Mack-Cali Realty Corporation Announces First Quarter Results

05/10/2001 Category: Earnings

CRANFORD, NEW JERSEY -May 10, 2001- Mack-Cali Realty Corporation (NYSE: CLI) today reported its results for the first quarter 2001.

FINANCIAL HIGHLIGHTS

FFO, after adjustment for straight-lining of rents and non-recurring charges, for the quarter ended March 31, 2001 amounted to $63.7 million, or $0.89 per share, versus $66.1 million, or $0.90 per share, for the quarter ended March 31, 2000, a per share decrease of 1.1 percent. Included in first quarter 2000 FFO was a gain on sale of land of $2.2 million, or $0.03 per share. Excluding such gain, FFO per share for first quarter 2001 increased by 2.3 percent over the same period in 2000.

Cash available for distribution (CAD) for the first quarter 2001 equaled $55.5 million, or $0.78 per share, versus $55.4 million, or $0.76 per share, for the same quarter last year, an increase of 2.6 percent on a per share basis. Excluding the first quarter 2000 gain on sale of land, CAD per share for first quarter 2001 increased by 6.8 percent.

Total revenues for the first quarter 2001 increased 2.4 percent to $146.5 million from $143.0 million for the same quarter last year.

Income from operations before minority interest in Operating Partnership for the first quarter 2001 equaled $43.5 million, or $0.61 per share, versus $43.3 million, or $0.59 per share, for the same quarter last year, a per share increase of 3.4 percent. Income from operations before minority interest in Operating Partnership excludes realized and unrealized gain/loss on disposition of rental property 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 56,961,704 shares of common stock, 7,957,525 common operating partnership units and 220,340 $1,000-face-value preferred operating partnership units outstanding at quarter end. The outstanding preferred units are convertible into 6,359,019 common operating partnership units. Assuming conversion of all preferred units into common units, the Company had a total of 71,278,248 shares/common units outstanding at March 31, 2001.

As of March 31, 2001, the Company had total indebtedness of approximately $1.66 billion, with a weighted average annual interest rate of 7.32 percent. Mack-Cali's total market capitalization was $3.6 billion at March 31, 2001. The Company had a debt-to-undepreciated assets ratio of 41.4 percent. The Company had an interest coverage ratio of 3.4 times for the quarter ended March 31, 2001.

Commenting on the results, Mitchell E. Hersh, chief executive officer, said, "I am pleased with our first quarter results and our leasing activity during the quarter in the face of a slowing economy." Mr. Hersh continued, "I believe that Mack-Cali's high quality portfolio will continue to provide a stable income stream going forward. Additionally, Mack-Cali's current dividend yield of 9.5 percent is an attractive investment opportunity in today's marketplace."

The Company continues to focus its efforts on its strategy of selling assets in its non-core markets and using the proceeds to enhance its presence in the Northeast and Mid-Atlantic regions.

PROPERTY SALES

Progress continued during the quarter on the Company's disposition program. The Company is currently in active contract negotiations on several of its Southwest properties, primarily those located in Houston and San Antonio.

The Company continued its marketing efforts for the sale of its Dallas and Colorado portfolios. Insignia/ESG Capital Advisors, Inc. has been named as the exclusive agent for the disposition of the Dallas portfolio. Cushman and Wakefield has been retained to sell the Colorado assets.

In April, the Company sold the north pier at its Harborside Financial Center in Jersey City, New Jersey for $3.8 million and a residual economic interest in the project to EQR-Lincoln North Pier L.L.C. EQR-Lincoln plans to build a 300-unit luxury residential complex on the north pier.

ACQUISITIONS

During the quarter, the Company acquired two fully leased office/flex properties located in Moorestown, New Jersey for approximately $7.1 million. The two buildings, 31 and 41 Twosome Drive, total 127,250 square feet.

