Mack-Cali Realty Corporation Announces Second Quarter Results

08/09/2001 Category: Earnings

CRANFORD, NEW JERSEY -August 9, 2001- Funds from operations (FFO), after adjustment for straight-lining of rents and non-recurring charges, for the quarter ended June 30, 2001 amounted to $66.2 million, or $0.93 per share, versus $66.4 million, or $0.91 per share, for the quarter ended June 30, 2000, a per share increase of 2.2 percent. For the six months ended June 30, 2001, FFO, after adjustment for straight-lining of rents and non-recurring charges, amounted to $129.9 million, or $1.82 per share, versus $132.6 million, or $1.81 per share, for the same period last year, a per share increase of 1.0 percent. In the second quarter 2000, the Company incurred non-recurring charges relating to contractual obligations to departing employees of $9.2 million, or $0.13 per share, which has been excluded from FFO for the period.

Cash available for distribution (CAD) for the second quarter 2001 equaled $56.3 million, or $0.79 per share, versus $54.1 million, or $0.74 per share, for the same quarter last year, an increase of 6.8 percent on a per share basis. For the six months ended June 30, 2001, CAD equaled $111.8 million, or $1.57 per share, versus $109.5 million, or $1.49 per share, for the same period last year, an increase of 5.4 percent on a per share basis.

Total revenues for the second quarter 2001 increased $2.5 million to $148.4 million from $145.9 million for the same quarter last year, a 1.7 percent increase. For the six months ended June 30, 2001, total revenues amounted to $294.9 million, an increase of 2.1 percent over total revenues of $288.9 million for the same period last year.

Income from operations before minority interest in Operating Partnership for the second quarter 2001 equaled $47.2 million, or $0.66 per share, versus $46.4 million, or $0.63 per share, for the same quarter last year, a per share increase of 4.8 percent. Income from operations before minority interest in Operating Partnership for the six months ended June 30, 2001 equaled $90.7 million, or $1.27 per share, versus $89.7 million, or $1.23 per share, for the same period last year, a per share increase of 3.3 percent. Income from operations before minority interest in Operating Partnership excludes realized gains and unrealized losses 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 56,299,124 shares of common stock, 7,956,525 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 70,614,668 shares/common units outstanding at June 30, 2001.

As of June 30, 2001, the Company had total indebtedness of approximately $1.72 billion, with a weighted average annual interest rate of 7.3 percent. Mack-Cali had a total market capitalization of $3.7 billion and a debt-to-undepreciated assets ratio of 42.2 percent at June 30, 2001. The Company had an interest coverage ratio of 3.5 times for the quarter ended June 30, 2001.

Mitchell E. Hersh, chief executive officer of Mack-Cali, commented, "I am pleased with our results for the second quarter and the progress we have made in selling non-strategic assets." Mr. Hersh continued, "I am particularly pleased that our occupancies remained relatively unchanged from last quarter indicating continued stability in a challenging economic climate."

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

PROPERTY SALES

During the quarter, the Company sold three wholly-owned properties and a joint venture-owned asset for total proceeds of approximately $112.3 million. The property sales, all of which were completed in June, consisted of the following:


    • Tetco Tower, a 256,137 square-foot office building located in San Antonio, Texas, was sold for approximately $21.9 million;

    • Cornerstone Regency, a 71,000 square-foot office building located in Houston, Texas, was sold for approximately $3.2 million;

    • Tenby Chase, a 327-unit multi-family, residential complex located in Delran, New Jersey, was sold for approximately $20 million; and

    • Continental Grand Plaza, a 239,085 square-foot office building located in El Segundo, California and owned by a joint venture between Mack-Cali and Highridge Partners, was sold for approximately $67.2 million.



More recently, the Company completed the sales of two additional properties, as follows:


    • In July, Preston Centre, a 95,509 square-foot office building located in Dallas, Texas, was sold for approximately $9.1 million; and

    • In August, Century III, a 72,265 square-foot office building located in West Des Moines, Iowa, was sold for approximately $5.4 million. Century III was the Company's sole asset in Iowa.



