Mack-Cali Realty Corporation Announces 7.5 Percent Increase in Second Quarter FFO Per Share

08/08/2002 Category: Earnings

CRANFORD, NEW JERSEY - August 8, 2002 - Mack-Cali Realty Corporation (NYSE: CLI) today reported its results for the second quarter 2002. The Company reported that its funds from operations (FFO) per diluted share for the second quarter 2002 increased 7.5 percent over the same period in 2001.



FINANCIAL HIGHLIGHTS




FFO, after adjustment for straight-lining of rents, for the quarter ended June 30, 2002 amounted to $72.1 million, or $1.00 per share, versus $66.2 million, or $0.93 per share, for the quarter ended June 30, 2001, a per share increase of 7.5 percent. For the six months ended June 30, 2002, FFO, after adjustment for straight-lining of rents, amounted to $138.0 million, or $1.92 per share, versus $129.9 million, or $1.82 per share, for the same period last year, a per share increase of 5.5 percent.



Cash available for distribution (CAD) for the second quarter 2002 equaled $61.2 million, or $0.85 per share, versus $56.3 million, or $0.79 per share, for the same quarter last year, a per share increase of 7.6 percent. For the six months ended June 30, 2002, CAD equaled $118.2 million, or $1.65 per share, versus $111.8 million, or $1.57 per share, for the same period last year, an increase of 5.1 percent on a per share basis.



Total revenues for the second quarter 2002 decreased to $141.5 million from $146.4 million for the same quarter last year, a decrease of 3.3 percent. For the six months ended June 30, 2002, total revenues amounted to $284.6 million, a decrease of 1.7 percent over total revenues of $289.5 million for the same period last year.



Net income for the second quarter 2002 equaled $35.0 million, or $0.61 per share, versus $57.7 million, or $0.98 per share, for the same quarter last year, a per share decrease of 37.8 percent. For the six months ended June 30, 2002, net income equaled $75.7 million, or $1.31 per share, versus $74.4 million, or $1.30 per share, for the same period last year, an increase of 0.8 percent on a per share basis.



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



The Company had 57,666,984 shares of common stock, 7,858,490 common operating partnership units and 215,894 $1,000-face-value preferred operating partnership units outstanding as of quarter end. The outstanding preferred units are convertible into 6,230,707 common operating partnership units. Assuming conversion of all preferred units into common units, the Company had a total of 71,756,181 shares/common units outstanding at June 30, 2002.



As of June 30, 2002, the Company had total indebtedness of approximately $1.7 billion, with a weighted average annual interest rate of 7.1 percent. Mack-Cali had a total market capitalization of $4.2 billion and a debt-to-undepreciated assets ratio of 40.9 percent at June 30, 2002. The Company had an interest coverage ratio of 3.9 times for the quarter ended June 30, 2002.



"Mack-Cali made significant progress with our capital recycling program in the second quarter with sales of over $82 million of non-core assets in the Southwest," said Mitchell E. Hersh, chief executive officer of Mack-Cali. "Despite a challenging economic environment, we're pleased to have been able to maintain strong occupancies, with 93.9 percent of our portfolio leased."



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.



The following is a summary of the Company's recent activity:



PROPERTY SALES




During the quarter, the Company sold eight office properties, aggregating 1,010,136 square feet, and a vacant land parcel, for total sales proceeds of $83.1 million, as follows:



- In April, the Company sold a land parcel located in its Horizon Center Business Park in Hamilton Township, New Jersey, for approximately $800,000;



- In May, the Company sold a portfolio of four office buildings totaling 488,789 square feet, located in the Dallas, Texas area, for approximately $34 million;



- Also in May, the Company sold 750 South Richfield Street, a 108,240 square-foot office building located in Aurora, Colorado, for approximately $21.1 million; and



- In June, the Company sold a portfolio of three office buildings totaling 413,107 square feet, located in Houston, Texas, for approximately $27.2 million.



More recently, in July, the Company sold One Mack-Cali Center, a 297,429 square-foot office building located in Tampa, Florida, for approximately $23.7 million. The building was Mack-Cali's sole asset in Florida.



ACQUISITIONS




In June, the Company acquired three land parcels located in Hawthorne and Yonkers, New York in one transaction for a total cost of approximately $2.6 million.



DEVELOPMENT SUMMARY




In April, the Company completed construction and placed in service 125 Clearbrook Road in Elmsford, New York. The 33,000 square-foot office/flex building is fully leased.



