Zacks_Analysts' Blog : Mixed 3Q for Mack-Cali - Analyst Blog

Mack-Cali Realty Corp. (CLI) reported FFO (fund from operations) of $72.9 million or 73 cents per share in the third quarter of 2011, up considerably from $64.2 million or 69 cents per share in the year-earlier quarter.

Funds from operations, 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. FFO per share in the quarter beat the Zacks Consensus Estimate by 6 cents.

Total revenue was $177.2 million during the quarter versus $197.9 million in the year-ago period. Total revenue was below of the Zacks Consensus Estimate of $178.0 million.

Despite the challenging market conditions, Mack-Cali executed strong leasing activities during the quarter. The company executed 136 leases for its consolidated in-service portfolio spanning over 1,245,345 square feet, including 980,764 square feet of office space and 264,581 square feet of office/flex space. Of the total leased space, 279,303 square feet were for new leases and 966,042 square feet were for lease renewals and other tenant retention transactions.

The consolidated in-service portfolio of the company was 88.2% leased at the end of the quarter compared with 88.1% in the previous quarter.

During the quarter, the company agreed to develop a 203,000 square-foot class A office building for Wyndham Worldwide Corporation, thereby enabling the hospitality company to consolidate its Parsippany, New Jersey-based workforce within a single campus.

At the end of the third quarter of 2011, the company had a total debt of $1.9 billion, with a debt-to-undepreciated assets ratio of 33.2%, an interest coverage ratio of 3.3x, and cash and cash equivalents of $15.8 million.

During the quarter, the company's operating partnership, Mack-Cali Realty, L.P., refinanced its unsecured revolving credit facility with a consortium of 20 lenders. The $600 million unsecured facility, which is expandable up to $1 billion, carries an interest rate equal to LIBOR plus 125 basis points.

With continued strong leasing activities, Mack-Cali anticipates the gradual recovery of the overall capital market. For full-year 2011, the company expects FFO in the range of $2.77 to $2.81 per share.

Mack-Cali currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Boston Properties Inc. (BXP) also holds a Zacks #3 Rank.