Press Release

Mack-Cali Realty Corporation Announces Third Quarter Results

- 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 -

Company Release - 10/28/2015 7:15 PM ET

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

 Mack-Cali Realty Corporation logo

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:


Full Year


Full Year


2015 Range


2016 Range

Net income available to common shareholders

$

(1.12)

-

$

(1.08)


$

0.08

-

$

0.18

Add: Impairments

1.64


-

Real estate-related depreciation and amortization on continuing operations

1.90


1.92

Deduct: Realized (gains) losses and unrealized losses on disposition of rental property, net

(0.53)


-

Gain on sale of investment in unconsolidated joint ventures

(0.06)


-

Funds from operations

$

1.83

-

$

1.87


$

2.00

-

$

2.10

These estimates reflect management's view of current market conditions and certain assumptions with regard to rental rates, occupancy levels and other assumptions/projections. Actual results could differ from these estimates.

CONFERENCE CALL/SUPPLEMENTAL INFORMATION

An earnings conference call with management is scheduled for October 29, 2015 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=5207843

The live conference call is also accessible by calling (719) 325-2362 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 beginning at 2:00 p.m. Eastern Time on October 29, 2015 through November 5, 2015.

A replay of the call will also be accessible during the same time period by calling (719) 457-0820 and using the pass code 1196434.

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

Third Quarter 2015 Form 10-Q:
https://www.mack-cali.com/media/799385/3rdquarter10q15.pdf

Third Quarter 2015 Supplemental Operating and Financial Data:
https://www.mack-cali.com/media/799388/3rdquartersp15.pdf

Third Quarter 2015 Supplemental Operating and Financial Data for Roseland Residential Platform:
https://www.mack-cali.com/media/799391/3rdquartersp15Roseland.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
(732) 590-1025

INFORMATION ABOUT FFO

Funds from operations ("FFO") is defined as net income (loss) before noncontrolling interest of unitholders, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from extraordinary items, sales of depreciable rental property, 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.

ABOUT THE COMPANY

Mack-Cali Realty Corporation is a fully integrated, self-administered, self-managed real estate investment trust (REIT) providing management, leasing, development, construction and other tenant-related services for its two-platform operations of waterfront and transit-based office and luxury multi-family. Mack-Cali owns or has interests in 274 properties, consisting of 146 office and 109 flex properties totaling approximately 29.7 million square feet and 19 multi-family rental properties containing approximately 5,700 residential units and a pipeline of approximately 11,000 units, all located in the Northeast. The properties enable the Company to provide a full complement of real estate opportunities to its diverse base of commercial and residential tenants.

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.

The information in this press release must be read in conjunction with, and is modified in its entirety by, the Quarterly Report on Form 10-Q (the "10-Q") filed by the Company for the same period with the Securities and Exchange Commission (the "SEC") and all of the Company's other public filings with the SEC (the "Public Filings"). In particular, the financial information contained herein is subject to and qualified by reference to the financial statements contained in the 10-Q, the footnotes thereto and the limitations set forth therein. Investors may not rely on the press release without reference to the 10-Q and the Public Filings.

Statements made in this press release may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by the use of words such as "may," "will," "plan," "potential," "should," "expect," "anticipate," "estimate," "continue," or comparable terminology. Such forward-looking statements are inherently subject to certain risks, trends and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate, and involve factors that may cause actual results to differ materially from those projected or suggested. Readers are cautioned not to place undue reliance on these forward-looking statements and are advised to consider the factors listed above together with the additional factors under the heading "Disclosure Regarding Forward-Looking Statements" and "Risk Factors" in the Company's Annual Reports on Form 10-K, as may be supplemented or amended by the Company's Quarterly Reports on Form 10-Q, which are incorporated herein by reference. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events, new information or otherwise.

Contact:

Michael J. DeMarco

Anthony Krug

Deidre Crockett


President

Chief Financial Officer

Director of Investor Relations


(732) 590-1589

(732) 590-1030

(732) 590-1025

 

Mack-Cali Realty Corporation

Consolidated Statements of Operations

(In thousands, except per share amounts) (unaudited)















Three Months Ended


Nine Months Ended


September 30,


September 30,

REVENUES


2015



2014



2015



2014

Base rents

$

119,707


$

125,793


$

364,746


$

393,054

Escalations and recoveries from tenants


15,050



19,172



49,291



61,736

Real estate services


7,510



7,622



22,555



21,323

Parking income


2,749



2,255



8,141



6,605

Other income


1,142



647



3,707



2,667

    Total revenues


146,158



155,489



448,440



485,385













EXPENSES












Real estate taxes


19,143



22,154



63,005



69,880

Utilities


13,172



15,701



44,146



58,555

Operating services


24,535



26,519



78,607



83,581

Real estate services expenses


6,673



6,933



19,520



20,213

General and administrative


13,670



12,665



36,669



49,219

Depreciation and amortization


44,099



41,983



127,266



131,679

Impairments


164,176



-



164,176



-

    Total expenses


285,468



125,955



533,389



413,127

Operating income (loss)


