Mack-Cali to Sell Office Assets Again - Analyst Blog
20 Luglio 2013 - 1:30AM
Zacks
To diversify its portfolio and venture into the multifamily
apartment sector, Mack-Cali Realty Corporation
(CLI) has penned deals to sell its 15 commercial office properties
and 3 land parcels in suburban Philadelphia through several joint
ventures. Particularly, the deal inked with a fund sponsored by
Keystone Property Group would help the company sell the assets at
approximately $233 million.
The Deal Details
These assets comprise existing office properties spanning 1.663
million square feet and land, which could house future development
of about 162,000 square feet. The selling price would include $201
million in cash, a $10 million mortgage secured by One Plymouth
Meeting, as well as subordinated interests in the portfolio with
capital accounts totaling $22 million.
Under the agreements, Mack-Cali would take part in management fees
and 50% of value creation over certain hurdle rates. The deal would
also result in Mack-Cali gaining majority stake in a land parcel in
Bala Cynwyd, Pa. This land parcel would be used for multi-family
residential development. Further, Mack-Cali would enjoy the
privilege of subdividing and building up multi-family residential
units at 150 Monument Road in Bala Cynwyd.
In Conclusion
Mack-Cali - the real estate investment trust (REIT), which
previously has primary focus on office assets, aims to redeploy the
proceeds for funding other strategic growth prospects. As a matter
of fact, the suburban office portfolio lacks significant growth
prospects in the near term due to a weak demand for such
properties.
Amid a stretched macroeconomic environment with high unemployment
levels and sufficient availability of space, the demand for office
space remains moderate. This, in turn, exerts pressure on rent and
occupancies. The company has also vended a number of office
properties in New Jersey in the recent past.
At the same time, Mack-Cali has been inking various acquisition
deals to expand its multifamily apartment portfolio. Among the
recent acquisitions, Alterra IA and Alterra IB at Overlook Ridge in
Metro Boston are noteworthy that were acquired from a joint venture
of Prudential Insurance Company of America, an operational arm of
Prudential Financial Inc. (PRU).
We believe that such restructuring efforts will ultimately help the
company to diversify its assets and ride high on growth. Moreover,
the increase in apartments' demand driven by ‘echo boomers’ –
children of the baby boomer generation – makes us positive on the
company’s strategy, as the particular population’s propensity to
rent is significant.
Zacks Earnings ESP
Mack-Cali is slated to release second-quarter 2013 results on Jul
25, before the opening bell. The Zacks Consensus Estimate for funds
from operations (FFO) per share for the upcoming quarter is pegged
at 62 cents.
The earnings ESP (Read: Zacks Earnings ESP: A Better Method) for
Mack-Cali is a positive 1.61% for the second quarter. However, we
are skeptical about a positive earnings surprise owing to the
company’s Zacks Rank #4 (Sell).
Other REITs to Consider
Two other REITs that are performing better are W. P. Carey
Inc. (WPC) and Winthrop Realty Trust
(FUR), both of which carry a Zacks Rank #1 (Strong Buy).
Note: FFO, a widely used metric to gauge the performance of
REITs, is obtained after adding depreciation and amortization and
other non-cash expenses to net income.
MACK CALI CORP (CLI): Free Stock Analysis Report
WINTHROP REALTY (FUR): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
WP CAREY INC (WPC): Get Free Report
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