Mack-Cali Realty Corp. Reports Second Quarter Results [Professional Services Close – Up]

Mack-Cali Realty Corp. reported its results for the second quarter 2013.

In a release on July 25, the Company noted recent highlights include:

-Reported funds from operations of $0.65 per diluted share;

-Reported net income of $0.26 per diluted share;

-Completed sale of $275 million face amount of 3.15 percent senior unsecured notes;

-Refinanced and extended unsecured revolving credit facility with a group of 17 lenders;

-Acquired 412-unit luxury multi-family property in Metro Boston for $88 million;

-Commenced initial operations of 203,506-square-foot, fully leased office property in Parsippany, New Jersey;

-Through July, completed sales of nine office properties, aggregating 1.3 million square feet, in several transactions for a total of approximately $186.6 million; and

-Signed agreements to sell 15 office properties, aggregating 1.7 million square feet, in suburban Philadelphia for approximately $233 million.

Financial Highlights

Funds from operations (FFO) available to common shareholders for the quarter ended June 30, amounted to $65.2 million, or $0.65 per share. For the six months ended June 30, FFO available to common shareholders equaled $128.2 million, or $1.29 per share.

Net income available to common shareholders for the second quarter 2013 equaled $23.1 million, or $0.26 per share. For the six months ended June 30, net income available to common shareholders amounted to $34.6 million, or $0.39 per share.

Total revenues for the second quarter 2013 were $177.9 million. For the six months ended June 30, total revenues amounted to $358.7 million.

All per share amounts presented above are on a diluted basis.

The Company had 88,004,354 shares of common stock, and 12,003,241 common operating partnership units outstanding as of June 30. The Company had a total of 100,007,595 common shares/common units outstanding at June 30.

As of June 30, the Company had total indebtedness of approximately $2.4 billion, with a weighted average annual interest rate of 5.64 percent.

The Company had a debt-to-undepreciated assets ratio of 38.8 percent at June 30. The Company had an interest coverage ratio of 3.1 times for the quarter ended June 30.

Mitchell E. Hersh, president and chief executive officer, commented, "Mack-Cali had a successful second quarter, executing on our strategy of selling select office properties as we continue our portfolio diversification into multi-family. We also saw significant office leasing activity having successfully completed lease transactions for over 1.3 million square feet."

Acquisitions

In April, the Company acquired Alterra at Overlook Ridge 1B, a 412-unit multi-family property in Revere, Massachusetts, for approximately $88 million. The Company funded the acquisition primarily through borrowings under the Company's unsecured revolving credit facility.

Development

In June, the Company commenced initial operations on 14 Sylvan Way in Parsippany, New Jersey. The 203,506-square-foot commercial property was 100 percent pre-leased.

Sales

On July 18, the Company announced that it entered into agreements to form various joint ventures with a fund sponsored by Keystone Property Group to facilitate the sale of Mack-Cali's 15 commercial office properties aggregating 1.66 million square feet, and three land parcels located throughout Suburban Philadelphia. Pursuant to the agreements, the portfolio will be sold for approximately $233 million: $201 million in cash, a $10 million mortgage secured by One Plymouth Meeting, and subordinated interests in the portfolio with capital accounts aggregating $22 million. Mack-Cali shall participate in management fees and 50 percent of value creation above certain hurdle rates. Mack-Cali anticipates receiving a majority interest in a land parcel in Bala Cynwyd, Pennsylvania, for multi-family residential development, subject to certain conditions. As part of the transaction, Mack-Cali retains the rights to subdivide and develop multi-family residential units at 150 Monument Road in Bala Cynwyd. The sale is subject to the purchaser's completion of due diligence by August 19, which may be extended, and normal and customary closing conditions. The Company anticipates a late 2013 closing.

Through July 2013, the Company completed the sales of nine office properties, aggregating 1.3 million square feet, for a total of approximately $186.6 million, as follows:

In April, the Company sold 19 Skyline Drive, located in Hawthorne, New York, for approximately $16.2 million. The vacant five-story, 248,400-square-foot building was sold to New York Medical College, a member of the Touro College and University System.

Also in April, the Company sold 55 Corporate Drive in Bridgewater, New Jersey for approximately $72.3 million. The building is a 204,057-square-foot, fully-leased property.

In May, the Company sold the following properties:

-Mack-Cali Airport property located in Little Ferry, New Jersey for approximately $32.3 million. The sold building is a fully leased, two-story, 286,628-square-foot property.

-777 Passaic Avenue in Clifton, New Jersey, for approximately $5.8 million to a joint venture comprised of Gottesman Real Estate Partners and Mountain Development Corp. The five-story, approximately 75,000-square-foot property was 65 percent leased.

-16 and 18 Sentry Park West in Blue Bell, Pennsylvania, for approximately $19.3 million. The four-story, 93,093-square-foot 16 Sentry Park West, and the four-story, 95,010-square-foot 18 Sentry West were sold to a fund sponsored by Keystone Property Group. The Company retained a carried passive economic interest in the two properties subject to future economic performance of the assets.

In June, the Company sold 51 Imclone Drive in Branchburg, New Jersey, for approximately $6.2 million. 51 Imclone Drive is a single tenant, two-story, 63,213-square-foot property.

Also in June, the Company sold 40 Richards Avenue in Norwalk, Connecticut for $16.5 million. The approximately 64 percent occupied, seven-story, 145,487-square-foot property was sold to the Davis Companies.