(139,310)



29,534



(84,949)



72,258













OTHER (EXPENSE) INCOME












Interest expense


(24,689)



(27,353)



(78,677)



(85,458)

Interest and other investment income


5



908



563



2,216

Equity in earnings (loss) of unconsolidated joint ventures


3,135



(1,268)



(2,723)



(2,060)

Realized gains (losses) on disposition of rental property, net


18,718



264



53,261



54,848

Gain on sale of investment in unconsolidated joint ventures


-



-



6,448



-

    Total other (expense) income


(2,831)



(27,449)



(21,128)



(30,454)

Net income (loss)


(142,141)



2,085



(106,077)



41,804

  Noncontrolling interest in consolidated joint ventures


(281)



145



582



757

  Noncontrolling interest in Operating Partnership


15,530



(248)



11,461



(4,754)

Net income (loss) available to common shareholders

$

(126,892)


$

1,982


$

(94,034)


$

37,807













Basic earnings per common share:












Net income (loss) available to common shareholders

$

(1.42)


$

0.02


$

(1.05)


$

0.43













Diluted earnings per common share:












Net income (loss) available to common shareholders

$

(1.42)


$

0.02


$

(1.05)


$

0.43













Basic weighted average shares outstanding


89,249



88,875



89,229



88,621













Diluted weighted average shares outstanding


100,172



100,052



100,236



100,014

 

 

Mack-Cali Realty Corporation

Statements of Funds from Operations

(in thousands, except per share/unit amounts) (unaudited)


















Three Months Ended


Nine Months Ended


September 30,


September 30,



2015



2014




2015




2014


Net income (loss) available to common shareholders

$

(126,892)


$

1,982



$

(94,034)



$

37,807


Add (deduct):  Noncontrolling interest in Operating Partnership


(15,530)



248




(11,461)




4,754


Real estate-related depreciation and amortization on continuing operations (a)


48,503



46,071




142,168




140,810


Impairments


164,176



-




164,176




-


Deduct: Realized (gains) losses and unrealized losses on disposition of rental property, net


(18,718)



(264)




(53,261)




(54,848)


Gain on sale of investment in unconsolidated joint ventures


-



-




(6,448)




-


Funds from operations available to common shareholders (b)

$

51,539


$

48,037



$

141,140



$

128,523

















Diluted weighted average shares/units outstanding (c)


100,172



100,052




100,236




100,014

















Funds from operations per share/unit-diluted

$

0.51


$

0.48



$

1.41



$

1.29

















Dividends declared per common share

$

0.15


$

0.15



$

0.45



$

0.60

















Dividend payout ratio:















     Funds from operations-diluted


29.15

%


31.24

%



31.96

%



46.69

%
















Supplemental Information:















Non-incremental revenue generating capital expenditures:















     Building improvements

$

5,631


$

8,010



$

20,193



$

13,263


     Tenant improvements and leasing commissions (d)

$

7,808


$

8,885



$

19,217



$

33,220


Straight-line rent adjustments (e)

$

1,419


$

998



$

1,336



$

5,187


Amortization of (above)/below market lease intangibles, net (f)

$

127


$

320



$

552



$

902


Acquisition transaction costs (h)


-



-




-



$

1,943


Net effect of unusual electricity rate spikes (g)


-



-




-



$

4,845


Executives severance costs (h)


-



-




-



$

11,044




































(a)

Includes the Company's share from unconsolidated joint ventures of $4,845 and $4,181 for the three months ended September 30, 2015 and 2014, respectively, and $15,828 and $9,396 for the nine months ended September 30, 2015 and 2014, respectively. Excludes non-real estate-related depreciation and amortization of $238 and $93 for the three months ended September 30, 2015 and 2014, respectively, and $723 and $265 for the nine months ended September 30, 2015 and 2014, respectively.

(b)

Funds from operations is calculated in accordance with the definition of FFO of the National Association of Real Estate Investment Trusts (NAREIT). See "Information About FFO" in this release.

(c)

Calculated based on weighted average common shares outstanding, assuming redemption of Operating Partnership common units into common shares (10,923 and 11,120 shares for the three months ended September 30, 2015 and 2014, respectively, and 11,008 and 11,334 for the nine months ended September 30, 2015 and 2014, respectively), plus dilutive Common Stock Equivalents (i.e. stock options).

(d)

Excludes expenditures for tenant spaces that have not been owned for at least a year or were vacant for more than a year.

