Mack-Cali Realty Corporation Announces 12.5% Increase in First Quarter FFO Per Share

05/04/1999 Category: Earnings

CRANFORD, NJ--May 4, 1999--Mack-Cali Realty Corporation (NYSE:CLI) today announced its results for the first quarter of 1999. The Company reported that its funds from operations (FFO) per diluted share for the first quarter 1999 increased 12.5% over the same period in 1998.

FINANCIAL HIGHLIGHTS
For the quarter ended March 31, 1999, FFO, after adjustment for straight-lining of rents, amounted to $60.2 million, or $0.81 per share, versus $46.8 million, or $0.72 per share, for the quarter ended March 31, 1998, a per share increase of 12.5%.

Cash available for distribution (CAD) for the first quarter 1999 equaled $54.0 million, or $0.73 per share, versus $40.7 million, or $0.62 per share, for the same quarter last year, an increase of 17.7% on a per share basis.

Total revenues for the first quarter 1999 increased 27.5% to $134.9 million from $105.8 million for the same quarter last year.

Income from operations before minority interest for the first quarter 1999 totaled $40.8 million, or $0.55 per share, versus $33.8 million, or $0.51 per share, for the same quarter last year, an increase of 7.8% on a per share basis. Income from operations before minority interest excludes extraordinary items and non-recurring charges.

All per share amounts presented are on a diluted basis; basic per share information is included in the financial tables accompanying this press release.

The Company had 58,268,701 shares of common stock, 8,870,608 common operating partnership units and 229,304 $1,000-face-value preferred operating partnership units (6.75% annual rate) outstanding as of quarter end. The outstanding preferred units are convertible into 6,617,721 common operating partnership units. Assuming conversion of all preferred units into common units, the Company had a total of 73,757,030 shares/common units outstanding at March 31, 1999.

As of March 31, 1999, the Company had total indebtedness of approximately $1.5 billion, with a weighted average annual interest rate of 7.12%. Mack-Cali's total market capitalization was $3.6 billion at March 31, 1999, with a debt-to-market capitalization ratio of 40.2%. The Company had an interest coverage ratio of 3.7 times for the quarter ended March 31, 1999.

Commenting on the results, Mitchell E. Hersh, chief executive officer, said, "We are once again pleased with our operating results for the first quarter. Our portfolio's high occupancy and increasing rents have contributed to yet another quarter of double-digit earnings growth. This continued growth is a clear indication of the strong fundamentals which highlight our Company -- the quality of our portfolio, the consistent strength of our core markets and the depth and commitment of our organization."

RECENT TRANSACTIONS
During the first quarter, Mack-Cali invested $16.3 million, and agreed to invest an additional $3.7 million, in ARCap, a joint venture which includes Apollo Real Estate Advisors and REMICap. The venture was formed to take advantage of the wide spreads among sub-investment grade tranches of commercial mortgage-backed securities (CMBS).

Mr. Hersh commented, "We are pleased to ally ourselves with such other high-powered real estate concerns as Apollo and REMICap. We believe the strategy to invest in these types of CMBS securities offers attractive returns with the potential for greater rewards as spreads compress and is indicative of our continued efforts to enhance shareholder value."

Additionally, during the quarter, Mack-Cali acquired two office properties, placed an office/flex building in service, initiated a land lease and purchased two developable land sites.

The first quarter transactions are described as follows:

  • Acquired from Pacifica Holding Company two office properties, located in Colorado Springs, El Paso County, Colorado, aggregating 94,737 square feet, for approximately $5.7 million;
  • Placed in service a 38,961 square-foot office/flex building in Totowa, Passaic County, New Jersey for a total cost of approximately $2.1 million;
  • Initiated a lease of 27.7 acres of its developable land in Mack-Cali's Horizon Center Business Park, located in Hamilton Township, Mercer County, New Jersey, to Home Depot for that company's development of a 134,000 square-foot retail store;
  • Acquired, through a joint venture with SJP Properties, a developable land site in Bernards Township, Somerset County, New Jersey for approximately $3.2 million, where the venture plans to develop a 135,000 square-foot office building; and
  • Acquired a 2.3-acre developable land site adjacent to the Company's Concord Plaza office property in San Antonio, Bexar County, Texas for approximately $1.5 million.