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



- 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 project is approximately 58 percent pre-leased;



- 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



- Hyatt Regency South Pier Hotel, a 350-room luxury hotel that was built on the south pier of Harborside through a joint venture between Mack-Cali and Hyatt, commenced operations in July.



LEASING INFORMATION




Mack-Cali's consolidated in-service portfolio was 93.9 percent leased at June 30, 2002, unchanged from March 31, 2002.



For the quarter ended June 30, 2002, the Company executed 183 leases totaling 1,179,732 square feet, consisting of 836,680 square feet of office space, 292,510 square feet of office/flex space and 50,542 square feet of industrial/warehouse space. Of these totals, 498,485 square feet were for new leases and 681,247 square feet were for lease renewals and other tenant retention transactions.



Highlights of the quarter's leasing transactions include:



- Cendant Operations, Inc., a subsidiary of Cendant Corporation, a provider of travel and residential real estate services, signed a six-year, 145,983 square-foot lease at 7 Sylvan Way in the Mack-Cali Business Campus in Parsippany, New Jersey. Cendant now leases 100 percent of the class A office building through 2011;



- Also in the Mack-Cali Business Campus, national insurance industry service provider GAB Robins North America, Inc. has renewed its lease of 75,049 square feet at 9 Campus Drive for five years. The 156,495 square-foot office property is 96.7 percent leased;



- Washington Mutual Bank, F.A. has leased 27,349 square feet at 100 Walnut Avenue in Clark, New Jersey for five years. The 182,555 square-foot office building is 100 percent leased;



- Meridian Health System, owner/operator of health care facilities, has leased a total of 42,616 square feet for 10 years at 1350 Campus Parkway in Wall Township, New Jersey. The transaction represents the renewal of 17,766 square feet and an expansion of 24,850 square feet. The 79,642 square-foot office building is 100 percent leased;



- Vie de France Yamazaki, Inc., the U.S. subsidiary of Yamazaki Baking Company, Ltd. of Tokyo, renewed 24,678 square feet at 525 Executive Boulevard in Elmsford, New York for five years. The 61,700 square-foot office/flex property is 100 percent leased;



- Eastern Research, Inc., a designer and manufacturer of access and internetworking products, renewed its lease for 39,000 square feet at 225 Executive Drive in Moorestown, New Jersey for three years. The 50,600 square-foot office/flex property is 100 percent leased; and



- Radio Free Europe/Radio Liberty, a private international communications service, renewed 26,856 square feet for eight years at 1201 Connecticut Avenue N.W. in Washington, DC. The 169,549 square-foot office building is 100 percent leased.



Included in the Company's Supplemental Operating and Financial Data for the second quarter 2002 are schedules highlighting the second quarter and year-to-date 2002 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.02.pdf.



ADDITIONAL INFORMATION




The Company expressed comfort with FFO per diluted share estimates for the third quarter 2002 in the range of $0.90 to $0.92 per share and a range of $3.72 to $3.76 per share for calendar year 2002. These estimates reflect management's view of 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 2002 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 8, 2002, at 11:00 a.m. Eastern Daylight Time, which will be broadcast live via the Internet at: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=96021&eventID=649476.



The live conference call is also accessible by calling (719)457-2641 and requesting the Mack-Cali conference call.



The conference call will be rebroadcast on Mack-Cali's website at http://www.mack-cali.com beginning at 2:00 p.m. Eastern Daylight Time on August 8, 2002 through August 15, 2002. A replay of the call will also be accessible during the same time period by calling (719)457-0820 and using the pass code 283094.



Copies of Mack-Cali's Form 10-Q and Supplemental Operating and Financial Data for the second quarter 2002, and the Company's Chief Executive Officer and Chief Financial Officer Certifications pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) are available on Mack-Cali's website, as follows:



Second Quarter 2002 Form 10-Q:

http://www.mack-cali.com/graphics/shareholders/pdfs/2nd.quarter.10q.02.pdf



Second Quarter 2002 Supplemental Operating and Financial Data:

http://www.mack-cali.com/graphics/shareholders/pdfs/2nd.quarter.sp.02.pdf



Second Quarter 2002 Chief Executive Officer and Chief Financial Officer Certifications:

http://www.mack-cali.com/graphics/shareholders/pdfs/2nd.quarter.cert.02.pdf



In addition, these items are available upon request from:



Mack-Cali Investor Relations Dept.