(e)

Includes the Company's share from unconsolidated joint ventures of $138 and $12 for the three months ended September 30, 2015 and 2014, respectively, and $676 and $12 for the nine months ended September 30, 2015 and 2014, respectively.

(f)

Includes the Company's share from unconsolidated joint ventures of $95 and $124 for the three months ended September 30, 2015 and 2014, respectively, and $333 and $372 for the nine months ended September 30, 2015 and 2014, respectively.

(g)

Approximately $10 million in utilities expense, net of approximately $5 million in escalations and recoveries from tenants related to such costs.

(h)

Included in general and administrative expense.

 

 

Mack-Cali Realty Corporation

Statements of Funds from Operations per Diluted Share

(amounts are per diluted share, except share counts in thousands) (unaudited)















Three Months Ended


Nine Months Ended


September 30,


September 30,



2015



2014



2015



2014

Net income (loss) available to common shareholders

$

(1.42)


$

0.02


$

(1.05)


$

0.43

Add: Impairments


1.64



-



1.64



-

Real estate-related depreciation and amortization on continuing operations (a)


0.48



0.46



1.42



1.41

Deduct: Realized (gains) losses and unrealized losses on disposition of rental property, net


(0.19)



-



(0.53)



(0.55)

Gain on sale of investment in unconsolidated joint ventures


-



-



(0.06)



-

Noncontrolling interest/rounding adjustment


-



-



(0.01)



-

Funds from operations (b)

$

0.51


$

0.48


$

1.41


$

1.29













Add: Net effect of unusual electricity rate spikes


-



-



-


$

0.05

   Executives severance costs


-



-



-



0.11

Noncontrolling interests/rounding adjustment


-



-



-



(0.01)

FFO excluding certain items

$

0.51


$

0.48


$

1.41


$

1.44













Diluted weighted average shares/units outstanding (c)


100,172



100,052



100,236



100,014



(a)

Includes the Company's share from unconsolidated joint ventures of $0.05 and $0.04 for the three months ended September 30, 2015 and 2014, respectively, and $0.16 and $0.09 for the nine months ended September 30, 2015 and 2014, respectively.

(b)

Funds from operations is calculated in accordance with the definition of FFO of the National Association of Real Estate Investment Trusts (NAREIT). See "Information About FFO" in this release.

(c)

Calculated based on weighted average common shares outstanding, assuming redemption of Operating Partnership common units into common shares (10,923 and 11,120 shares for the three months ended September 30, 2015 and 2014, respectively, and 11,008 and 11,334 for the nine months ended September 30, 2015 and 2014, respectively), plus dilutive Common Stock Equivalents (i.e. stock options).

 

 

Mack-Cali Realty Corporation

Consolidated Balance Sheets

(in thousands, except per share amounts) (unaudited)










September 30,



December 31,

Assets


2015



2014

Rental property






  Land and leasehold interests

$

706,122


$

760,855

  Buildings and improvements


3,619,200



3,753,300

  Tenant improvements


398,812



431,969

  Furniture, fixtures and equipment


13,582



12,055



4,737,716



4,958,179

Less – accumulated depreciation and amortization


(1,434,603)



(1,414,305)







Net investment in rental property


3,303,113



3,543,874

Cash and cash equivalents


30,866



29,549

Investments in unconsolidated joint ventures


299,486



247,468

Unbilled rents receivable, net


118,466



123,885

Deferred charges, goodwill and other assets, net


200,723



204,650

Restricted cash


40,068



34,245

Accounts receivable, net of allowance for doubtful accounts of $1,579 and $2,584


9,180



8,576







Total assets

$

4,001,902


$

4,192,247







Liabilities and Equity






Senior unsecured notes

$

1,268,568


$

1,267,744

Revolving credit facility


35,000



-

Mortgages, loans payable and other obligations


740,024



820,910

Dividends and distributions payable


15,582



15,528

Accounts payable, accrued expenses and other liabilities


136,673



126,971

Rents received in advance and security deposits


47,645



52,146

Accrued interest payable


27,413



26,937

   Total liabilities


2,270,905



2,310,236

Commitments and contingencies












Equity:






Mack-Cali Realty Corporation stockholders' equity:






Common stock, $0.01 par value, 190,000,000 shares authorized,






89,310,243 and 89,076,578 shares outstanding


893



891

Additional paid-in capital


2,565,143



2,560,183

Dividends in excess of net earnings


(1,070,456)



(936,293)

   Total Mack-Cali Realty Corporation stockholders' equity


1,495,580



1,624,781







Noncontrolling interests in subsidiaries:






Operating Partnership


180,691



202,173

Consolidated joint ventures


54,726



55,057

Total noncontrolling interests in subsidiaries


235,417



257,230







Total equity


1,730,997



1,882,011







Total liabilities and equity

$

4,001,902


$

4,192,247

 

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SOURCE Mack-Cali Realty Corporation