Mack-Cali Realty Corporation Announces 17% Increase in FFO Per Share for Second Quarter

08/06/1998 Category: Earnings

CRANFORD, NJ--August 6, 1998--Mack-Cali Realty Corporation (NYSE:CLI) today reported that its second quarter 1998 funds from operations (FFO) per share-diluted was $0.76, representing an increase of 17% over the same period in 1997.

Financial Highlights

For the quarter ended June 30, 1998, FFO, after adjustment for straight-lining of rents, amounted to $54.2 million, or $0.76 per share, versus $26.5 million, or $0.65 per share, for the quarter ended June 30, 1997. FFO, after adjustment for straight-lining of rents, amounted to $101.0 million, or $1.48 per share, for the six months ended June 30, 1998, versus $50.5 million, or $1.24 per share, for the same period last year; a six-month period increase of 19.4% on a per share basis.

For the quarter ended June 30, 1998, cash available for distribution (CAD) equaled $49.0 million, or $0.69 per share, versus $25.3 million, or $0.62 per share, for the same quarter last year; an increase of 11.3% on a per share basis. For the six months ended June 30, 1998, CAD equaled $89.6 million, or $1.31 per share, versus $47.9 million, or $1.17 per share, for the same period last year; a six-month period increase of 12.0% on a per share basis. For the quarter ended June 30, 1998, total revenues increased 101.6% to $122.0 million from $60.5 million for the same quarter last year. For the six months ended June 30, 1998, total revenues amounted to $227.9 million, an increase of 102.2% over the $112.7 million of total revenues for the same period last year. Income from operations before minority interest and extraordinary item for the quarter totaled $38.2 million, or $0.53 per common share, versus $20.0 million, or $0.49 per common share , for the quarter ended June 30, 1997; an increase of 8.2% on a per share basis.

Income from operations before minority interest and extraordinary item for the six months ended June 30, 1998 totaled $72.0 million, or $1.04 per common share, versus $38.1 million, or $0.93 per common share, for the same period last year; a six-month period increase of 11.8% on a per share basis. All per share amounts reported above are diluted; basic per share information is included in the financial tables accompanying this press release.

"We are very pleased with our second quarter and year-to-date results. In addition to the positive impact of our recent acquisitions on our results, net operating income on our same-store portfolio increased by over four percent. This internal growth is demonstrative of the tightening supply and increased rental rates in those markets in which we have a significant presence, especially in our Northeastern markets," stated Barry Lefkowitz, executive vice president and chief financial officer. Mr. Lefkowitz continued, "We expect our same-store portfolio to continue to produce positive results going forward as we are in a solid position to leverage on market conditions in our core markets."

Summary of Second Quarter Transactions

During the second quarter of 1998, the Company completed over $225 million in acquisitions, entered into joint venture transactions with total investments of approximately $37.9 million, and completed construction of a property. The acquisitions, which added 12 properties aggregating approximately 1.5 million square feet of office and office/flex space, consisted of: eight office properties in the Denver and Colorado Springs, Colorado markets, totaling 773,585 square feet for approximately $106.4 million; two office properties in Washington D.C. totaling 325,000 square feet for approximately $90.3 million; a 158,235 square-foot office property in Princeton, New Jersey, for approximately $21.3 million; and a 232,000 square-foot redevelopment property in Rockland County, New York, for approximately $7.0 million. The joint venture transactions consisted of: a 49.9% interest in a 305,000 square-foot office property located in San Francisco, California, for an investment of approximately $10.0 million; a joint venture to develop an office property and three office/flex properties in Southern California, which will aggregate 369,000 square feet, for an investment to total approximately $19.2 million; and a joint venture acquisition of developable land located in Jersey City, New Jersey, for an investment of approximately $8.7 million. The land, which is currently leased to a parking operator, can accommodate in excess of 1.5 million square feet of future development.

The Company also completed construction and delivered a 30,600 square-foot office/flex property in its existing Commercenter business park in Totowa, New Jersey, for a cost of approximately $2.1 million. The Company previously constructed and placed in service two office/flex properties in the same park in December 1996.

Thomas A. Rizk, chief executive officer, stated, "We are very pleased with our second quarter activities as they reflect Mack-Cali's ability to identify and execute transactions that enhance the Company's financial results and competitive position. While the real estate investment environment is more challenging today, the real estate fundamentals of our business in our markets have never been better. The class A vacancy rate in our core New Jersey market is now at an historic low level of 6.2%, and the roll-over rental rates of our Southwestern assets have achieved an average increase of 23% for the second quarter of 1998. We look forward to new growth opportunities in today's real estate environment by focusing on relationship-driven, opportunistic transactions."

