a Zacks Rank #2 (Buy).

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.