Mack-Cali Realty Corporation Announces Second Quarter 2017 Results

Date : 08/02/2017 @ 7:17PM
Source : PR Newswire (US)
Stock : Mack-Cali Realty Corp. (CLI)
Quote : 22.42  0.01 (0.04%) @ 12:59PM
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Mack-Cali Realty Corporation Announces Second Quarter 2017 Results

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JERSEY CITY, N.J., Aug. 2, 2017 /PRNewswire/ -- Mack-Cali Realty Corporation (NYSE: CLI) today reported its results for the second quarter 2017.

Mack-Cali Realty Corporation logo (PRNewsFoto/Mack-Cali Realty Corporation) (PRNewsfoto/Mack-Cali Realty Corporation)

SECOND QUARTER 2017 HIGHLIGHTS

  • Achieved Funds from Operations per diluted share of $0.60 and Core Funds from Operations growth of 9.1% to $0.60 for the quarter;
  • Net loss of $0.44 per diluted share for the quarter (including the effect of net losses from property sales of $0.39 per share);
  • Increased Adjusted Funds from Operations by 114.2% to $42.2 million for the quarter ended June 30, 2017, as compared to $19.7 million for the comparable period in 2016;
  • Increased rental rates by 17.7% on a GAAP basis and 6.6% on a cash basis at its Core/Waterfront/Flex properties;
  • Leased 728,246 square feet;
  • Increased Roseland percent leased to 97.9%, up from 97.5% for the first quarter;
  • Urby achieved 78% lease-up in five months at average rents of $57.50 per square foot;
  • Chase II achieved 91% lease-up in seven months at average rents of $27.36 per square foot;
  • Quarry Place achieved 58% lease-up in seven months at average rents of $43.20 per square foot;
  • Increased quarterly common stock dividend to $0.20 per share; and
  • Updated 2017 FFO guidance of $2.18 to $2.28 per diluted share, a decrease of $0.09 at the midpoint.

Michael J. DeMarco, chief executive officer, commented "Solid quarter on all operating fronts. We have made great progress on the lease-up of our completed multifamily properties and on our office sales program.  Renewal spreads and lease costs are strong in our office segment.  Tour activity has also been high.  However, our only concern has been that tenants are taking longer to commit to new leases, which is causing a delay in filling up space that we projected for 2017. We expect this to be corrected in the next two quarters."

FINANCIAL HIGHLIGHTS

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

Net income (loss) available to common shareholders for the quarter ended June 30, 2017 amounted to $(37.3) million, or $(0.44) per share, as compared to $48.4 million, or $0.54 per share, for the quarter ended June 30, 2016. For the six months ended June 30, 2017, net income (loss) to common shareholders equaled $(17.5) million, or $(0.33) per share, as compared to $110.6 million, or $1.23 per share, for the same period last year.  Included in net income (loss) for the quarter and six months ended June 30, 2017 was $(39.0) million and $(33.4) million, respectively, of net losses from dispositions.

Funds from Operations (FFO) for the quarter ended June 30, 2017 amounted to $60.5 million, or $0.60 per share, as compared to $64.1 million, or $0.64 per share, for the quarter ended June 30, 2016. For the six months ended June 30, 2017, FFO equaled $116.3 million, or $1.16 per share, as compared to $112.3 million, or $1.12 per share, for the same period last year.

For the second quarter 2017, Core FFO was $0.60 per share. The quarter's Core FFO per share increased 9.1 percent from the same quarter last year primarily due to increased base rents in 2017 and interest expense savings from refinancing of high rate debt.

Adjusted Funds from Operations (AFFO) increased by $22.5 million to $42.2 million for the quarter ended June 30, 2017, as compared to $19.7 million for the comparable period in 2016.

OPERATING HIGHLIGHTS

Mack-Cali's consolidated Core, Waterfront and Flex properties were 89.9 percent leased at June 30, 2017, as compared to 90.4 percent leased at March 31, 2017 and 90.6 percent leased at December 31, 2016.

For the quarter ended June 30, 2017, the Company executed 48 leases at its consolidated in-service commercial portfolio totaling 728,246 square feet. Of these totals, 18 percent were for new leases and 82 percent were for lease renewals and other tenant retention transactions. Rental rate roll up for second quarter 2017 transactions in the Company's Core, Waterfront and Flex properties was 6.6 percent on a cash basis and 17.7 percent on a GAAP basis. 

