Mack-Cali Realty Corporation Reports First Quarter 2018 Results

JERSEY CITY, N.J., May 2, 2018 /PRNewswire/ -- Mack-Cali Realty Corporation (NYSE: CLI) today reported its results for the first quarter 2018.

FIRST QUARTER 2018 HIGHLIGHTS

• Reported net income of $0.45 per diluted share for the quarter;
• Achieved Core Funds from Operations per diluted share of $0.50 for the quarter;
• Attained Adjusted Funds from Operations of $36.3 million for the quarter;
• Leased 265,885 square feet of office space; Core portfolio 85.2% leased at quarter end;
• Grew Core portfolio office rental rates by 5.1% on a cash basis and 10.7% on a GAAP basis;
• Multifamily stabilized portfolio was 97.3% leased at March 31, 2018, as compared to 96.6% for the fourth quarter; 2017 lease-up properties containing 1,162 units were 97.6% leased at March 31, 2018;
• Commenced multifamily leasing activities at three communities located in Worcester, Massachusetts, Morris Plains, New Jersey and the East Boston waterfront totaling 858 units;
• Completed property sales of $232 million in the first quarter. Additional dispositions of $170 million expected to be completed by year end; and
• Declared $0.20 per share quarterly common stock dividend.

Michael J. DeMarco, Chief Executive Officer, commented "We have made solid progress toward our disposition goals for the year, completing $232 million of non-core asset sales in the first quarter. We only have $170 million remaining for the rest of the year.  As we have stated previously, our core focus in 2018 is on leasing, and while we cannot control the timing we remain aggressive in our efforts.  To that point, interest from potential office users, and the waterfront in particular, has accelerated since year-end; however, the conversion cycle remains longer than preferred.  Our residential deliveries and lease-ups continue to meet our expectations and we anticipate higher velocity as we approach the height of leasing season in the coming months.  Overall the team is singularly focused on improving the portfolio's collective occupancy and operational cash flows 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 March 31, 2018 amounted to $43.0 million, or $0.45 per share, as compared to $19.9 million, or $0.11 per share, for the quarter ended March 31, 2017.

Funds from operations (FFO) for the quarter ended March 31, 2018 amounted to $35.3 million, or $0.35 per share, as compared to $55.9 million, or $0.56 per share, for the quarter ended March 31, 2017.

For the first quarter 2018, Core FFO was $0.50 per share, as compared to $0.56 for the same period last year.

OPERATING HIGHLIGHTS

Mack-Cali's consolidated Core office properties were 85.2 percent leased at March 31, 2018, as compared to 87.6 percent leased at December 31, 2017 and 90.4 percent leased at March 31, 2017.

First quarter 2018 same store GAAP revenues for the office portfolio declined by 1.8 percent while same store GAAP NOI fell by 6.7 percent. First quarter 2018 same store cash revenues for the office portfolio declined by 2.8 percent while same store cash NOI fell by 8.7 percent. 

For the quarter ended March 31, 2018, the Company executed 41 leases at its consolidated in-service commercial portfolio totaling 265,885 square feet. Of these totals, 11 leases for 55,204 square feet (21 percent) were for new leases and 30 leases for 210,681 square feet (79 percent) were for lease renewals and other tenant retention transactions. Rental rate roll up for the Core portfolio for first quarter 2018 transactions was 5.1 percent on a cash basis and 10.7 percent on a GAAP basis.  Rental rate roll up for first quarter 2018 for new transactions was 4.0 percent on a cash basis and 15.7 percent on a GAAP basis; and for renewals and other tenant retention transactions was 5.3 percent on a cash basis and 10.1 percent on a GAAP basis.

The Company's residential same store portfolio increased net operating income by 1.3 percent for the first quarter. The same store portfolio is comprised of 3,156 units that were 97.3 percent leased at quarter-end. 

Included in equity in earnings for the first quarter 2018 was $2.6 million of the Company's share of the Urby venture's income from its first annual sale of an economic tax credit certificate to a third party.

The Company incurred a $5.1 million charge in connection with the departure of two key executives and a broader reduction in force. These charges are excluded from Core Funds from Operations.

DISPOSITIONS

The Company continued its repositioning efforts in the first quarter with the sale of 20 properties containing 1.7 million square feet for $232 million. The Company continues to expect dispositions to range between $375 million and $425 million for the year.  This will conclude the Company's major disposition program started in 2015, with future sales occurring on a select one-off basis.

LEASING COMMENCEMENT

In March, the Company commenced residential leasing activities at Residences at City Square (Phase I), a 365-unit multi-family property located in Worcester, Massachusetts; Signature Plaza, a 197-unit community in Morris Plains, New Jersey; and Portside 5/6, a 296-unit community on the East Boston waterfront.

BALANCE SHEET/CAPITAL MARKETS

As of March 31, 2018, the Company had a debt-to-undepreciated assets ratio of 44.5 percent compared to 46.5 percent at December 31, 2017 and 43.8 percent at March 31, 2017. Net debt to adjusted EBITDA for the quarter ended March 31, 2018 was 8.8x compared to 9.3x for the quarter ended December 31, 2017.  The Company had an interest coverage ratio of 3.7x for the quarter ended March 31, 2018 compared to 3.3x for the quarter ended December 31, 2017 and 3.8x for the quarter ended March 31, 2017.

The Company retired three high-coupon mortgages with a weighted average interest rate of 6.8 percent during the quarter, the largest of which was a $209 million mortgage at Harborside Plaza 5 in Jersey City, NJ. The Company utilized its line of credit, which has a lower cost of funds, to repay these loans.  Total pre-payment charges were $10.3 million.  These charges are excluded from Core Funds from Operations.

DIVIDENDS

In March 2018, the Company's Board of Directors declared a quarterly cash dividend of $0.20 per common share (indicating an annual rate of $0.80 per common share) for the first quarter 2018, which was paid on April 13, 2018 to shareholders of record as of April 3, 2018. The Company's Core FFO dividend payout ratio for the quarter was 39.7 percent.

GUIDANCE/OUTLOOK

The Company's projected net income and Core FFO per diluted share guidance for full year 2018 is as follows:

This guidance reflects 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 May 3, 2018 at 10:00 a.m. Eastern Time, which will be broadcast live via the Internet at:
https://edge.media-server.com/m6/p/tmu6anka

The live conference call is also accessible by calling (323) 794-2093 and requesting the Mack-Cali conference call. 

The conference call will be rebroadcast on Mack-Cali's website at http://investors.mack-cali.com/corporate-profile beginning at 12:00 p.m. Eastern Time on May 3, 2018.

A replay of the call will also be accessible May 3, 2018 through May 10, 2018 by calling (719) 457-0820 and using the pass code, 1941485.

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

First Quarter 2018 Form 10-Q:
http://investors.mack-cali.com/sec-filings

First Quarter 2018 Supplemental Operating and Financial Data:
http://investors.mack-cali.com/quarterly-supplementals

In addition, these items are available upon request from:
Mack-Cali Investor Relations Department - Deidre Crockett
Harborside 3, 210 Hudson St., Ste. 400, Jersey City, New Jersey 07311
(732) 590-1025

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 THE COMPANY

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.

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.

We consider portions of this report, including the documents incorporated by reference, to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.  We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of such act.  Such forward-looking statements relate to, without limitation, our future economic performance, plans and objectives for future operations and projections of revenue and other financial items.  Forward-looking statements can be identified by the use of words such as "may," "will," "plan," "potential," "projected," "should," "expect," "anticipate," "estimate," "target," "continue" or comparable terminology.  Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate.  Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved.  Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements.

SOURCE Mack-Cali Realty Corporation