11 Commerce Drive, Cranford, NJ 07016-3501

(908)272-8000 ext. 2484



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 258 properties, primarily office and office/flex buildings located in the Northeast, totaling approximately 27.3 million square feet. The properties enable the Company to provide a full complement of real estate opportunities to its diverse base of approximately 2,000 tenants.



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



Estimates of future Funds From Operations per share are by definition and certain other matters discussed in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the federal securities laws, including Section 21E of the Securities Exchange Act of 1934. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements relate to, without limitation, the Company's future economic performance, plans and objectives for future operations and projections of revenue and other financial items. Forward-looking statements can be identified by the use of words such as "may," "will," "should," "expect," "anticipate," "estimate," "continue," or comparable terminology. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, it can give no assurance that its expectations will be achieved. Forward-looking statements are inherently subject to certain risks, trends and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Among the risks, trends and uncertainties are changes in the general economic conditions, including those affecting industries in which the Company's principal tenants compete; any failure of the general economy to recover timely from the current economic downturn; the extent of any tenant bankruptcies; the Company's ability to lease or re-lease space at current or anticipated rents; changes in the supply of and demand for office, office/flex and industrial/warehouse properties; changes in interest rate levels; changes in operating costs; the Company's ability to obtain adequate insurance, including coverage for terrorist acts; 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. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.




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


Quarter Ended June 30,
2002 2001
---------------------------------------------------------------------------
Base rents $122,049 $129,419
Escalations and recoveries from tenants 14,427 13,430
Parking and other 4,536 3,060
Interest income 446 472


Total revenues 141,458 146,381


Real estate taxes 15,369 15,510
Utilities 9,307 10,699
Operating services 16,541 17,686
General and administrative 7,903 6,856
Depreciation and amortization 27,522 21,951
Interest expense 25,596 28,555


Total expenses 102,238 101,257


Equity in earnings of unconsolidated
joint ventures 9,374 2,037


Income before realized gains (losses) and
unrealized losses on disposition of rental
property and minority interest 48,594 47,161
Realized gains (losses) and unrealized losses
on disposition of rental property, net (4,840) 22,510
Income before minority interest 43,754 69,671


Minority interest in Operating Partnership (8,715) (11,998)


Net income $35,039 $57,673


PER SHARE DATA:
Basic earnings per share $0.61 $1.02
Diluted earnings per share $0.61 $0.98


Dividends declared per common share $0.62 $0.61


Basic weighted average shares outstanding 57,241 56,519
Diluted weighted average shares outstanding 65,606 71,044


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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 June 30,
2002 2001
---------------------------------------------------------------------------
Income before realized gains (losses) and
unrealized losses on disposition of rental
property and minority interest $48,594 $47,161
Add: Real estate depreciation and amortization(1) 27,540 23,068
Gain on sale of land 717 --
Deduct: Adjustment to rental income for
straight-lining of rents(2) (1,210) (4,057)
Equity in earnings from gain on sale of
rental property (3,506) --
Funds from operations(3), after adjustment for
straight-lining of rents $72,135 $66,172
Deduct: Non-incremental revenue generating
capital expenditures:
Capital expenditures (1,947) (1,461)
Tenant improvements and leasing commissions (8,969) (8,399)


Cash available for distribution $61,219 $56,312


Basic weighted average shares/units outstanding(4) 65,168 64,476
Diluted weighted average shares/units
outstanding(5) 71,940 71,044


Per Share/Unit - Basic(6):
Funds from operations $1.05 $0.97
Cash available for distribution $0.88 $0.81
Per Share/Unit - Diluted:
Funds from operations $1.00 $0.93
Cash available for distribution $0.85 $0.79


Dividends declared per common share $0.62 $0.61
Dividend payout ratios:
Funds from operations-diluted 61.83% 65.49%
Cash available for distribution-diluted 72.86% 76.96%


(1) Includes the Company's share from unconsolidated joint ventures of $239 and $1,321
for 2002 and 2001, respectively.
(2) Includes the Company's share from unconsolidated joint ventures of $94 and $90
for 2002 and 2001, 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
$3,863 and $3,879 in 2002 and 2001, respectively.