In April, the Company acquired two additional class A office buildings located in the Mack-Cali Business Campus in Parsippany, New Jersey for approximately $48 million. Maple Plaza I and II, located at 4 and 6 Campus Drive, total 295,800 square feet. The properties are 92.6 percent leased to leading tenants such as Nabisco, Prudential Insurance and ExxonMobil.

DEVELOPMENT SUMMARY

During the first quarter, the Company successfully completed and delivered the following properties:

  • The 220,000 square-foot class A office property at 105 Eisenhower Parkway in Roseland, New Jersey. Arthur Andersen, a long-time Mack-Cali tenant, has leased 50 percent of the building.

  • The 185,254 square-foot, Class A office property located in the Denver Tech Center in Denver, Colorado. The building is 62 percent leased to URS Greiner Woodward Clyde.



Progress continues on three of the Company's newest development projects at its Harborside Financial Center, located on the Hudson River Waterfront in Jersey City, New Jersey, as follows:

  • Plaza 10, a 19-story 575,000 square-foot Class A office building, which is completely pre-leased to Charles Schwab & Company, Inc., will be the site of its newly expanded East Coast regional headquarters, and is expected to be completed in late 2002.

  • Plaza 5, a 34-story, 980,000 square-foot Class A office tower with a 1,270-car parking garage pedestal is under construction and due to be completed by the end of 2002. The Company has signed leases for approximately 174,000 square feet with exciting prospects for more than the remaining space in the building.

  • Hyatt Regency South Pier Hotel is a 350-room luxury hotel that is being built on the south pier of Harborside through a joint venture with Hyatt. Completion of this project is anticipated in the third quarter 2002.



Additionally, continuing its commitment to accommodating tenants' expansion requirements, the Company constructed a 31,000 square-foot addition to its 206,274 square-foot office building at 600 Community Drive in Manhasset, New York, for the benefit of CMP Media, Inc., which occupies the entire building.

FINANCING ACTIVITIES

During the quarter, the Company issued $300 million of 7.75 percent, 10-year unsecured notes. Net proceeds from the issuance were used primarily to pay down outstanding borrowings on the Company's credit facilities.

Since the September 2000 increased authorization to the Company's Share Repurchase Program to $150 million, the Company has purchased 2.2 million shares of its outstanding common stock at an aggregate cost of approximately $59.1 million.

LEASING INFORMATION

Mack-Cali's consolidated in-service portfolio was 96.4 percent leased at March 31, 2001, compared to 96.8 percent at December 31, 2000.

For the quarter ended March 31, 2001, the Company executed 163 leases totaling 791,629 square feet, consisting of 619,182 square feet of office space, 169,447 square feet of office/flex space and 3,000 square feet of industrial/warehouse space. Of these totals, 244,606 square feet were for new leases and 547,023 square feet were for lease renewals and other tenant retention transactions.

Highlights of the quarter's leasing transactions included:

  • Group 1 Software, a marketing and software company established in 1981, signed expansion and extension leases through 2015 for headquarters space totaling 68,573 square feet at the East Point office property in Lanham, Maryland.

  • Trigen Energy Corporation, an energy management firm, signed a new 10-year lease for 36,789 square feet for its headquarters at 3 Barker Avenue in White Plains, New York.

  • Fujitsu Network Communications, a designer and manufacturer of fiber-optic transmission and broadband switching platforms and a subsidiary of Fujitsu Limited, leased the entire 15,220 square-foot building at 350 Executive Boulevard in Elmsford, New York for seven years.

  • Turner Investment Partners, an investment advisory firm, signed new and renewal leases for 33,767 square feet for its company headquarters at Westlakes Office Park in Berwyn, Pennsylvania for an average of five years.

  • A.C. Nielsen Company, a market research, information and analysis firm, signed a new lease for 23,400 square feet of space for six years at 650 From Road in Paramus, New Jersey.