FINANCING ACTIVITIES
The Company's most notable financing transaction for the first quarter was the issuance of $600 million in senior unsecured public notes, comprised of two tranches: $300 million of 7.0%, five-year notes and $300 million of 7.25%, 10-year notes. The Company's first public debt issuance increased the weighted average term to maturity for the Company's indebtedness from 4.2 to 6.3 years.

Barry Lefkowitz, executive vice president and chief financial officer, stated, "I am very satisfied with the success of the financial transactions Mack-Cali completed during the first quarter. In line with our financial strategy, we successfully completed our first public debt offering with the issuance of $600 million in senior unsecured notes. This issuance, the second largest debut offering in REIT history, is clearly representative of the financial community's expanding interest and confidence in Mack-Cali's sound financial position."

LEASING INFORMATION
After net absorption of 75,247 leased square feet in the first quarter, Mack-Cali's in-service portfolio was 96.7% leased at quarter-end, compared to 96.6% at December 31, 1998. v For the quarter ended March 31, 1999, the Company executed 166 leases totaling 723,809 square feet, consisting of 494,251 square feet of office space, 213,758 square feet of office/flex space and 15,800 square feet of industrial/warehouse space; 242,603 square feet for new leases and 481,206 square feet for lease renewals and other tenant retention transactions.

Accompanying this press release are schedules highlighting the first quarter leasing statistics of the Company.

ABOUT THE COMPANY
Mack-Cali Realty Corporation is a fully-integrated, self-administered, self-managed real estate investment trust (REIT) providing management, leasing, development, construction and other tenant-related services for its class A real estate portfolio. Mack-Cali owns or has interests in 253 properties, primarily office and office/flex buildings, totaling approximately 28 million square feet, located in 12 states and the District of Columbia. The properties, which are primarily located in the Northeast, enable the Company to provide a full complement of real estate opportunities to its diverse base of over 2,400 tenants.

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 March 31,
1999 1998
--------------------------------------------------------------------
Base rents $116,080 $92,916
Escalations & recoveries 14,860 10,357
Parking and other 3,900 1,981
Interest income 255 544
Equity in (loss) earnings of
unconsolidated joint ventures (206) 25


Total revenues 134,889 105,823

Real estate taxes 13,843 10,073
Utilities 9,592 8,301
Operating services 16,916 12,693
General and administrative 8,134 6,196
Depreciation and amortization 21,969 16,231
Interest expense 23,622 18,480

Total expenses 94,076 71,974

Income from operations before
minority interest 40,813 33,849
Minority interest (8,749) (7,306)


Net income $32,064 $26,543



PER SHARE DATA:
Income from operations - basic $0.55 $0.52
Net income - basic $0.55 $0.52


Income from operations - diluted $0.55 $0.51
Net income - diluted $0.55 $0.51



Dividends declared $0.55 $0.50



Basic weighted average
shares outstanding 58,162 51,363
Diluted weighted average
shares outstanding 67,283 58,682
===================================================================


Mack-Cali Realty Corporation
Statements of Funds from Operations and
Cash Available for Distribution
(in thousands, except per share/unit amounts)
--------------------------------------------------------------------
Quarter Ended March 31,
1999 1998
Income from operations before
minority interest $40,813 $33,849
Add: Real estate depreciation
and amortization(1) 22,951 16,120
Deduct: Adj. to rental income for
straight-lining of rents(1) (3,545) (3,203)
Funds from operations(2) after adj.
for straight-lining of rents $60,219 $46,766
Deduct:
Nonincremental revenue generating
capital expenditures:
Capital improvements (569) (362)
Tenant improvements and leasing
commissions (5,653) (5,746)

