Mack-Cali Realty Corporation Announces 7.7 Percent Increase in Third Quarter FFO Per Share

11/05/2002 Category: Earnings

CRANFORD, NEW JERSEY - November 5, 2002 - Mack-Cali Realty Corporation (NYSE: CLI) today reported its results for the third quarter 2002. The Company reported that its funds from operations (FFO) per diluted share for the third quarter 2002 increased 7.7 percent over the same period in 2001.



FINANCIAL HIGHLIGHTS




FFO, after adjustment for straight-lining of rents, for the quarter ended September 30, 2002 amounted to $70.5 million, or $0.98 per share, versus $64.3 million, or $0.91 per share, for the quarter ended September 30, 2001, a per share increase of 7.7 percent. For the nine months ended September 30, 2002, FFO, after adjustment for straight-lining of rents, amounted to $208.5 million, or $2.91 per share, versus $194.2 million, or $2.73 per share, for the same period last year, a per share increase of 6.6 percent.



Cash available for distribution (CAD) for the third quarter 2002 equaled $61.6 million, or $0.86 per share, versus $53.5 million, or $0.76 per share, for the same quarter last year, a per share increase of 13.2 percent. For the nine months ended September 30, 2002, CAD equaled $179.8 million, or $2.51 per share, versus $165.3 million, or $2.33 per share, for the same period last year, an increase of 7.7 percent on a per share basis.



Total revenues for the third quarter 2002 decreased to $143.4 million from $144.0 million for the same quarter last year, a decrease of 0.4 percent. For the nine months ended September 30, 2002, total revenues amounted to $428.0 million, a decrease of 1.3 percent over total revenues of $433.5 million for the same period last year.



Net income for the third quarter 2002 equaled $34.2 million, or $0.59 per share, versus $24.0 million, or $0.43 per share, for the same quarter last year, a per share increase of 37.2 percent. For the nine months ended September 30, 2002, net income equaled $109.9 million, or $1.91 per share, versus $98.4 million, or $1.74 per share, for the same period last year, an increase of 9.8 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 57,669,818 shares of common stock, 7,814,806 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 71,715,331 shares/common units outstanding at September 30, 2002.



As of September 30, 2002, the Company had total indebtedness of approximately $1.8 billion, with a weighted average annual interest rate of 7.0 percent. Mack-Cali had a total market capitalization of $4.1 billion and a debt-to-undepreciated assets ratio of 41.5 percent at September 30, 2002. The Company had an interest coverage ratio of 3.8 times for the quarter ended September 30, 2002.



"Despite the uncertainty surrounding the economy, Mack-Cali is pleased to report another quarter of solid FFO growth, strong occupancies, and continued progress in exiting non-core markets and enhancing our geographic focus in our core Northeast markets," said Mitchell E. Hersh, chief executive officer of Mack-Cali.



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



ACQUISITIONS




During the quarter, the Company acquired two office properties, aggregating 143,417 square feet of space, for approximately $16.7 million, as follows:



- The Company acquired a 75,668 square-foot condominium interest in 3 Skyline Drive, a 113,098 square-foot office building located in Hawthorne, New York, for approximately $9.3 million; and



- In August, the Company acquired 25 Commerce Drive, a 67,749 square-foot office building located in Cranford, New Jersey, for approximately $7.4 million.



More recently, on November 1, the Company acquired 1633 Littleton Road, a 57,722 square-foot office building located in Parsippany, New Jersey, for approximately $11.4 million.



DEVELOPMENT SUMMARY




A summary of the Company's development projects at its Harborside Financial Center, located on the Hudson River Waterfront in Jersey City, New Jersey, is as follows:



- Harborside Plaza 5, a 34-story, 980,000 square-foot class A office tower with a 1,270-car parking garage pedestal, commenced initial operations in September. The property is approximately 58 percent leased (which includes a lease with a tenant for 68,000 square feet, or 6.9 percent of the property, for which the tenant has informed the Company that it is experiencing financial difficulties and has failed to meet certain monetary obligations under the lease, including the payment of rent);



- Harborside Plaza 10, a 19-story, 575,000 square-foot class A office building, commenced initial operations in September. The property is 100 percent 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 initial operations in July.