Included in the Company's Supplemental Operating and Financial Data for the first quarter 2001 are schedules highlighting the first quarter leasing statistics for both the Company's consolidated and joint venture properties. The supplemental information is available on Mack-Cali's website, as follows: http://www.mack-cali.com/graphics/shareholders/pdfs/1st.quarter.sp.01.pdf.

ADDITIONAL INFORMATION

The Company expressed comfort with FFO per diluted share estimates for the second quarter 2001 in the range of $0.89 to $0.91 per share and a range of $3.65 to $3.71 per diluted share for calendar year 2001. These estimates reflect current market conditions and certain assumptions with regard to rental rates, occupancy levels and other assumptions/projections. Additionally, with the Company's ongoing capital recycling program, the estimates for the second quarter and calendar year 2001 may be positively or negatively impacted by the actual timing and business terms of property sales and the corresponding use of the proceeds from these sales. The Company intends to use proceeds from property sales to invest in property acquisitions and development projects in its core Northeast markets, fund stock repurchases and repay debt.

An earnings conference call with management is scheduled for today, May 10, 2001, at 11:00 a.m. Eastern Time, which will be broadcast live via the Internet at: http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=CLI&script=2400&layout=-6.

The live conference call is also accessible by calling (719)457-2629 and requesting the Mack-Cali conference call.

The conference call will be rebroadcast immediately following the live call on Mack-Cali's website at http://www.mack-cali.com through May 24, 2001. Beginning at 2:00 p.m. Eastern Time on May 10 through May 17, 2001, a replay of the call can also be accessed by calling (719)457-0820 and using the pass code 575360.

Copies of Mack-Cali's Form 10-Q and Supplemental Operating and Financial Data for the first quarter 2001 are available upon request from:

Mack-Cali Investor Relations Dept.
11 Commerce Drive, Cranford, NJ 07016
(908)272-8000 ext. 2484



In addition, these items are available on Mack-Cali's website, as follows:

First Quarter 2001 Form 10-Q:
http://www.mack-cali.com/graphics/shareholders/pdfs/1st.quarter.10q.01.pdf

First Quarter 2001 Supplemental Operating and Financial Data:
http://www.mack-cali.com/graphics/shareholders/pdfs/1st.quarter.sp.01.pdf

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 273 properties, primarily office and office/flex buildings located in the Northeast, totaling approximately 29.1 million square feet. The properties 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 http://www.mack-cali.com.

Estimates of future FFO per share are by definition, and certain other matters 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 differ 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 operating costs may be greater than anticipated. For further 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, current reports on Form 8-K, and annual reports on Form 10-K.



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

Quarter Ended March 31, 2001 2000---------------------------------------------------------------------------Base rents $125,376 $121,598Escalations & recoveries from tenants 14,762 16,668Parking and other 2,346 3,322Equity in earnings of unconsolidated joint ventures 3,409 1,137Interest income 613 254

Total revenues 146,506 142,979

Real estate taxes 15,287 14,704Utilities 11,956 10,379Operating services 17,879 17,742General and administrative 6,010 6,113Depreciation and amortization 23,484 22,182Interest expense 28,365 26,426

Total expenses 102,981 97,546

Minority interest in partially-owned properties -- (2,090)Income from operations before minority interest in Operating Partnership 43,525 43,343 Minority interest in Operating Partnership(1) (8,751) (8,701)Income from operations 34,774 34,642 Realized and unrealized (loss)/gain on disposition of rental property(2) (18,036) 1,973

Net income $16,738 $36,615

PER SHARE DATA:Income from operations - basic $0.61 $0.59Net income Ð basic $0.29 $0.63Income from operations Ð diluted $0.61 $0.59Net income Ð diluted $0.29 $0.62Dividends declared per common share $0.61 $0.58

Basic weighted average shares outstanding 56,807 58,295Diluted weighted average shares outstanding 64,994 73,191

(1) Excludes effect of minority interest's share of realized and unrealized (loss)/gain on disposition of rental property.(2) Net of minority interest's share of $2,527 in 2001 and $275 in 2000.