Financing Highlights

Financing transactions during the quarter included over $122 million in equity issuances and $1.0 billion in new financing. The new financing consisted of: a $900 million unsecured revolving credit facility (which replaced the Company's previous $400 million facility); and a seven-year, 7.1%, $150 million mortgage which provides for a conversion, at the Company's option, to unsecured debt based on the Company's achievement of an investment-grade credit rating.

Simultaneous with the new mortgage, the Company repaid its $200 million term loan with Prudential Securities and an aggregate of $48.2 million of mortgage debt assumed in the Mack transaction. As of June 30, 1998, the Company carried total debt of approximately $1.35 billion, with a weighted average annual interest rate of 7.05%. The Company had 57,971,447 shares of common stock, 7,675,081 common operating partnership units and 248,055 6.75%, $1,000 face-value preferred operating partnership units outstanding as of quarter end. The outstanding preferred units are convertible into common operating partnership units at $34.65 per unit, which would convert into 7,158,875 common units.

Leasing Information

Mack-Cali Realty Corporations's in-service portfolio (excluding joint venture properties) was 96.1% leased at June 30, 1998, up from 95.8% at March 31, 1998. The Company's development/ redevelopment properties not-in-service as of June 30, 1998 totaled 453,000 square feet of space. During the second quarter 1998, the Company executed 219 leases totaling 1,055,625 square feet, consisting of 842,020 square feet of office space, 201,610 square feet of office/flex space and 11,995 square feet of industrial/warehouse space; 311,791 square feet resulting from new leases and 743,834 square feet from lease renewals, expansions and other leasing transactions with existing tenants. A schedule is attached highlighting the second quarter's leasing statistics.

About the Company

Mack-Cali Realty Corporation is a fully-integrated, self-administered, self-managed real estate investment trust (REIT) providing leasing, management, acquisition, development, construction and tenant-related services for its portfolio. With the completion of pending transactions, Mack-Cali's portfolio will consist of 250 properties, primarily office and office/flex buildings, totaling approximately 27.5 million square feet, serving over 2,300 tenants. The Company's portfolio is located in 12 states and the District of Columbia, primarily in the Northeast, as well as the Southwest and West.

Additional information on Mack-Cali Realty Corporation is available on the Company's website at www.mack-cali.com.

Certain information discussed in this press release may constitute forward-looking statements within the meaning of the Federal Securities law. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to different materially from those projected. Among those risks, trends and uncertainties are the general economic climate; the supply of and demand for office, office/flex and industrial/warehouse properties; interest rate levels; the availability of financing; and other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or information on factors which could impact the Company and the statements contained herein, reference should be made to the Company's filings with the Securities and Exchange Commission including quarterly reports on Form 10-Q on Form 8-K, and annual reports on Form 10-L.

Mack-Cali Realty Corporation Consolidated Statements of Operations
(in thousands, except per share amounts)

  Quarter Ended June 30,
  1998 1997
Base rents $105,861 $50,389
Escalations & recoveries 12,358 7,667
Parking and other 2,906 2,054
Interest income 916 432
Total revenues 122,041 60,542
Real estate taxes 11,854 6,496
Utilities 9,115 4,215
Operating services 15,629 7,357
General and administrative 6,394 3,754
Depreciation and amortization 19,093 9,080
Interest expense 21,786 9,603
Total expenses 83,871 40,505
Income from operations before minority interest and extraordinary item 38,170 20,037
Minority interest (7,782) (2,012)
Extraordinary item-loss on early retirement of debt(1) (2,373) -
Net income $28,015 $18,025
Earnings per Common Share-Basic:
Income from operations before extraordinary item $0.53 $0.49
Extraordinary item (0.04) - Net income per common share $0.49 $0.49
Earnings per Common Share-Diluted: Income from operations before extraordinary item $0.53 $0.49
Extraordinary item (0.04) -
Net income per common share $0.49 $0.49
Dividends declared per common share $0.50 $0.45
Basic weighted average common shares outstanding 57,019 36,489
Diluted weighted average common shares outstanding 64,626 41,213 (1)



(1)Net of minority interest's share of extraordinary item of $297 in 1998.


