Mack-Cali Realty Corporation CLI is in a transformational phase. The company’s new executive leadership has finally concluded that the company has promising opportunities waiting on the Hudson Waterfront, also called the Gold Coast.
The new leaders have chalked out a three-year strategic transformation plan – 20/15 – which calls for the disposition of 30 to 40 properties worth $600 million to $800 million located in New York City and Washington DC, as well as in Maryland, Parsippany and Paramus, apart from several other non-strategic assets across all markets.
Mack-Cali, which had suffered its share of struggles in recent years, is presently focused on waterfront and transit-oriented office properties as well as luxury multi-family properties instead of continuing as a suburban company, under the direction of Chief Executive Officer Mitchell Rudin and President Michael DeMarco.
Their primary motive is to capture the attention of people who prefer to live, work and play in the same area – a trend that drove development in several other cities in the U.S. This group also gives much importance to the transit options and hence focusing on such areas has become a strategic choice for the company.
Going into specifics, Mack-Cali plans to focus on the Waterfront properties in Jersey City, Weehawken, Hoboken, and West New York. The company already owns 4.3 million square feet of Waterfront office space and 3,400 luxury multi-family units along with several other development projects.
The transformation plan also includes a relocation of the company’s headquarters to Jersey City in the first half of 2016. Furthermore, its multi-family subsidiary, Roseland, is also expected to gain distinction as Roseland Property Trust (RPT) on Sep 30, 2015.
Mack-Cali also has extensive plans for upgrading its existing assets. The company intends to spend $20 million for upgrading its major assets in Parsippany, Paramus and White Plains with the aim of transforming these buildings to Class A properties, a move expected to drive higher rents and occupancy at these properties. Mack-Cali would also spend $25 million on repositioning Harborside.
Besides, improving efficiency is also on management’s agenda. Around $25 million of cost savings have been identified that include job cuts, G&A reduction, refinancing and interest expense savings. Having saved on all these fronts effectively, the company should be able to execute suburban asset upgrades.
Bottom Line
We believe that such strategic measures would enable Mack-Cali to ride on the growth trajectory for a long time. Several Fortune 500 companies have their headquarters in New Jersey, while others have a significance presence in the region. Armed with a skilled workforce and the presence of well-established transit network, it remains a top choice for the company to expand its business.
Mack-Cali currently has a Zacks Rank # 2 (Buy). Other stocks in the real estate operations sector worth considering include Prologis, Inc. PLD, PS Business Parks Inc. PSB and Public Storage PSA. All these stocks share the same rank as Mack-Cali.
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