RECENT TRANSACTIONS

In April, Roseland acquired all joint venture partner interests in Monaco, Jersey City, New Jersey, the 523-apartment, two-tower, stabilized community completed in 2011. The transaction converted Roseland's non-cash flowing 15 percent subordinate interest to 100 percent.  The Monaco transaction, valued at $315 million or $602,000/unit, represents a capitalization rate of 4.66 percent on a trailing 12-month basis. 

BALANCE SHEET/CAPITAL MARKETS

As of June 30, 2017, the Company had a debt-to-undepreciated assets ratio of 47.5 percent compared to 43.8 percent at March 31, 2017 and 40.3 percent at June 30, 2016. Net debt to EBITDA for the quarter ended June 30, 2017 was 8.3 times compared to 8.5 times for the quarter ended March 31, 2017.  The Company had an interest coverage ratio of 3.5 times for the quarter ended June 30, 2017 compared to 3.8 times for the quarter ended March 31, 2017 and 3.4 times for the quarter ended June 30, 2016.

DIVIDENDS

In June 2017, the Company's Board of Directors declared an increased quarterly cash dividend of $0.20 per common share (indicating an annual rate of $0.80 per common share) for the second quarter 2017, which was paid on July 14, 2017 to shareholders of record as of July 6, 2017. This was an increase of 33.3 percent over the prior quarter and the first increased dividend since 2006.  The Company's Core FFO dividend payout ratio for the quarter was 33.2 percent.

GUIDANCE/OUTLOOK

The Company provided updated net income and FFO per diluted share guidance for the full year 2017, as follows:

 



Full Year



2017 Range

Net income (loss) available to common shareholders

$

(0.38)

-

$

(0.28)

Add (deduct):


Real estate-related depreciation and amortization on continuing operations

2.15

Redemption value adjustment to redeemable noncontrolling interests

0.21

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

0.33

Gain on sale of investment in unconsolidated joint ventures

(0.13)

Funds from operations

$

2.18

-

$

2.28

 

This updated guidance reflects a decrease of $0.09 per diluted share from the Company's previously provided funds from operations guidance midpoint, primarily as a result of lower leasing starts ($0.06) and increased debt reduction in lieu of office acquisitions ($0.03) projected for the second half of the year.  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 August 3, 2017 at 8:30 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=5260386

The live conference call is also accessible by calling (323) 794-2130 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 12:00 p.m. Eastern Time on August 3, 2017 through August 3, 2018.

A replay of the call will also be accessible August 3, 2017 through August 10, 2017 by calling (719) 457-0820 and using the pass code, 2716622.

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 2017 Form 10-Q:
https://www.mack-cali.com/media/1047483/2ndquarter10q17.pdf

Second Quarter 2017 Supplemental Operating and Financial Data:
https://www.mack-cali.com/media/1047489/2ndquartersp17.pdf

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 multifamily 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 multifamily 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.

 


Contact:

Michael J. DeMarco

Anthony Krug

Deidre Crockett


Chief Executive Officer

Chief Financial Officer

Vice President, Corporate Communications


(732) 590-1589

(732) 590-1030

and Investor Relations


mdemarco@mack-cali.com

tkrug@mack-cali.com

(732) 590-1025




dcrockett@mack-cali.com

 

Mack-Cali Realty Corporation

Consolidated Statements of Operations

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



Three Months Ended


Six Months Ended


June 30,


June 30,

REVENUES


2017



2016



2017



2016

Base rents

$

133,017


$

124,223


$

254,272


$

250,610

Escalations and recoveries from tenants


15,951



14,110



31,070



29,071

Real estate services


5,767



6,469



12,232



13,281

Parking income


5,052



3,532



9,281



6,688

Other income


2,979



893



5,798



2,500

    Total revenues


162,766



149,227



312,653



302,150













EXPENSES












Real estate taxes


21,217



22,418



42,309



45,644

Utilities


10,357



10,953



21,771



24,531

Operating services


27,092



24,024



54,183



50,756

Real estate services expenses


5,899



6,211



12,169



13,057

General and administrative


12,491



12,755



24,083



25,004

Acquisition-related


-



2,039



-



2,039

Depreciation and amortization


57,762



43,459



105,393



86,522

    Total expenses


134,818



121,859



259,908



247,553

Operating income


27,948



27,368



52,745



54,597













OTHER (EXPENSE) INCOME












Interest expense


(24,943)