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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, 2001 2000---------------------------------------------------------------------------Income from operations before minority interest in Operating Partnership $43,525 $43,343Add: Real estate depreciation and amortization(1) 24,003 22,718 Gain on sale of land -- 2,248Deduct: Adj. to rental income for straight-lining of rents(2) (3,805) (2,190)Funds from operations(3), after adj. for straight- lining of rents and non-recurring charges $63,723 $66,119Deduct: Non-incremental revenue generating capital expenditures: Capital expenditures (913) (847) Tenant improvements and leasing commissions (7,325) (9,909)

Cash available for distribution $55,485 $55,363

Basic weighted average shares/units outstanding(4) 64,767 66,428Diluted weighted average shares/units outstanding(5) 71,353 73,191

Per Share/Unit - Basic(6): Funds from operations $0.92 $0.94 Cash available for distribution $0.80 $0.78Per Share/Unit - Diluted: Funds from operations $0.89 $0.90 Cash available for distribution $0.78 $0.76

Dividends declared per common share $0.61 $0.58

Dividend payout ratios: Funds from operations-diluted 68.30% 64.20% Cash available for distribution-diluted 78.45% 76.68%

(1) Includes the Company's share from unconsolidated joint ventures of $721 and $734 for 2001 and 2000, respectively.(2) Includes the Company's share from unconsolidated joint ventures of $35 and $57 for 2001 and 2000, respectively.(3) Funds from operations for both periods are calculated in accordance with the National Association of Real Estate Investment Trusts (NAREIT) definition, as published in October 1999.(4) Calculated based on weighted average common shares outstanding, assuming redemption of Operating Partnership common units into common shares.(5) 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).(6) Amounts calculated after deduction for distributions to preferred unitholders of $3,879 and $3,869 in 2001 and 2000, respectively.

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

March 31, December 31, 2001 2000---------------------------------------------------------------------------ASSETS: Rental property Land and leasehold interests $ 475,923 $ 542,841 Buildings and improvements 2,615,080 2,934,383 Tenant improvements 108,466 106,208 Furniture, fixtures and equipment 6,732 6,445 3,206,201 3,589,877Less-accumulated deprec. & amort. (294,786) (302,932) 2,911,415 3,286,945 Rental property held for sale, net 469,320 107,458 Net investment in rental property 3,380,735 3,394,403 Cash and cash equivalents 11,720 13,179Investments in unconsolidated joint ventures 117,389 101,438Unbilled rents receivable, net 54,274 50,499Deferred charges and other assets, net 100,197 102,655Restricted cash 7,521 6,557Accounts receivable, net 9,223 8,246Total assets $3,681,059 $3,676,977

LIABILITIES AND STOCKHOLDERS' EQUITY:Senior unsecured notes $1,096,477 $ 798,099Revolving credit facilities 85,000 348,840Mortgages and loans payable 480,707 481,573Dividends and distributions payable 43,483 43,496Accounts payable and accrued expenses 52,392 53,608Rents received in advance and security deposits 35,347 31,146Accrued interest payable 10,118 17,477 Total liabilities 1,803,524 1,774,239Minority interests: Operating Partnership 444,848 447,523 Partially-owned properties -- 1,925 Total minority interests 444,848 449,448Commitments and contingenciesStockholders' equity:Preferred stock, 5,000,000 shares authorized, none issued -- --Common stock, $0.01 par value, 190,000,000 shares authorized, 56,961,704 and 56,980,893 shares outstanding 570 570Additional paid-in capital 1,512,330 1,513,037Dividends in excess of net earnings (75,161) (57,149)Unamortized stock compensation (5,052) (3,168) Total stockholders' equity 1,432,687 1,453,290Total liabilities and stockholders' equity $3,681,059 $3,676,977