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Thursday, 10 September 2015

Mack-Cali Launches Ambitious Make-Over Plan

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Commercial Real Estate Direct Staff Report

Mack-Cali Realty Corp. is planning to sell up to $800 million of its properties as part of an effort to remake itself.

The Edison, N.J., company, which will be moving its headquarters to Jersey City, N.J., as part of its effort, owns 255 office and office/flex properties with 29.7 million square feet and 19 apartment properties with 5,700 units.

When its repositioning is completed in 2018, its portfolio will total 20 million sf of office space and nearly 15,000 apartment units concentrated in waterfront markets, primarily along New Jersey's gold coast and certain transit-oriented markets. The repositioning plan is being called 20/15.

The repositioning is being spearheaded by Mitchell E. Rudin, the company's chief executive, and Michael J. DeMarco, its president, who joined the company in June, replacing Mitchell E. Hersh, who had stepped down after 32 years with the company and a predecessor. Before the two had joined the REIT, the company had started an effort to reposition itself into an owner and developer of high-end office and apartment properties in markets along the Washington, D.C., to Boston corridor. Its efforts had been prompted by a long-struggling stock price.

The company's latest effort, announced this morning, is designed to address the relatively low 82.3 percent occupancy rate of its portfolio, as of the end of June, to improve cash flow and fund the development of its proposed high-value apartment properties.

DeMarco and Rudin noted that the company wouldn't rush to sell any of its assets. It would, instead, sell properties opportunistically and time them to fund costs associated with planned developments or property improvements. Ultimately, it will sell the 524,476-sf office building at 125 Broad St. in lower Manhattan; the 10 buildings with 1.3 million sf it owns in the Maryland suburbs of Washington, D.C.; roughly 800,000 sf it owns in Paramus, N.J.; 500,000 sf in Parsippany, N.J., and 400,000 sf it owns in Monmouth County, N.J.

When all is said and done, just more than a quarter of its office portfolio, in terms of size, will be comprised of office-flex properties, an asset class that DeMarco described as being extremely stable. Such properties tend not to be capital intensive and generally have little lease roll-over. "People drive up to the door and they basically stay there," he said. Waterfront properties will comprise roughly a quarter of its portfolio and properties in Parsippany and Paramus will comprise another quarter, with the remainder of its portfolio comprised of class-A properties in markets such as Cranford, N.J., White Plains, N.Y., and Princeton, N.J.

To fund its plan to upgrade properties to class-A status, which is estimated to cost some $20 million over the coming two years, the REIT has cut staffing levels, re-bid every services contract and trimmed marketing, legal and other services, moves that are slated to result in $25 million of savings next year.

By upgrading the properties in its portfolio, the company expects it will be able to lure tenants, increasing overall occupancy to 90 percent by 2018.

Meanwhile, Mack-Cali expects that by the time its plan is fully implemented, roughly half of its portfolio value will be derived from its waterfront holdings. Key to that is the redevelopment of its 3 million-sf Harborside property in Jersey City to include adding some 200,000 sf of retail space in unused corridor space and boat slips. That plan would cost some $25 million to complete, but projections call for it to generate some $5 million of annual net operating income. In addition, the property can be expanded by 1.2 million sf.

Mack-Cali also plans to develop some 2,250 apartment units, 364 hotel rooms and some 290,000 sf of office space at its Port Imperial property, along the Hudson River in Weehawken, N.J.

Its apartment assets, overseen by Roseland Partners, which is being renamed Roseland Property Trust, will increase sharply solely through development. The business, which Mack-Cali had acquired in 2012 and is led by Marshall Tycher, currently has 5,674 units in operation and another 1,182 units under construction. That's slated to grow to 14,843 units, to include those in operation and under construction, by 2018. That would come at a net cost of some $611 million, which it would fund with $150 million of financing, cash flow from units that come online, joint-venture equity and proceeds from property sales.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.



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Additional Info

  • Syndicate to Realpoint: No
  • Subject: REITS -general (REITS)
  • Company: Maguire Properties Inc.
  • Private: No
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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