Mack-Cali Realty Corp. (CLI)

[Enterprising Investor]

Mack-Cali Realty Corporation Announces Third Quarter Results (10/28/15)

- Core FFO Per Diluted Share, Which Excludes Certain Items, was $0.48 for The Quarter

- Company Increases Guidance For 2015 and Provides Preliminary 2016 Outlook

EDISON, N.J., Oct. 28, 2015 /PRNewswire/ -- Mack-Cali Realty Corporation (NYSE: CLI) today reported its results for the third quarter 2015.

Recent highlights include:

•Funds from operations (FFO) per diluted share of $0.51 for the quarter and $1.41 for the nine months 2015;

•Reported 85.8 percent leased at quarter end, an increase of 3.5 percent over second quarter;

•Reported net loss of $1.42 per diluted share due to impairment charge for contemplated sales;

•Topped off URL® Harborside Tower 1, a 763-unit apartment building, with expected lease up by year end 2016;

•Commenced the disposition activities of $700 to $800 million of asset sales;

•Signed definitive agreements to acquire two properties in New Jersey a 196,000 square-foot office building located in Edison and a 147,000 square-foot office building located in Parsippany:

•Raised full year 2015 guidance range to $1.83 to $1.87 per diluted share;

•Introduced preliminary 2016 guidance of $2.00 - $2.10 per diluted share;

•Declared $0.15 per share quarterly common stock dividend; and

•Engaged Eastdil Secured to explore raising common equity for the to be formed Roseland Residential Trust.

"We continue to make progress on our ongoing repositioning efforts as we work to transform Mack-Cali. In our third quarter we put in place our plans to divest between $700 to $800 million of non-core assets, while selectively adding complimentary assets that we expect will contribute to earnings as we move ahead. The Company is reenergized by the numerous opportunities to enhance our office portfolio and to profitably expand our multi-family platform. While this will take time we are excited that process is underway and that our team's efforts should result in the creation of sustained cash-flow and earnings in the coming years as we look to build additional value for our shareholders," said Michael J. DeMarco, president.

FINANCIAL HIGHLIGHTS

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

Funds from operations (FFO) for the quarter ended September 30, 2015 totaled $51.5 million, or $0.51 per share, as compared to $48.0 million, or $0.48 per share, for the quarter ended September 30, 2014. For the nine months ended September 30, 2015, FFO equaled $141.1 million, or $1.41 per share, as compared to $128.5 million, or $1.29 per share, for the same period last year.

For the current quarter compared to the prior year, the increase in FFO per share resulted primarily from $0.03 of equity in earnings from refinancing proceeds received from a joint venture; increased net real estate tax appeal proceeds of $0.02; partially offset by $0.02 in increased general and administrative expense due to separation costs in the current quarter. This results in Core FFO per diluted share for the current quarter of $0.48 versus $0.48 for the prior year period.

Net income (loss) available to common shareholders for the quarter ended September 30, 2015 amounted to $(126.9) million, or $(1.42) per share, as compared to $2.0 million, or $0.02 per share, for the quarter ended September 30, 2014.

For the nine months ended September 30, 2015, net income (loss) available to common shareholders equaled $(94.0) million, or $(1.05) per share, as compared to $37.8 million, or $0.43 per share, for the same period last year. Included in net loss for the quarter and nine months ended September 30, 2015 was $164.2 million of impairment charges taken during the third quarter on properties the Company intends to sell as part of its recently-announced strategic initiative.

Total revenues for the third quarter 2015 were $146.2 million, as compared to $155.5 million for the third quarter 2014. For the nine months ended September 30, 2015, total revenues amounted to $448.4 million, as compared to $485.4 million for the same period last year.

OPERATING HIGHLIGHTS

Mack-Cali's consolidated commercial in-service portfolio was 85.8 percent leased at September 30, 2015, as compared to 82.3 percent leased at June 30, 2015.

For the quarter ended September 30, 2015, the Company executed 94 leases at its consolidated in-service commercial portfolio totaling 955,570 square feet. Of these totals, 361,000 square feet were for new leases and 594,570 square feet were for lease renewals and other tenant retention transactions. Lease transactions included 345,905 square feet in Core properties, 222,824 square feet in Waterfront properties, 177,820 square feet in Flex properties and 209,021 square feet in Non-Core properties.

Mitchell E. Rudin, chief executive officer, commented, "Operationally, we had an excellent quarter and have launched a number of value-creating initiatives. This quarter marks the beginning of a long-term effort to deliver enhanced and sustained returns for our shareholders."

RECENT TRANSACTIONS

In September, the Company announced the topping out of URL® Harborside 1 at 713 feet, making the new multi-family tower on the Jersey City waterfront the tallest residential building in New Jersey. URL® Harborside 1 is a uniquely-designed, 69-story residential tower that will add 763 contemporary rental residences to Mack-Cali's Harborside on the Jersey City waterfront.

On October 23, 2015, the Company signed an agreement to acquire a 196,000 square-foot office property located in Edison, New Jersey, for approximately $53.1 million, subject to certain conditions. The acquisition is expected to be completed in the fourth quarter of 2015.

The Company is also in discussions to acquire a 147,000 square-foot office building located in Parsippany, New Jersey, as well its partner's interest in a 371-unit multi-family residential property located in Malden, Massachusetts.

DISPOSITIONS

In September 2015, the Company announced a comprehensive three-year strategic initiative to transform the Company into dual-platform owner of waterfront and transit-oriented office properties and a regional owner of luxury multi-family properties. As part of its increased focus on "Gold Coast" waterfront properties in Jersey City Weehawken, Hoboken, and West New York, the Company identified approximately $700 million to $800 million of non-core assets that it intends to sell to help fund its capital plan and transformation.

During the three months ended September 30, 2015, the Company transferred the deeds for two of its office properties to the lender in satisfaction of its mortgage loan obligations. In the three and nine months ended September 30, 2015, the Company recorded gains on the disposal of office properties of $18.7 million and $28.4 million, respectively.

As a result of identifying the non-core assets for sale, the Company evaluated the recoverability of the carrying values of these properties, and determined that due to the shortening of the expected periods of ownership, it was necessary to reduce the carrying values of 22 rental properties to their estimated fair values. Accordingly, the Company recorded an impairment charge of $158.6 million at September 30, 2015.

In addition, the Company estimated that the carrying value of three mortgaged properties, aggregating 479,877 square feet and located in Roseland and Parsippany, New Jersey, may not be recoverable over their anticipated holding periods and recorded impairment charges of $5.6 million at September 30, 2015.

BALANCE SHEET/CAPITAL MARKETS

As of September 30, 2015, the Company had total indebtedness of approximately $2.0 billion, with a weighted average annual interest rate of approximately 5.4 percent and a debt-to-undepreciated assets ratio of 37.6 percent. The Company had an interest coverage ratio of 3.1 times and 2.8 times for the quarter and nine months ended September 30, 2015, respectively.

DIVIDENDS

In September, 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 third quarter 2015, which was paid on October 15, 2015 to shareholders of records as of October 5, 2015.

GUIDANCE/OUTLOOK

Based on recent results and recently announced strategic initiatives, the Company is revising its guidance on net income and FFO per diluted share for the full year 2015 and providing preliminary 2016 guidance, as follows:

2015
$1.83 - $1.87

2016
$2.00 - $2.10

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