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



Six Months Ended June 30,
2002 2001
---------------------------------------------------------------------------
Base rents $248,506 $254,795
Escalations and recoveries from tenants 27,697 28,192
Parking and other 7,600 5,406
Interest income 784 1,085


Total revenues 284,587 289,478


Real estate taxes 30,702 30,797
Utilities 19,437 22,655
Operating services 32,739 35,565
General and administrative 14,608 12,866
Depreciation and amortization 51,475 45,435
Interest expense 51,955 56,920


Total expenses 200,916 204,238


Equity in earnings of unconsolidated
joint ventures 8,069 5,446


Income before realized gains (losses) and
unrealized losses on disposition of rental
property and minority interest 91,740 90,686
Realized gains (losses) and unrealized losses
on disposition of rental property, net 2,258 1,947
Income before minority interest 93,998 92,633


Minority interest in Operating Partnership (18,344) (18,222)


Net income $75,654 $74,411


PER SHARE DATA:
Basic earnings per share $1.33 $1.31
Diluted earnings per share $1.31 $1.30


Dividends declared per common share $1.24 $1.22


Basic weighted average shares outstanding 57,021 56,662
Diluted weighted average shares outstanding 71,702 71,198


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


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,
2002 2001
---------------------------------------------------------------------------
Income before realized gains (losses) and
unrealized losses on disposition of rental
property and minority interest $91,740 $90,686
Add: Real estate depreciation and amortization(1) 51,989 47,071
Gain on sale of land 717 --
Deduct: Adjustment to rental income for
straight-lining of rents(2) (2,923) (7,862)
Equity in earnings from gain on sale of
rental property (3,506) --
Funds from operations(3), after adjustment for
straight-lining of rents $138,017 $129,895
Deduct: Non-incremental revenue generating
capital expenditures:
Capital expenditures (2,265) (2,374)
Tenant improvements and leasing commissions (17,535) (15,724)


Cash available for distribution $118,217 $111,797


Basic weighted average shares/units outstanding(4) 64,961 64,621
Diluted weighted average shares/units
outstanding(5) 71,702 71,198


Per Share/Unit - Basic(6):
Funds from operations $2.00 $1.89
Cash available for distribution $1.70 $1.61
Per Share/Unit - Diluted:
Funds from operations $1.92 $1.82
Cash available for distribution $1.65 $1.57


Dividends declared per common share $1.24 $1.22
Dividend payout ratios:
Funds from operations-diluted 64.42% 66.87%
Cash available for distribution-diluted 75.21% 77.70%


(1) Includes the Company's share from unconsolidated joint ventures of $953 and $2,043
for 2002 and 2001, respectively.
(2) Includes the Company's share from unconsolidated joint ventures of ($953) and $126
for 2002 and 2001, 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
$7,806 and $7,758 in 2002 and 2001, respectively.



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


June 30, December 31,
2002 2001
ASSETS: (unaudited)
---------------------------------------------------------------------------
Rental property
Land and leasehold interests $ 505,363 $ 479,358
Buildings and improvements 2,977,233 2,751,453
Tenant improvements 152,230 140,071
Furniture, fixtures and equipment 7,326 7,189
3,642,152 3,378,071
Less-accumulated deprec. & amort. (399,041) (350,705)
3,243,111 3,027,366
Rental property held for sale, net 120,109 384,626
Net investment in rental property 3,363,220 3,411,992
Cash and cash equivalents 64,939 12,835
Investments in unconsolidated joint ventures 172,611 146,540
Unbilled rents receivable, net 61,526 60,829
Deferred charges and other assets, net 101,407 101,499
Restricted cash 7,358 7,914
Accounts receivable, net 4,447 5,161


Total assets $3,775,508 $3,746,770


LIABILITIES AND STOCKHOLDERS' EQUITY:
Senior unsecured notes $1,097,087 $1,096,843
Revolving credit facilities 66,600 59,500
Mortgages and loans payable 541,972 543,807
Dividends and distributions payable 44,493 44,069
Accounts payable and accrued expenses 61,546 64,620
Rents received in advance and
security deposits 33,212 33,512
Accrued interest payable 25,639 25,587
Total liabilities 1,870,549 1,867,938
Minority interest in Operating
Partnership 439,848 446,244
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,
57,666,984 and 56,712,270
shares outstanding 576 567
Additional paid-in capital 1,529,424 1,501,623
Dividends in excess of net earnings (60,483) (64,906)
Unamortized stock compensation (4,406) (4,696)
Total stockholders' equity 1,465,111 1,432,588


Total liabilities and
stockholders' equity $3,775,508 $3,746,770