PROPERTY SALES




During the quarter, in July, the Company exited Florida by selling One Mack-Cali Center, a 297,429 square-foot office building located in Tampa, for approximately $23.7 million.



More recently, in October, the Company exited another non-core market by selling its remaining three office properties in Arizona, aggregating 416,967 square feet, for approximately $43.0 million.



FINANCING ACTIVITY




In September, the Company raised its quarterly dividend by 1.6 percent to $0.63 per share ($2.52 per share on an annualized basis), effective for the quarter ended September 30, 2002. This increase represented the eighth consecutive year in which the Company has increased its quarterly dividend.



Also in September, the Company's operating partnership, Mack-Cali Realty, L.P., refinanced its unsecured revolving credit facility with a group of 14 lender banks, arranged by J.P. Morgan Securities, Inc. and Fleet Securities, Inc. The $600 million unsecured facility, which is expandable to $800 million, carries an interest rate equal to LIBOR plus 70 basis points, representing a reduction of 10 basis points from the previous facility. The interest rate is subject to adjustment, on a sliding scale, based upon a change in the partnership's unsecured debt ratings. The credit facility, which also carries a facility fee of 20 basis points, has a three-year term with a one-year extension option.



In accordance with the Company's Share Repurchase Program, during the third quarter, the Company purchased 54,000 shares of its outstanding common stock for an aggregate cost of approximately $1.7 million, representing an average price of $30.97 per share. Thus far in 2002, the Company purchased 186,700 shares of its outstanding common stock for an aggregate cost of approximately $5.8 million, representing an average price of $30.84 per share.



LEASING INFORMATION




Mack-Cali's consolidated in-service portfolio was 93.0 percent leased at September 30, 2002, compared to 93.9 percent at June 30, 2002.



For the quarter ended September 30, 2002, the Company executed 190 leases totaling 1,338,585 square feet, consisting of 1,048,271 square feet of office space, 229,083 square feet of office/flex space and 61,231 square feet of industrial/warehouse space. Of these totals, 346,564 square feet were for new leases and 992,021 square feet were for lease renewals and other tenant retention transactions.



Highlights of the quarter's leasing transactions include:



- BT Harborside Urban Renewal Corporation, a division of Deutsche Bank, a global banking and securities firm, signed a lease renewal through December 31, 2004 for 385,000 square feet at Harborside Financial Center Plaza One in Jersey City, New Jersey. The 400,000 square-foot building is 100 percent leased;



- Cendant Mortgage Corporation, a wholly-owned subsidiary of Cendant Corporation, renewed its lease for 74,472 square feet for five years at 228 Strawbridge Drive in Moorestown, New Jersey. Cendant Mortgage leases the entire building, which is located in Moorestown Corporate Center;



- Fabrication Enterprises, Inc., a supplier of physical and occupational therapy products, signed a new ten-year lease for 20,500 square feet at 3 Westchester Plaza in Elmsford, New York. The 93,500 square-foot office/flex property, located in Cross Westchester Executive Park, is 94.6 percent leased;



- Aeropostale, Inc., a retail apparel company, signed new leases for 20,000 square feet for an average term of 5.8 years at 201 Willowbrook Boulevard in Wayne, New Jersey. The 178,329 square-foot property is 61.2 percent leased;



- McCarthy, Fingar, Donovan, Drazen & Smith, L.L.P., a law firm, signed a renewal for 20,000 square feet for seven years at 11 Martine Avenue in White Plains, New York. Located at Westchester Financial Center, the 180,000 square-foot class A office property is 100 percent leased; and



- The Medicines Company, a developer of pharmaceutical products, signed a new ten-year lease for 16,779 square feet at 8 Campus Drive in Parsippany, New Jersey. The 215,265 square-foot class A office property is 86.2 percent leased.



Included in the Company's Supplemental Operating and Financial Data for the third quarter 2002 are schedules highlighting the third 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/3rd.quarter.sp.02.pdf.



ADDITIONAL INFORMATION




The Company expressed comfort with FFO per diluted share estimates for the fourth quarter 2002 in the range of $0.86 to $0.88 per share. The Company also provided for the first time its estimates for FFO per diluted share for calendar year 2003 in the range of $3.52 to $3.72 per share. 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 fourth quarter and calendar year 2003 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, November 5, 2002, at 11:00 a.m. Eastern Standard Time, which will be broadcast live via the Internet at: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=96021&eventID=669721.