Mack-Cali Realty Corporation Statements of Funds from Operations and Cash Available for Distribution
(in thousands, except per share/unit amounts)

  Quarter Ended June 30,
  1998 1997
Income from operations before minority interest and extraordinary item $38,170 $20,037
Add: Real estate depreciation and amortization(1) 19,211 8,786
Deduct: Adj. to rental income for straight-lining of rents(1) (3,142) (2,337)
Funds from operations(2) after adj. for straight-lining of rents $54,239 $26,486
 
Deduct: Non-incremental revenue generating capital expenditures:
Capital improvements (377) (341)
Tenant improvements and leasing commissions (4,878) (871)
Cash available for distribution $48,984 $25,274
Basic weighted average shares/units outstanding (3) 64,145 40,579
Diluted weighted average shares/units outstanding(4) 71,444 41,013
Per Share/Unit - Basic(5): Funds from operations $0.78 $0.65
Cash available for distribution $0.70 $0.62
 
Per Share/Unit - Diluted:
Funds from operations $0.76 $0.65
Cash available for distribution $0.69 $0.62
Dividend per common share $0.50 $0.45
Dividend payout ratios:
Funds from operations-diluted 65.86% 69.68%
Cash available for distribution-diluted 72.93% 73.02%



(1) Includes FFO adjustments in 1998 related to Company's investments in joint ventures. (2) Funds from operations for both periods are calculated in accordance with the National Association of Real Estate Investment Trusts (NAREIT) definition, as published in March 1995. (3) Calculated based on weighted average common shares outstanding, assuming redemption of operating partnership common units into common shares. (4) Calculated based on shares and units included in basic per share/unit computation, plus dilutive Common Stock Equivalents (i.e. convertible preferred units, options and warrants).

(5) 1998 amount calculated after deduction of distributions to preferred unitholders of $3,985.

Mack-Cali Realty Corporation Consolidated Statements of Operations
(in thousands, except per share amounts)

  Six Months Ended June 30,
  1998 1997
Base rents $198,777 $93,180
Escalations & recoveries 22,715 14,279
Parking and other 4,913 3,598
Interest income 1,459 1,640
Total revenues 227,864 112,697
Real estate taxes 21,926 11,929
Utilities 17,417 7,940
Operating services 28,321 13,773
General and administrative 12,591 6,927
Depreciation and amortization 35,324 16,844
Interest expense 40,265 17,152
Total expenses 155,844 74,565
Income from operations before minority interest and extraordinary item 72,020 38,132
Minority interest (15,089) (3,648)
Extraordinary item-loss on early retirement of debt(1) (2,373) -
Net income $54,558 $34,484
 
Earnings per Common Share-Basic:
Income from operations before extraordinary item $1.05 $0.95
Extraordinary item (0.04) -
Net Income per common share $1.01 $0.95
 
Earnings per Common Share-Diluted:
Income from operations before extraordinary item $1.04 $0.93
Extraordinary item (0.04) -
Net income per common share $1.00 $0.93
Dividends declared per common share $1.00 $0.90
Basic weighted average common shares outstanding 54,207 36,475
Diluted weighted average common shares outstanding 61,671 41,016



(1) Net of minority interest's share of extraordinary item of $297 in 1998.


Mack-Cali Realty Corporation Statements of Funds from Operations and Cash Available for Distribution
(in thousands, except per share/unit amounts)

  Six Months Ended June 30,
  1998 1997
Income from operations before minority interest & extraordinary item $72,020 $38,132
Add: Real estate depreciation and amortization(1) 35,330 16,265
Deduct: Adj. to rental income for straight-lining of rents(1) (6,345) (3,944)
Funds from operations(2) after adj. for straight-lining of rents $101,005 $50,453
Deduct: Non-incremental revenue generating capital expenditures:
Capital improvements (739) (633)
Tenant improvements and leasing commissions (10,624) (1,926)
Cash available for distribution $89,642 $47,894
Basic weighted average shares/units outstanding (3) 61,056 40,334
Diluted weighted average shares/units outstanding(4) 68,425 40,817
Per Share/Unit - Basic(5):
Funds from operations $1.53 $1.25
Cash available for distribution $1.34 $1.19
Per Share/Unit - Diluted:
Funds from operations $1.48 $1.24
Cash available for distribution $1.31 $1.17
Dividend per common share $1.00 $0.90
Dividend payout ratios:
Funds from operations-diluted 67.74% 72.81%
Cash available for distribution-diluted 76.33% 76.70%



(1) Includes FFO adjustments in 1998 related to Company's investments in joint ventures.

(2) Funds from operations for both periods are calculated in accordance with the National Association of Real Estate Investment Trusts (NAREIT) definition, as published in March 1995.

(3) Calculated based on weighted average common shares outstanding, assuming redemption of operating partnership common units into common shares.

(4) Calculated based on shares and units included in basic per share/unit computation, plus dilutive Common Stock Equivalents (i.e. convertible preferred units, options and warrants).

(5) 1998 amount calculated after deduction of distributions to preferred unitholders of $7,896.