In July, the Company sold Liberty Corner Corporate Center, 106 Allen Road in Bernards Township, New Jersey, for approximately $18.0 million. The four-story, 132,010-square-foot building was sold to The Silverman Group.

Financing Activity

In May, the Company completed the sale of $275 million face amount of 3.15 percent senior unsecured notes due May 15, 2023 with interest payable semi-annually in arrears. The net proceeds from the issuance of approximately $266.5 million, after underwriting discount and offering expenses, were used primarily to repay outstanding borrowings under the Company's unsecured revolving credit facility.

In July, the Company refinanced and extended its unsecured revolving credit facility with a group of 17 lenders. The $600 million unsecured facility, which is expandable to $1 billion, carries an interest rate equal to LIBOR plus 110 basis points. The credit facility, which also carries a facility fee of 20 basis points, has a four-year term with two six-month extension options. The interest rate and facility fee are subject to adjustment, on a sliding scale, based upon the operating partnership's unsecured debt ratings.

Leasing Information

Mack-Cali's consolidated in-service portfolio was 86.2 percent leased at June 30, as compared to 86.0 percent leased at March 31.

For the quarter ended June 30, the Company executed 165 leases at its consolidated in-service portfolio totaling 1,311,917 square feet, consisting of 955,751 square feet of office space, 293,436 square feet of office/flex space and 62,730 square feet of industrial/warehouse space. Of these totals, 401,777 square feet were for new leases and 910,140 square feet were for lease renewals and other tenant retention transactions.

Highlights of the quarter's leasing transactions include:

Northern New Jersey:

-T-Mobile USA, Inc., a wireless telecommunications service provider, signed a renewal for the entire 105,135-square-foot office building at 4 Sylvan Way, located in Mack-Cali Business Campus in Parsippany.

-Sunovion Pharmaceuticals Inc., a research-based pharmaceutical company, signed a renewal for 45,847 square feet at One Bridge Plaza in Fort Lee. The 200,000-square-foot office building is 91.4 percent leased.

-Toyota Motor Credit Corp., a provider of finance and insurance products and services, signed a renewal for 22,236 square feet at 4 Gatehall Drive in Parsippany. The 248,480-square-foot office building, located in Mack-Cali Business Campus, is 81.7 percent leased.

-Law firm Orloff, Lowenbach, Stifelman & Siegel, P.A. signed a renewal for 20,228 square feet at 101 Eisenhower Parkway in Roseland. The 237,000-square-foot office building, located in Eisenhower/280 Corporate Center, is 84.8 percent leased.

Central New Jersey:

-American General Life Insurance Company, a provider of life insurance, annuity, and accident and health products, signed a new lease for 74,199 square feet at 3600 Route 66 in Neptune. The 180,000-square-foot office building is 100 percent leased.

-Public Service Electric & Gas Company signed a renewal for 47,604 square feet at 20 Commerce Drive in Cranford. The 176,600- square-foot office building, located in Cranford Business Park, is 87.5 percent leased.

-Hammerman & Gainer, Inc., a third party administration firm, signed a new lease for 20,874 square feet at 3 Paragon Way in Freehold. The 66,898-square-foot office building, located in Monmouth Executive Center, is 88.2 percent leased.

Westchester County, New York:

-Xand Operations, LLC, a provider of data center infrastructure and business continuity solutions, signed transactions totaling 131,078 square feet consisting of a renewal of 46,078 square feet at 11 Skyline Drive and a renewal of 43,632 square feet and an expansion of 41,368 square feet at 17 Skyline Drive in Hawthorne. With this expansion, Xand Operations now leases the entirety of both buildings, which are located in Mid-Westchester Executive Park.

-Evening Out, Inc., a dinner theatre operator, signed a renewal for the entire 32,720-square-foot office/flex building at 75 Clearbrook Road in Elmsford'sCross Westchester Executive Park.

-Knighted, LLC, a developer of warehouse management and logistics software, signed a new lease for 30,000 square feet at 555 Taxter Road in Elmsford. The 170,554-square-foot office building, located in Taxter Corporate Park, is 86.3 percent leased.

-Con-way Freight Inc., a provider of freight transportation and logistics, signed a renewal for the entire 22,100-square-foot industrial/warehouse building at 6 Warehouse Lane in Elmsford Distribution Center in Elmsford.

Manhattan:

-Financial firm Loeb Holding Corp. signed a new lease for 22,255 square feet at 125 Broad Street in Manhattan. Mack-Cali's ownership interests of 524,476 square feet in the building are 100 percent leased.

Suburban Philadelphia:

-BAYADA Home Health Care, a provider of home health care services, signed transactions totaling 43,970 square feet consisting of a 29,265-square-foot renewal at 101 Executive Drive, a 5,400- square-foot renewal at 1 Executive Drive, and a 9,305-square-foot new lease at 2 Executive Drive, all office/flex properties located in Moorestown West Corporate Center in Moorestown. 101 Executive Drive is a 29,355-square-foot building which is 99.7 percent leased. 1 Executive Drive contains 20,570 square feet and is 90.8 percent leased, and the 60,800-square-foot 2 Executive Drive is 81.1 percent leased.

Included in the Company's Supplemental Operating and Financial Data for the second quarter 2013 are schedules highlighting the leasing statistics for both the Company's consolidated and joint venture properties.

Mack-Cali Realty Corp. 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.

More information:

www.mack-cali.com/file-uploads/2nd.quarter.sp.13.pdf

www.mack-cali.com

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