The live conference call is also accessible by calling (719)457-2621 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 Standard Time on November 5, 2002 through November 12, 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 695816.



Copies of Mack-Cali's Form 10-Q and Supplemental Operating and Financial Data for the third quarter 2002 are available on Mack-Cali's website, as follows:



Third Quarter 2002 Form 10-Q:

http://www.mack-cali.com/graphics/shareholders/pdfs/3rd.quarter.10q.02.pdf



Third Quarter 2002 Supplemental Operating and Financial Data:

http://www.mack-cali.com/graphics/shareholders/pdfs/3rd.quarter.sp.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 260 properties, primarily office and office/flex buildings located in the Northeast, totaling approximately 28.6 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 September 30,
2002 2001
-----------------------------------------------------------------------------
Base rents $120,069 $126,789
Escalations and recoveries from tenants 15,152 13,944
Parking and other 7,445 2,610
Interest income 742 685


Total revenues 143,408 144,028


Real estate taxes 15,161 16,012
Utilities 10,090 11,517
Operating services 16,743 16,336
General and administrative 5,525 8,767
Depreciation and amortization 29,300 22,529
Interest expense 26,429 27,772


Total expenses 103,248 102,933


Equity in earnings of unconsolidated
joint ventures 2,205 1,884


Income before realized gains (losses) and
unrealized losses on disposition of rental
property and minority interest 42,365 42,979
Realized gains (losses) and unrealized losses
on disposition of rental property, net 456 (11,624)
Income before minority interest 42,821 31,355


Minority interest in Operating Partnership (8,589) (7,346)


Net income $34,232 $24,009


PER SHARE DATA:
Basic earnings per share $0.60 $0.43
Diluted earnings per share $0.59 $0.43


Dividends declared per common share $0.63 $0.62


Basic weighted average shares outstanding 57,534 56,129
Diluted weighted average shares outstanding 65,656 64,403


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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 September 30,
2002 2001
-----------------------------------------------------------------------------
Net income $34,232 $24,009
Add: Minority interest in Operating Partnership 8,589 7,346
(Deduct)/Add: Realized (gains) losses and
unrealized losses on disposition of rental
property, net (456) 11,624
Add: Real estate depreciation and amortization(1) 30,216 23,179
Deduct: Adjustment to rental income for
straight-lining of rents(2) (2,112) (1,830)
Funds from operations(3), after adjustment for
straight-lining of rents $70,469 $64,328
Deduct: Non-incremental revenue generating
capital expenditures:
Capital expenditures (1,771) (1,478)
Tenant improvements and leasing commissions (7,100) (9,359)


Cash available for distribution $61,598 $53,491


Basic weighted average shares/units outstanding(4) 65,372 64,084
Diluted weighted average shares/units
outstanding(5) 71,887 70,762


Per Share/Unit - Basic(6):
Funds from operations $1.02 $0.94
Cash available for distribution $0.88 $0.77
Per Share/Unit - Diluted:
Funds from operations $0.98 $0.91
Cash available for distribution $0.86 $0.76


Dividends declared per common share $0.63 $0.62
Dividend payout ratios:
Funds from operations-diluted 64.27% 68.20%
Cash available for distribution-diluted 73.52% 82.02%

(1) Includes the Company's share from unconsolidated joint ventures of $1,125 and $863
for 2002 and 2001, respectively.
(2) Includes the Company's share from unconsolidated joint ventures of $124 and ($62)
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
$3,925 and $3,943 in 2002 and 2001, respectively.