ACQUISITIONS

During the quarter, the Company expanded its presence in Parsippany and Moorestown, New Jersey in two transactions, both of which were completed in April, as follows:

    • Maple Plaza I and II, located in the Mack-Cali Business Campus in Parsippany, New Jersey, were acquired for approximately $48 million. The two class A office buildings, located at 4 and 6 Campus Drive, total 295,800 square feet, and are over 90 percent leased to leading tenants, including Nabisco, Prudential Insurance and ExxonMobil. The acquisitions increased the Company's holdings in the Parsippany submarket to a total of 2.0 million square feet; and

    • The Company acquired three office/flex properties, which aggregate 154,200 square feet and are located in the Company's Moorestown West Corporate Center in Moorestown, New Jersey, for approximately $11 million. The acquisitions, which are 100 percent leased, increased the Company's holdings in the complex to a total of 1.2 million square feet.


In August, the Company acquired two office/flex buildings, located in the Mid-Westchester Executive Park in Hawthorne, New York, for approximately $14.7 million. The two buildings, located at 5 and 6 Skyline Drive, total 168,177 square feet, and are 100 percent leased.

DEVELOPMENT SUMMARY

Progress also 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, comprised of the following:


    • 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;

    • Plaza 10, a 19-story, 575,000 square-foot class A office building, is expected to be completed in late 2002. The building is 100 percent pre-leased to Charles Schwab & Co., Inc. and will be the site of its newly expanded East Coast regional headquarters; and

    • 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 between Mack-Cali and Hyatt. Completion of this project is anticipated by late 2002.



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 pier.

FINANCING ACTIVITIES

During the quarter, the Company obtained an additional $70.0 million in proceeds from the existing mortgage lenders on Harborside Financial Center Plazas 2 and 3. The mortgage on Plazas 2 and 3, with a balance of $163.9 million at quarter end, bears interest at a weighted average fixed rate of 7.36 percent and matures in January 2006. Proceeds from the financing were used to pay down outstanding borrowings on the Company's revolving credit facility.

In accordance with the Company's Share Repurchase Program, during the second quarter, the Company purchased 749,500 shares of its outstanding common stock for an aggregate cost of approximately $20.5 million.

LEASING INFORMATION

Mack-Cali's consolidated in-service portfolio was 96.3 percent leased at June 30, 2001, compared to 96.4 percent at March 31, 2001.

For the quarter ended June 30, 2001, the Company executed 226 leases totaling 1,115,707 square feet, consisting of 855,466 square feet of office space and 260,241 square feet of office/flex space. Of these totals, 415,379 square feet were for new leases and 700,328 square feet were for lease renewals and other tenant retention transactions.

Highlights of the quarter's leasing transactions include:

    • Sankyo Pharma, Inc., a pharmaceutical firm and the U.S. subsidiary of Sankyo Co., Ltd., signed leases for 56,954 square feet at Two Hilton Court in the Mack-Cali Business Campus in Parsippany, New Jersey. The leases, which carry an average term of 11 years, represent a 36,435 square-foot expansion of Sankyo Pharma's current space. Two Hilton Court, a 181,592 square-foot class A office property, is currently 100 percent leased.

    • Computer Sciences Corporation, a consulting and systems integration firm, leased the Company's entire 41,600 square-foot office building at 100 Decadon Drive in Egg Harbor Township, New Jersey. Computer Sciences Corporation signed a four-year lease renewal for 32,637 square feet, with a five-year expansion on 8,963 square feet.

    • The State of New Jersey Department of Environmental Protection renewed its 34,810 square-foot lease for 10 years at 300 Horizon Center Drive in the Company's Horizon Center Business Park in Hamilton Township, New Jersey. 300 Horizon Center Drive, a 69,780 square-foot office/flex building, is currently 100 percent leased.

    • Yardville National Bank signed a new 15-year lease for 17,435 square feet at 500 Horizon Center Drive at Horizon Center Business Park in Hamilton Township, New Jersey. 500 Horizon Center Drive, a 41,205 square-foot office/flex property, is currently 100 percent leased.

    • Japan Research Institute, a majority-owned subsidiary of Sumitomo Mitsui Bank Corp., renewed its 30,683 square-foot lease for five years at Harborside Financial Center, in Jersey City, New Jersey. Harborside Financial Center, a 2.1 million square-foot class A office complex, is currently 100 percent leased.


Included in the Company's Supplemental Operating and Financial Data for the second quarter 2001 are schedules highlighting the second quarter and year-to-date 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/2nd.quarter.sp.01.pdf.

ADDITIONAL INFORMATION

The Company expressed comfort with FFO per diluted share estimates for the third quarter 2001 in the range of $0.91 to $0.93 per share and a range of $3.63 to $3.68 per 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 third 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, August 9, 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.