Cash available for distribution $53,997 $40,658

Basic weighted average shares/units
outstanding (3) 67,011 57,933
Diluted weighted average shares/units
outstanding(4) 73,975 65,371

Per Share/Unit - Basic(5):
Funds from operations $0.84 $0.74
Cash available for distribution $0.75 $0.63


Per Share/Unit - Diluted:
Funds from operations $0.81 $0.72
Cash available for distribution $0.73 $0.62

Dividend per common share $0.55 $0.50

Dividend payout ratios:
Funds from operations-diluted 67.56% 69.89%
Cash available for distribution-diluted 75.35% 80.39%


(1) Includes FFO adjustments related to Company's investments in unconsolidated
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) Amounts calculated after deduction for distributions to preferred
unitholders of $3,869 and $3,911 for the three months ended March 31, 1999
and 1998, respectively.

===================================================================


Mack-Cali Realty Corporation
Consolidated Balance Sheets
(in thousands, except share amounts)


-------------------------------------------------------------------------
March 31, December 31,
ASSETS: 1999 1998
-------------------------------------------------------------------------
Rental property
Land and leasehold interests $515,000 $510,534
Buildings and improvements 2,899,495 2,887,115
Tenant improvements 74,659 64,464
Furniture, fixtures and equipment 6,021 5,686
3,495,175 3,467,799
Less-accumulated depreciation
and amortization (198,945) (177,934)
Total rental property 3,296,230 3,289,865


Cash and cash equivalents 12,406 5,809
Investments in unconsolidated
joint ventures 87,736 66,508
Unbilled rents receivable 44,576 41,038
Deferred charges and other assets, net 44,842 39,020
Restricted cash 6,378 6,026
Accounts receivables 6,774 3,928

Total assets $3,498,942 $3,452,194


LIABILITIES AND STOCKHOLDERS' EQUITY:
-------------------------------------------------------------------------
Senior Unsecured Notes $ 597,265 $ --
Revolving Credit Facilities 110,600 671,600
Mortgages and loans payable 749,914 749,331
Dividends and distributions payable 40,757 40,564
Accounts payable and accrued expenses 33,401 33,253
Rents received in advance and
security deposits 32,555 29,980
Accrued interest payable 3,838 2,246


Total liabilities 1,568,330 1,526,974
Minority interest of unitholders
in Operating Partnership 474,926 501,313
Commitments and contingencies
Stockholders' equity:
Preferred stock, 5,000,000 shares
authorized, none issued -- --
Common stock, $0.01 par value,
190,000,000 shares authorized,
58,268,701 and 57,266,137
shares outstanding 583 573
Additional paid-in capital 1,546,402 1,514,648
Dividends in excess of net earnings (91,299) (91,314)
Total stockholders' equity 1,455,686 1,423,907


Total liabilities and
stockholders' equity $3,498,942 $3,452,194
========================================================================


Mack-Cali Realty Corporation
Leasing Statistics
For Quarter Ended March 31, 1999


--------------------------------------------------------------------
WHOLLY-OWNED PORTFOLIO
--------------------------------------------------------------------
SUMMARY OF SPACE LEASED DURING PERIOD
--------------------------------------------------------------------
IN-SERVICE PROPERTIES:
Square feet leased at December 31, 1998 25,847,457
Net leasing activity in 1st quarter 1999 75,247
Leased s.f. from 1st quarter 1999 acquisitions/
properties placed in service 70,685
Occupancy adjustment(1) 17,888

Square feet leased at March 31, 1999 26,011,277

Percent leased at March 31, 1999 96.7%

Square feet of Development/Redevelopment
Properties Not-in-Service as of March 31, 1999 68,000


OFFICE SPACE
--------------------------------------------------------------------
Number Weighted Average
of Rentable Average Term
Leases S.F. Base Rent (Years)
New Leases:
First generation space 1 2,384 $14.50 5.0
Second generation space 46 116,412 $22.57 5.1
Total new leasing 47 118,796 $22.41