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



Nine Months Ended September 30,
2002 2001
-----------------------------------------------------------------------------
Base rents $368,575 $381,584
Escalations and recoveries from tenants 42,849 42,136
Parking and other 15,045 8,016
Interest income 1,526 1,770


Total revenues 427,995 433,506


Real estate taxes 45,863 46,809
Utilities 29,527 34,172
Operating services 49,482 51,901
General and administrative 20,133 21,633
Depreciation and amortization 80,775 67,964
Interest expense 78,384 84,692


Total expenses 304,164 307,171


Equity in earnings of unconsolidated
joint ventures 10,274 7,330


Income before realized gains (losses) and
unrealized losses on disposition of rental
property and minority interest 134,105 133,665
Realized gains (losses) and unrealized losses
on disposition of rental property, net 2,714 (9,677)
Income before minority interest 136,819 123,988


Minority interest in Operating Partnership (26,933) (25,568)


Net income $109,886 $98,420


PER SHARE DATA:
Basic earnings per share $1.92 $1.74
Diluted earnings per share $1.91 $1.74


Dividends declared per common share $1.87 $1.84


Basic weighted average shares outstanding 57,194 56,482
Diluted weighted average shares outstanding 71,764 64,691


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


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

Nine Months Ended September 30,
2002 2001
-----------------------------------------------------------------------------
Net income $109,886 $98,420
Add: Minority interest in Operating Partnership 26,933 25,568
(Deduct)/Add: Realized (gains) losses and
unrealized losses on disposition of rental
property, net (2,714) 9,677
Add: Real estate depreciation and amortization(1) 82,205 70,250
Add: Gain on sale of land 717 --
Deduct: Adjustment to rental income for
straight-lining of rents(2) (5,035) (9,692)
Deduct: Equity in earnings from gain on sale of
rental property (3,506) --
Funds from operations(3), after adjustment for
straight-lining of rents $208,486 $194,223
Deduct: Non-incremental revenue generating
capital expenditures:
Capital expenditures (4,036) (3,852)
Tenant improvements and leasing commissions (24,635) (25,083)
Cash available for distribution $179,815 $165,288


Basic weighted average shares/units outstanding(4) 65,099 64,440
Diluted weighted average shares/units
outstanding(5) 71,764 71,050
Per Share/Unit - Basic(6):
Funds from operations $3.02 $2.83
Cash available for distribution $2.58 $2.38
Per Share/Unit - Diluted:
Funds from operations $2.91 $2.73
Cash available for distribution $2.51 $2.33
Dividends declared per common share $1.87 $1.84
Dividend payout ratios:
Funds from operations-diluted 64.37% 67.31%
Cash available for distribution-diluted 74.63% 79.09%

(1) Includes the Company's share from unconsolidated joint ventures of $2,078 and $2,906
for 2002 and 2001, respectively.
(2) Includes the Company's share from unconsolidated joint ventures of ($829) and $64
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
$11,731 and $11,701 in 2002 and 2001, respectively.



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


September 30,
2002 December 31,
ASSETS: (unaudited) 2001
-----------------------------------------------------------------------------
Rental property
Land and leasehold interests $ 521,439 $ 479,358
Buildings and improvements 3,040,046 2,751,453
Tenant improvements 157,380 140,071
Furniture, fixtures and equipment 7,400 7,189
3,726,265 3,378,071
Less-accumulated deprec. & amort. (420,939) (350,705)
3,305,326 3,027,366
Rental property held for sale, net 41,239 384,626
Net investment in rental property 3,346,565 3,411,992
Cash and cash equivalents 76,819 12,835
Investments in unconsolidated joint ventures 188,264 146,540
Unbilled rents receivable, net 61,609 60,829
Deferred charges and other assets, net 126,829 101,499
Restricted cash 7,429 7,914
Accounts receivable, net 4,815 5,161


Total assets $3,812,330 $3,746,770


LIABILITIES AND STOCKHOLDERS' EQUITY:
Senior unsecured notes $1,097,209 $1,096,843
Revolving credit facilities 119,000 59,500
Mortgages and loans payable 541,026 543,807
Dividends and distributions payable 45,181 44,069
Accounts payable and accrued expenses 62,499 64,620
Rents received in advance and
security deposits 39,062 33,512
Accrued interest payable 8,805 25,587
Total liabilities 1,912,782 1,867,938
Minority interest in Operating
Partnership 438,422 446,244
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,
57,669,818 and 56,712,270
shares outstanding 576 567
Additional paid-in capital 1,528,874 1,501,623
Accumulated other comprehensive loss (2,174) --
Dividends in excess of net earnings (62,583) (64,906)
Unamortized stock compensation (3,567) (4,696)
Total stockholders' equity 1,461,126 1,432,588


Total liabilities and stockholders' equity $3,812,330 $3,746,770