The live conference call is also accessible by calling (719)457-2637 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 August 23, 2001. Beginning at 2:00 p.m. Eastern Time on August 9 through August 16, 2001, a replay of the call can also be accessed by calling (719)457-0820 and using the pass code 451563.

Copies of Mack-Cali's Form 10-Q and Supplemental Operating and Financial Data for the second 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:

Second Quarter 2001 Form 10-Q:
http://www.mack-cali.com/graphics/shareholders/pdfs/2nd.quarter.10q.01.pdf

Second Quarter 2001 Supplemental Operating and Financial Data:
http://www.mack-cali.com/graphics/shareholders/pdfs/2nd.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 269 properties, primarily office and office/flex buildings located in the Northeast, totaling approximately 28.5 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 June 30,
2001 2000
---------------------------------------------------------------------------
Base rents $129,419 $122,072
Escalations & recoveries from tenants 13,430 14,627
Parking and other 3,060 6,128
Equity in earnings of
unconsolidated joint ventures 2,037 1,070
Interest income 472 1,992


Total revenues 148,418 145,889


Real estate taxes 15,510 14,733
Utilities 10,699 10,014
Operating services 17,686 16,822
General and administrative 6,856 5,159
Depreciation and amortization 21,951 22,945
Interest expense 28,555 26,835


Total expenses 101,257 96,508


Minority interest in partially-owned
properties -- (2,982)
Income from operations before minority
interest in Operating Partnership 47,161 46,399
Minority interest in Operating
Partnership(1) (9,220) (8,936)
Income from operations 37,941 37,463
Non-recurring charges(2) -- (8,109)
Realized gains and unrealized losses on
disposition of rental property(3) 19,732 64,954


Net income $57,673 $94,308


PER SHARE DATA:
Income from operations - basic $0.67 $0.64
Net income - basic $1.02 $1.61
Income from operations - diluted $0.66 $0.63
Net income - diluted $0.98 $1.52
Dividends declared
per common share $0.61 $0.58


Basic weighted average
shares outstanding 56,519 58,545
Diluted weighted average
shares outstanding 71,044 73,284


(1) Excludes effect of minority interest's share of non-recurring charges
and realized gains and unrealized losses on disposition of rental property.
(2) Net of minority interest's share of $1,119 in 2000.
(3) Net of minority interest's share of $2,778 and $8,967 in 2001 and 2000,
respectively.





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,
2001 2000
--------------------------------------------------------------------------
Income from operations before minority interest
in Operating Partnership $47,161 $46,399
Add: Real estate depreciation and amortization(1) 23,068 23,434
Deduct: Adj. to rental income for straight-lining
of rents(2) (4,057) (3,400)
Funds from operations(3), after adj. for straight-
lining of rents and non-recurring charges $66,172 $66,433
Deduct: Non-incremental revenue generating
capital expenditures:
Capital expenditures (1,461) (1,763)
Tenant improvements and leasing commissions (8,399) (10,551)


Cash available for distribution $56,312 $54,119


Basic weighted average shares/units
outstanding(4) 64,476 66,627
Diluted weighted average shares/units
outstanding(5) 71,044 73,284


Per Share/Unit - Basic(6):
Funds from operations $0.97 $0.94
Cash available for distribution $0.81 $0.76
Per Share/Unit - Diluted:
Funds from operations $0.93 $0.91
Cash available for distribution $0.79 $0.74


Dividends declared per common share $0.61 $0.58


Dividend payout ratios:
Funds from operations-diluted 65.49% 63.98%
Cash available for distribution-diluted 76.96% 78.54%


(1) Includes the Company's share from unconsolidated joint ventures of $1,321
and $686 for 2001 and 2000, respectively.
(2) Includes the Company's share from unconsolidated joint ventures of $90
and ($3) 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 $3,765 in 2001 and 2000, respectively.