(22,932)



(45,264)



(47,925)

Interest and other investment income (loss)


122



146



596



(523)

Equity in earnings (loss) of unconsolidated joint ventures


(3,298)



(614)



(3,349)



(2,168)

Gain on change of control of interests


-



5,191



-



15,347

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


(38,954)



27,117



(33,448)



85,717

Gain on sale of investment in unconsolidated joint venture


-



5,670



12,563



5,670

Gain (loss) from extinguishment of debt, net


-



12,420



(239)



12,420

    Total other income (expense)


(67,073)



26,998



(69,141)



68,538

Net income (loss)


(39,125)



54,366



(16,396)



123,135

Noncontrolling interest in consolidated joint ventures


181



(311)



418



395

Noncontrolling interest in Operating Partnership


4,296



(5,662)



2,001



(12,946)

Redeemable noncontrolling interest


(2,682)



-



(3,474)



-

Net income (loss) available to common shareholders

$

(37,330)


$

48,393


$

(17,451)


$

110,584













Basic earnings per common share:












Net income (loss) available to common shareholders

$

(0.44)


$

0.54


$

(0.33)


$

1.23













Diluted earnings per common share:












Net income (loss) available to common shareholders

$

(0.44)


$

0.54


$

(0.33)


$

1.23













Basic weighted average shares outstanding


90,011



89,740



89,983



89,731













Diluted weighted average shares outstanding


100,370



100,401



100,354



100,359


 

 

Mack-Cali Realty Corporation

Statements of Funds from Operations

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



Three Months Ended


Six Months Ended


June 30,


June 30,



2017




2016




2017




2016


Net income (loss) available to common shareholders

$

(37,330)



$

48,393



$

(17,451)



$

110,584


Add (deduct): Noncontrolling interest in Operating Partnership


(4,296)




5,662




(2,001)




12,946


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


63,156




48,042




114,913




95,501


Gain on sale of investment in unconsolidated joint venture


-




(5,670)




(12,563)




(5,670)


Gain on change of control of interests


-




(5,191)




-




(15,347)


Realized gains and unrealized losses on disposition of rental property, net


38,954




(27,117)




33,448




(85,717)


Funds from operations (b)

$

60,484



$

64,119



$

116,346



$

112,297


















Diluted weighted average shares/units outstanding (c)


100,370




100,401




100,354




100,359


















Funds from operations per share/unit-diluted

$

0.60



$

0.64



$

1.16



$

1.12


















Dividends declared per common share

$

0.20



$

0.15



$

0.35



$

0.30


















Dividend payout ratio:
















     Core Funds from operations-diluted


33.19

%



27.39

%



30.13

%



28.93

%

















Supplemental Information:
















Non-incremental revenue generating capital expenditures:
















     Building improvements

$

3,303



$

4,138



$

8,272



$

8,506


     Tenant improvements & leasing commissions (d)

$

8,150



$

16,271



$

12,115



$

26,809


Tenant improvements & leasing commissions on space vacant for more than a year

$

4,956



$

13,470



$

12,116



$

29,931


Straight-line rent adjustments (e)

$

3,240



$

4,592



$

6,253



$

6,953


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

$

2,187



$

276



$

3,764



$

445


Non real estate depreciation and amortization

$

349



$

187



$

726



$

411


Amortization of deferred financing costs

$

1,175



$

1,180



$

2,278



$

2,349


















 

(a)

Includes the Company's share from unconsolidated joint ventures and adjustments for noncontrolling interest, of $5,742 and $4,768 for the three months ended June 30, 2017 and 2016, respectively, and $10,245 and $9,389 for the six months ended June 30, 2017 and 2016, respectively.  Excludes non-real estate-related depreciation and amortization of $349 and $187 for the three months ended June 30, 2017 and 2016, respectively, and $726 and $411 for the six months ended June 30, 2017 and 2016, 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 (10,359 and 10,499 shares for the three months ended June 30, 2017 and 2016, respectively, and 10,371 and 10,504 for the six months ended June 30, 2017 and 2016, 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.

(e)

Includes the Company's share from unconsolidated joint ventures of $307 and $(20) for the three months ended June 30, 2017 and 2016, respectively, and $295 and $149 for the six months ended June 30, 2017 and 2016, respectively.