Renewals & extensions 65 200,093 $21.82 3.8
Other retained tenants 26 175,362 $26.54 6.8
Total leasing 138 494,251



Capital Expenditures - Second Generation Space(2):


Tenant Leasing
Improvements(3) Commissions Total
--------------------------------------------------------------------
Expend. committed-1st qtr $3,983,116 $1,760,335 $5,743,451
Rentable s.f. leased-1st qtr 491,867
Cap. ex. committed
per r.s.f. per year $1.57 $0.69 $2.26


(1) Represents the net change in the amount of space leased/expired since the
prior reporting period in excess of 100 percent of the gross rentable area
of certain properties in the portfolio.
(2) Represents amounts committed, but not necessarily expended during period.
(3) Equals estimated workletter costs.

===================================================================


OFFICE/FLEX SPACE
--------------------------------------------------------------------
Number Weighted Average
of Rentable Average Term
Leases S.F. Base Rent(1) (Years)
--------------------------------------------------------------------
New Leases - Second
generation space 10 111,007 $12.20 7.3


Renewals & extensions 13 68,316 $12.12 3.2
Other retained tenants 3 34,435 $19.20 9.4
Total leasing 26 213,758


Capital Expenditures - Second Generation Space(2):


Tenant Leasing
Improvements(3) Commissions Total
--------------------------------------------------------------------
Expend. committed-1st qtr $1,389,741 $515,422 $1,905,163
Rentable s.f. leased-1st qtr 213,758
Cap. ex. committed
per r.s.f. per year $1.02 $0.38 $1.40


INDUSTRIAL/WAREHOUSE SPACE
--------------------------------------------------------------------
Number Weighted Average
of Rentable Average Term
Leases S.F. Base Rent(1) (Years)
--------------------------------------------------------------------
New Leases - Second
generation space 1 12,800 $10.31 5.0


Renewals & extensions 1 3,000 $11.73 2.0
Total leasing 2 15,800


Capital Expenditures - Second Generation Space(2):


Tenant Leasing
Improvements(3) Commissions Total
--------------------------------------------------------------------
Expend. committed-1st qtr $12,800 $45,665 $58,465
Rentable s.f. leased-1st qtr 15,800
Cap. ex. committed
per r.s.f. per year $0.18 $0.65 $0.83


(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.

===================================================================


LEASE RENEWALS
--------------------------------------------------------------------
Number of
Leases Rentable S.F.
--------------------------------------------------------------------
Leases expiring 188 648,562

Leases renewed & extended 79 271,409
Other retained tenants 29 209,797
Total leases retained 108 481,206
Percent retained 57.4% 74.2%

Future expirations renewed or
relet (included in totals above) 50 453,619
===================================================================


JOINT VENTURE PROPERTIES
SUMMARY OF SPACE LEASED DURING PERIOD
IN-SERVICE PROPERTIES:s
--------------------------------------------------------------------
Square feet leased at December 31, 1998 625,713
Net leasing activity in 1st quarter 1999 13,580

Square feet leased at March 31, 1999 639,293

Percent leased at March 31, 1999 84.1%

Square feet of Development/Redevelopment
Properties Not-in-Service as of March 31, 1999 601,300



OFFICE SPACE
--------------------------------------------------------------------
Number Weighted Average
of Rentable Average Term
Leases S.F. Base Rent (Years)
--------------------------------------------------------------------
Leasing Activity:
New Leases:
2nd generation space 1 2,083 $20.10 5.0

Other retained tenants 3 13,270 $23.45 4.2
Total leasing 4 15,353


Capital Expenditures - Second Generation Space(1):

Tenant Leasing
Improvements(2) Commissions Total
--------------------------------------------------------------------
Expend. committed-1st qtr $161,012 $14,327 $175,339
Rentable s.f. leased-1st qtr 15,353
Cap. ex. committed
per r.s.f. per year $2.44 $0.22 $2.66


(1) Represents amounts committed, but not necessarily expended during period.
(2) Equals estimated workletter costs.

===================================================================