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


Six Months Ended June 30,
2001 2000
-----------------------------------------------------------------------
Base rents $254,795 $243,670
Escalations & recoveries from tenants 28,192 31,295
Parking and other 5,406 9,450
Equity in earnings of
unconsolidated joint ventures 5,446 2,207
Interest income 1,085 2,246


Total revenues 294,924 288,868


Real estate taxes 30,797 29,437
Utilities 22,655 20,393
Operating services 35,565 34,564
General and administrative 12,866 11,272
Depreciation and amortization 45,435 45,127
Interest expense 56,920 53,261


Total expenses 204,238 194,054


Minority interest in partially-owned
properties -- (5,072)
Income from operations before minority
interest in Operating Partnership 90,686 89,742
Minority interest in Operating
Partnership(1) (17,971) (17,637)
Income from operations 72,715 72,105
Non-recurring charges(2) -- (8,109)
Realized gains and unrealized losses on
disposition of rental property(3) 1,696 66,927


Net income $74,411 $130,923


PER SHARE DATA:
Income from operations - basic $1.28 $1.23
Net income - basic $1.31 $2.24
Income from operations - diluted $1.27 $1.23
Net income - diluted $1.30 $2.14
Dividends declared
per common share $1.22 $1.16


Basic weighted average
shares outstanding 56,662 58,420
Diluted weighted average
shares outstanding 71,198 73,237


(1) Excludes effect of minority interest's share of non-recurring charges and
realized gains and unrealized losses on disposition of rental property.
(2) Net of minority interest's share of $1,119 in 2000.
(3) Net of minority interest's share of $251 and $9,242 in 2001 and 2000,
respectively.


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,
2001 2000
---------------------------------------------------------------------------
Income from operations before minority interest
in Operating Partnership $90,686 $89,742
Add: Real estate depreciation and amortization(1) 47,071 46,152
Gain on sale of land -- 2,248
Deduct: Adj. to rental income for straight-lining
of rents(2) (7,862) (5,590)
Funds from operations(3), after adj. for straight-
lining of rents and non-recurring charges $129,895 $132,552
Deduct: Non-incremental revenue generating
capital expenditures:
Capital expenditures (2,374) (2,610)
Tenant improvements and leasing commissions (15,724) (20,460)


Cash available for distribution $111,797 $109,482


Basic weighted average shares/units
outstanding(4) 64,621 66,527
Diluted weighted average shares/units
outstanding(5) 71,198 73,237


Per Share/Unit - Basic(6):
Funds from operations $1.89 $1.88
Cash available for distribution $1.61 $1.53
Per Share/Unit - Diluted:
Funds from operations $1.82 $1.81
Cash available for distribution $1.57 $1.49


Dividends declared per common share $1.22 $1.16


Dividend payout ratios:
Funds from operations-diluted 66.87% 64.09%
Cash available for distribution-diluted 77.70% 77.60%


(1) Includes the Company's share from unconsolidated joint ventures of $2,043
and $1,420 for 2001 and 2000, respectively.
(2) Includes the Company's share from unconsolidated joint ventures of $126
and $54 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 $7,758 and $7,634 in 2001 and 2000, respectively.


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


June 30, December 31,
2001 2000
---------------------------------------------------------------------
ASSETS:
Rental property
Land and leasehold interests $ 488,288 $ 542,841
Buildings and improvements 2,679,435 2,934,383
Tenant improvements 120,707 106,208
Furniture, fixtures and equipment 7,046 6,445
3,295,476 3,589,877
Less-accumulated deprec. & amort. (314,239) (302,932)
2,981,237 3,286,945
Rental property held for sale, net 450,932 107,458
Net investment in rental property 3,432,169 3,394,403
Cash and cash equivalents 22,738 13,179
Investments in unconsolidated
joint ventures 130,944 101,438
Unbilled rents receivable, net 58,118 50,499
Deferred charges and other assets, net 100,337 102,655
Restricted cash 7,492 6,557
Accounts receivable, net 8,121 8,246
Total assets $3,759,919 $3,676,977


LIABILITIES AND STOCKHOLDERS' EQUITY:
Senior unsecured notes $1,096,599 $ 798,099
Revolving credit facilities 76,500 348,840
Mortgages and loans payable 547,701 481,573
Dividends and distributions payable 43,080 43,496
Accounts payable and accrued expenses 51,712 53,608
Rents received in advance and
security deposits 31,592 31,146
Accrued interest payable 26,814 17,477
Total liabilities 1,873,998 1,774,239
Minority interests:
Operating Partnership 448,088 447,523
Partially-owned properties -- 1,925
Total minority interests 448,088 449,448
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,
56,299,124 and 56,980,893
shares outstanding 563 570
Additional paid-in capital 1,494,124 1,513,037
Dividends in excess of net earnings (51,837) (57,149)
Unamortized stock compensation (5,017) (3,168)
Total stockholders' equity 1,437,833 1,453,290
Total liabilities and
stockholders' equity $3,759,919 $3,676,977