(f)

Includes the Company's share from unconsolidated joint ventures of $80 and $95 for the three months ended June 30, 2017 and 2016, respectively, and $175 and $190 for the six months ended June 30, 2017 and 2016, respectively.


 

 

Mack-Cali Realty Corporation

Statements of Funds from Operations (FFO) and Core FFO per Diluted Share

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



Three Months Ended


Six Months Ended


June 30,


June 30,



2017



2016



2017



2016

Net income (loss) available to common shareholders

$

(0.44)


$

0.54


$

(0.33)


$

1.23

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


0.63



0.48



1.15



0.95

Redemtion value adjustment to redeemable noncontrolling interests


0.03



-



0.15



-

Gain on sale of investment in unconsolidated joint venture


-



(0.06)



(0.13)



(0.06)

Gain on change of control of interests


-



(0.05)



-



(0.15)

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


0.39



(0.27)



0.33



(0.85)

Noncontrolling interest/rounding adjustment


(0.01)



-



(0.01)



-

Funds from operations (b)

$

0.60


$

0.64


$

1.16


$

1.12













Add/(Deduct):












Acquisition-related costs


-


$

0.02



-


$

0.02

Dead deal costs


-



0.01



-



0.01

Mark-to-market interest rate swap


-



-



-



0.01

(Gain)/Loss from extinguishment of debt


-



(0.12)



-



(0.12)

Core FFO

$

0.60


$

0.55


$

1.16


$

1.04













Diluted weighted average shares/units outstanding (c)


100,370



100,401



100,354



100,359

 

(a)

Includes the Company's share from unconsolidated joint ventures of $0.06 and $0.05 for the three months ended June 30, 2017 and 2016, respectively, and $0.10 and $0.09 for the six months ended June 30, 2017 and 216, 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 (10,359 and 10,499 shares for the three months ended June 30, 2017 and 2016, respectively, and 10,371 and 10,504 for the six months ended June 30, 2017 and 2016, respectively), plus dilutive Common Stock Equivalents (i.e. stock options).


 

 

Mack-Cali Realty Corporation

Consolidated Balance Sheets

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




June 30,



December 31,

Assets


2017



2016

Rental property






  Land and leasehold interests

$

721,753


$

661,335

  Buildings and improvements


3,998,971



3,758,210

  Tenant improvements


344,108



364,092

  Furniture, fixtures and equipment


27,985



21,230



5,092,817



4,804,867

Less – accumulated depreciation and amortization


(1,131,799)



(1,332,073)



3,961,018



3,472,794

Rental property held for sale, net


292,243



39,743

Net investment in rental property


4,253,261



3,512,537

Cash and cash equivalents


21,719



31,611

Investments in unconsolidated joint ventures


315,110



320,047

Unbilled rents receivable, net


105,547



101,052

Deferred charges, goodwill and other assets, net


316,984



267,950

Restricted cash


56,167



53,952

Accounts receivable, net of allowance for doubtful accounts of $1,145 and $1,335


7,706



9,617







Total assets

$

5,076,494


$

4,296,766







Liabilities and Equity






Senior unsecured notes, net

$

818,294


$

817,355

Unsecured revolving credit facility and term loans


770,388



634,069

Mortgages, loans payable and other obligations, net


1,361,537



888,585

Dividends and distributions payable


20,684



15,327

Accounts payable, accrued expenses and other liabilities


177,801



159,874

Rents received in advance and security deposits


53,939



46,442

Accrued interest payable


9,199



8,427

   Total liabilities


3,211,842



2,570,079

Commitments and contingencies












Redeemable noncontrolling interests


206,026



-







Equity:






Mack-Cali Realty Corporation stockholders' equity:






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






89,913,919 and 89,696,713 shares outstanding


899



897

Additional paid-in capital


2,566,997



2,576,473

Dividends in excess of net earnings


(1,101,099)



(1,052,184)

Accumulated other comprehensive income


1,872



1,985

   Total Mack-Cali Realty Corporation stockholders' equity


1,468,669



1,527,171







Noncontrolling interests in subsidiaries:






Operating Partnership


170,510



178,570

Consolidated joint ventures


19,447



20,946

Total noncontrolling interests in subsidiaries


189,957



199,516







Total equity


1,658,626



1,726,687







Total liabilities and equity

$

5,076,494


$

4,296,766

 

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SOURCE Mack-Cali Realty Corporation

Copyright 2017 PR Newswire

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