Mack-Cali Realty Corp. (CLI)

[Enterprising Investor]

Mack-Cali Realty Corporation Announces Second Quarter 2016 Results (8/02/16)

EDISON, N.J., Aug. 2, 2016 /PRNewswire/ -- Mack-Cali Realty Corporation (NYSE: CLI) today reported its results for the second quarter 2016.

Recent highlights include:

•Net income of $0.54 per diluted share;

•Funds from Operations per diluted share of $0.64; and Core Funds from Operations of $0.55 for the quarter;

•Raised 2016 Core FFO per share guidance to a range of $2.07 - $2.13;

•Increased rental rates by 27.3% on a GAAP basis and 17.2% on a cash basis;

•86.7% leased at quarter end; a 4.4% improvement over second quarter 2015;

•89.8% leased at quarter end for Core/Waterfront/Flex properties;

•660,000 square feet leased in second quarter;

•Acquired 101 Wood Avenue in Metropark, Iselin, New Jersey;

•Acquired remaining interest in a 175-unit, multi-family community in East Boston, Massachusetts;

•Sold three properties for $276 million; and

•Declared $0.15 per share quarterly common stock dividend.

Michael J. DeMarco, president, commented "Mack-Cali has made great strides in its realignment plans over the last 12 months and our progress is starting to flow through to our quarterly results. We have made substantial progress on our disposition program and have selectively acquired other properties that have strengthened our positioning in the Waterfront and Metropark submarkets. We are encouraged with our progress and excited by the opportunities in both our office and multi-family portfolios to extract additional value for our shareholders."

FINANCIAL HIGHLIGHTS

* All per share amounts presented below are on a diluted basis.

Net income available to common shareholders for the quarter ended June 30, 2016 amounted to $48.4 million, or $0.54 per share, as compared to $35.4 million, or $0.40 per share, for the quarter ended June 30, 2015. For the six months ended June 30, 2016, net income to common shareholders equaled $110.6 million, or $1.23 per share, as compared to $32.9 million, or $0.37 per share, for the same period last year. Included in net income for the quarter ended June 30, 2016 was $45.1 million of net gains from property and debt-related transactions (net of noncontrolling interests in Operating Partnership of $5.3 million). All per share amounts presented above are on a diluted basis.

Funds from operations (FFO) for the quarter ended June 30, 2016 amounted to $64.1 million, or $0.64 per share, as compared to $46.5 million, or $0.46 per share, for the quarter ended June 30, 2015. For the six months ended June 30, 2016, FFO equaled $112.3 million, or $1.12 per share, as compared to $89.6 million, or $0.89 per share, for the same period last year.

For the second quarter 2016, Core FFO was $0.55 per share after adjusting for a $12 million gain from extinguishment of debt, $2 million in acquisition costs and $0.8 million of dead deal costs, as compared to $0.45 per share for the quarter ended June 30, 2015. The quarter's Core FFO per share of $0.55 increased 22.2 percent from the same quarter last year primarily due to increased base rents and lower net property expenses.

OPERATING HIGHLIGHTS

Mack-Cali's consolidated commercial in-service portfolio was 86.7 percent leased at June 30, 2016, as compared to 87.2 percent leased at March 31, 2016 and an increase of 4.4 percent as compared to June 30, 2015.

For the quarter ended June 30, 2016, the Company executed 74 leases at its consolidated in-service commercial portfolio totaling 660,373 square feet. Of these totals, 154,069 square feet were for new leases and 506,304 square feet were for lease renewals and other tenant retention transactions. Lease transactions included 270,199 square feet in Core properties, 127,745 square feet in Waterfront properties, 150,786 square feet in Flex properties and 111,643 square feet in Non-Core properties. Lease spreads on a GAAP basis were 2.2 percent for new leases and 29.9 percent for renewed or retained leases, for an average of 27.3 percent for the quarter.

Mitchell E. Rudin, chief executive officer, commented "Our leasing pace is encouraging. During the quarter, we addressed over 275,000 square feet of our 2017 expirations and anticipate additional progress. As we embark on repositioning Harborside, we continue to attract technology, media and financial services users to this premier waterfront, mixed-use complex, as evidenced by our recent announcement of new leases with Omnicom and Zurich Insurance. These recent leases, along with our previously announced acquisition of 111 River Street in Hoboken, bring our current waterfront presence of 4.9 million square feet to 94.7 percent leased – strongly outperforming the Hudson Waterfront submarket."

RECENT TRANSACTIONS

In July, the Company announced a series of transactions in the redeployment of disposition proceeds as part of its announced strategic plan. The Company has sold approximately $400 million of assets year to date. Currently, Mack-Cali has contracts out for an additional $250 million of dispositions, $200 million of which it expects to close in the third quarter or early fourth quarter, with the remainder in early 2017. In addition, the Company is currently marketing for sale $200 million in assets for total potential sale proceeds of $850 million. The proceeds from these dispositions is expected to be used to pay down debt, fund development, and purchase suitable acquisitions.

The Company has purchased two class A office assets for approximately $317 million in Hoboken, and Metropark, NJ, totaling approximately 830,000 square feet. Earlier this year, Mack-Cali also acquired three smaller assets for approximately $34 million.

The Company's acquisitions and dispositions are part of Mack-Cali's broad-based portfolio realignment announced as part of their strategic plan last September on balance sheet management while focusing on increasing holdings in waterfront and transit-based locations. To achieve this realignment, the Company has set a goal of $750 million in dispositions to help raise capital for reduction in debt, development funding, and key acquisitions.

