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Mack-Cali (CLI) Making Great Strides in Strategic Plan 20/15

Mack-Cali Realty Corporation CLI revealed solid progress on its “20/15” strategic plan. Laid down last year, this plan is aimed at transforming Mack-Cali by focusing on the waterfront and transit-based office holdings in the Northeast, and on luxury multi-family portfolio growth. It also includes planned exits from non-core markets and capital improvements in core assets.

In fact, this 39-month plan intends to reposition Mack-Cali’s portfolio to include 20 million square feet of office and 15,000 luxury apartment units by 2018. For the office portfolio, the company is targeting an increased leased percentage to 90% by year-end 2016 and 93% in 2017. Moreover, the company plans to lower expenses in office operations as well as reduce credit costs by exploring refinancing options in 2016 and 2017.

Further, the company intends to upgrade its present amenities and improve its offerings with six major capital investment programs in the next 12 to 18 months. Among such projects is the $50 to $75 million transformation and reimagination of the Harborside complex on the Jersey City Waterfront.

In fact, per Mack-Cali’s presentation, over the last 12 months, the company has already determined market mix, exited the non-core markets, purchased in transit-based markets in Hoboken & Metropark and closed non-core asset sales worth $400 million with another $200 million under contract. It has also reduced staffing levels, operating costs and G&A expenditures, making cash savings of $18 million.

And finally, in the next 24 months, Mack-Cali targets 6% annual yield and 11% internal rate of return (IRR) on developments. It also intends to make up to $450 million non-core asset sales through 2017. Moreover, the company plans to fund Roseland Residential Trust through asset sales or other capital market activities.

Notably, last year, Mack-Cali’s wholly owned multi-family subsidiary – Roseland Residential Trust – was created. Currently, Roseland has 5,434 multi-family units in operation with 97% leased and additional 2,560 units under construction with a pipeline of 11,600 units to be developed. Roseland plans to decrease the number of projects in which it owns subordinated interests to three by year-end 2016 from nine at year-end 2014.

Going forward, Mack-Cali’s focus on waterfront and transit-oriented office properties, large commercial tenants and diversification into the apartment sector are expected to drive growth and increase cash flows. Yet, dispositions lead to earnings dilution while any hike in interest rate can add to its woes.

Mack-Cali currently has a Zacks Rank #3 (Hold).

A better-ranked stock in the REIT industry is InfraREIT, Inc. HIFR, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Also, investors can consider stocks like DuPont Fabros Technology, Inc. DFT and HCP Inc. HCP that carry a Zacks Rank #2 (Buy).

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