Mack-Cali Realty Corporation Leasing Statistics
(excluding joint venture properties)
For Quarter Ended June 30, 1998

TOTAL SPACE LEASED

In-Service Properties: 11
Square feet leased at March 31, 1998 24,152,295
Net leasing activity in 2nd quarter 1998 (1,905)
Leased s.f. from 2nd quarter 1998 acquisitions 1,190,812
Occupancy adjustment(1) (12,362)
Reclassification to Joint Venture (156,495)
Square feet leased at June 30, 1998 25,172,345
Percent leased at June 30, 1998 96.1%
Square feet of Development/Redevelopment Properties Not-in-Service as of June 30, 1998 453,000


OFFICE SPACE

  Number of
Leases
Rentable
S.F.
Weighted
Average
Base Rent
Average Term
(Years)
 
New Leases:
First generation space 3 9,631 $19.08 5.0
Second generation space 58 195,422 $21.53 5.2
Total new leasing: 61 205,053
Renewals & extensions 89 509,402 $19.48(2) 5.6
Other retained tenants 36 127,565 $24.37 5.2
Total leasing: 186 842,020



Capital Expenditures- Second Generation Space(3):

  Tenant
Improvements(4)
Leasing
Commissions
Total
Expend. committed-2nd qtr. $4,514,992 $3,046,616 $7,561,608
Rentable s.f. leased-2nd qtr.     832,389
Cap ex. committed per r.s.f.     $9.08



(1) Represents the amount of space leased during the period in excess of 100% of the gross rentable area of certain properties in the portfolio.

(2) Includes a 124,171 square foot "triple-net" lease at $13.00 per s.f. Weighted average base rent for all lease renewals in this period excluding this transaction was $21.57 per s.f.

(3) Represents amounts committed, but not necessarily expended during period.

(4) Equals estimated workletter costs, net of estimated profit and overhead.

OFFICE/FLEX SPACE

  Number of
Leases
Rentable S.F Weighted
Average
Base Rent(1)
Average Term
(Years)
New leases -
second generation space 13 106,738 $9.76 4.5
Renewals and extensions 15 90,297 $13.86 4.3
Other retained tenants 3 4,575 $8.82 4.5
Total leasing: 31 201,610



Capital Expenditures - Second Generation Space(2):

  Tenant
Improvements(3)
Leasing
Commissions
Total
Expend. committed-2nd qtr. $568,163 $368,631 $936,794
Rentable s.f. leased-2nd qtr.     201,610
Cap ex.committed per r.s.f.     $4.65



INDUSTRIAL/WAREHOUSE SPACE

  Number of
Leases
Rentable S.F Weighted
Average
Base Rent(1)
Average Term
(Years)
Renewals & extensions 1 5,995 $12.32 5.0
Other retained tenants 1 6,000 $8.56 1.7
Total leasing: 2 11,995



Capital Expenditures - Second Generation Space(2):

  Tenant
Improvements(3)
Leasing
Commissions
Total
Expend. committed-2nd qtr. $5,995 $8,045 $14,040
Rentable s.f. leased-2nd qtr.     11,995
Cap ex. committed per r.s.f.     $1.17



(1) Equals "triple net" rent plus common area costs and real estate taxes. (2) Represents amounts committed, but not necessarily expended during period. (3) Equals estimated workletter costs, net of estimated profit and overhead.

LEASE RENEWALS

  Number of
Leases
Rentable
S.F.
Leases expiring 217 1,057,530
Leases renewed & extended 105 605,694
Other retained tenants 40 138,140
Total leases retained 145 743,834
% Retained 66.8% 70.3%
Future expirations renewed or relet (included in totals above) 51 370,353


Leasing Statistics Joint Venture Properties
For Quarter Ended June 30, 1998 TOTAL SPACE LEASED

In-Service Properties:
Square feet leased at March 31, 1998 156,495
Net leasing activity in 2nd quarter 1998 54,995
Leased s.f. from 2nd quarter 1998 acquisitions 137,853
Square feet leased at June 30, 1998 349,343
Percent leased at June 30, 1998 75.6%
Square feet of Development/Redevelopment Properties Not-in-Service as of June 30, 1998 237,000
 
  Number of
Leases
Rentable S.F Weighted
Average
Base Rent(1)
Average Term
(Years)
New Leases - second generation space 4 64,834 $29.91 5.2



Capital Expenditures- Second Generation Space(1):

  Tenant
Improvements(2)
Leasing
Commissions
Total
Expend. committed-2nd qtr. $819,010 $63,734 $882,744
Rentable s.f. leased-2nd qtr.     64,834
Cap ex. committed per r.s.f.     $13.62



(1) Represents amounts committed, but not necessarily expended during period.

(2) Equals estimated workletter costs, net of estimated profit and overhead.