Also in July, the Company announced that Roseland Residential Trust ("Roseland"), in the second quarter, completed the acquisition of various partners' interests in Port Imperial on the Hudson River Waterfront and in East Boston, as well as disposition of its subordinated ownership in two Port Imperial communities. In addition, Roseland entered into an agreement to sell Andover Place in Andover, Massachusetts.

BALANCE SHEET/CAPITAL MARKETS

In January 2016, the Company obtained a new $350 million unsecured term loan, which matures in January 2019 with two one-year extension options. The interest rate for the new term loan is currently 140 basis points over LIBOR, subject to adjustment on a sliding scale based on the Company's unsecured debt ratings, or at the Company's option, a defined leverage ratio. Mack-Cali entered into interest rate swap arrangements to fix LIBOR for the duration of the term loan. Including costs, the loan provides for a current all-in fixed rate of 3.13 percent. There is no premium or penalty associated with full or partial prepayment of the term loan.

Proceeds from the unsecured term loan were used primarily to repay outstanding borrowings on its $600 million unsecured revolving credit facility, and to repay the Company's $200 million, 5.8 percent senior unsecured notes that matured on January 15, 2016.

As of June 30, 2016, the Company had total indebtedness of approximately $2.3 billion, with a weighted average annual interest rate of approximately 4.79 percent and a debt-to-undepreciated assets ratio of 40.3 percent. The Company had an interest coverage ratio of 3.4 times for the quarter ended June 30, 2016.

DIVIDENDS

In June, the Company's Board of Directors declared a cash dividend of $0.15 per common share (indicating an annual rate of $0.60 per common share) for the second quarter 2016, which was paid on July 15, 2016 to shareholders of records as of July 6, 2016.

CONFERENCE CALL/SUPPLEMENTAL INFORMATION

An earnings conference call with management is scheduled for August 3, 2016 at 10:00 a.m. Eastern Time, which will be broadcast live via the Internet at:
http://phoenix.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=96021&eventID=5232618

The live conference call is also accessible by calling [phone] and requesting the Mack-Cali conference call.

The conference call will be rebroadcast on Mack-Cali's website at https://www.mack-cali.com/investors/events-presentations/ beginning at 2:00 p.m. Eastern Time on August 3, 2016 through August 10, 2016.

A replay of the call will also be accessible during the same time period by calling [phone] and using the pass code 6464818.

Copies of Mack-Cali's Form 10-Q and Supplemental Operating and Financial Data are available on Mack-Cali's website, as follows:

Second Quarter 2016 Form 10-Q:
https://www.mack-cali.com/media/944543/2ndquarter10q16.pdf

Second Quarter 2016 Supplemental Operating and Financial Data:
https://www.mack-cali.com/media/944546/2ndquartersp16.pdf

Second Quarter 2016 Supplemental Operating and Financial Data for Roseland Residential Platform:
https://www.mack-cali.com/media/944549/2ndquartersp16Roseland.pdf

In addition, these items are available upon request from:
Mack-Cali Investor Relations Department - Deidre Crockett
343 Thornall Street, Edison, New Jersey 08837-2206
[phone]

INFORMATION ABOUT FFO

Funds from operations ("FFO") is defined as net income (loss) before noncontrolling interests of unitholders, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses from depreciable rental property transactions, and impairments related to depreciable rental property, plus real estate-related depreciation and amortization. The Company believes that FFO per share is helpful to investors as one of several measures of the performance of an equity REIT. The Company further believes that as FFO per share excludes the effect of depreciation, gains (or losses) from sales of properties and impairments related to depreciable rental property (all of which are based on historical costs which may be of limited relevance in evaluating current performance), FFO per share can facilitate comparison of operating performance between equity REITs.

FFO per share should not be considered as an alternative to net income available to common shareholders per share as an indication of the Company's performance or to cash flows as a measure of liquidity. FFO per share presented herein is not necessarily comparable to FFO per share presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company's FFO per share is comparable to the FFO per share of real estate companies that use the current definition of the National Association of Real Estate Investment Trusts ("NAREIT"). A reconciliation of net income per share to FFO per share is included in the financial tables accompanying this press release.

Core FFO is defined as FFO, as adjusted for certain items to facilitate comparative measurement of the Company's performance over time. Core FFO is presented solely as supplemental disclosure that the Company's management believes provides useful information to investors and analysts of its results, after adjusting for certain items to facilitate comparability of its performance from period to period. Core FFO is a non-GAAP financial measure that is not intended to represent cash flow and is not indicative of cash flows provided by operating activities as determined in accordance with GAAP. As there is not a generally accepted definition established for Core FFO, the Company's measures of Core FFO may not be comparable to the Core FFO reported by other REITs. A reconciliation of net income per share to Core FFO in dollars and per share is included in the financial tables accompanying this press release.

About Mack-Cali Realty Corporation

Mack-Cali Realty Corporation is a fully integrated, self-administered, self-managed real estate investment trust (REIT) providing management, leasing, development, and other tenant-related services for its two-platform operations of waterfront and transit-based office and luxury multi-family assets. Mack-Cali provides its tenants and residents with the most innovative communities that empower them to re-imagine the way they work and live.

Additional information on Mack-Cali Realty Corporation and the commercial real estate properties and multi-family residential communities available for lease can be found on the Company's website at www.mack-cali.com.

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