New Day for Mack-Cali

With brand new leadership aboard, Mack-Cali Realty has gone into transformation mode.
Mitchell Rudin, Mack-Cali

Mitchell Rudin, Mack-Cali

With brand new leadership aboard, Mack-Cali Realty Corp. goes into transformation mode as it launches 20/15, a comprehensive strategic initiative designed to refocus the office and multi-family REIT over a three-year period.

The announcement of the new initiative comes roughly three months after Mack-Cali welcomed Mitchell Rudin and Michael DeMarco to the company to serve as CEO and president/COO, respectively.

“We do not have all the answers but we do understand the problems that we face,” DeMarco said during an investor and analyst meeting on Thursday. Those problems, as outlined by the company, include inefficient operations, declining occupancy, opaque disclosure, poor capital allocation and strained cash flows. The REIT’s 20/15 initiative is one of the answers.

Mack-Cali’s strategy is rather straightforward. As DeMarco explained, “We want to transform the company into a premier waterfront and transit-based office company, lose the suburban label and also be a regional owner of luxury multifamily across the Northeast, but principally in the waterfront of New Jersey.” Specific target markets will be Jersey City, Weehawken, and Hoboken, N.J., as well as West New York.

Michael DeMarco, Mack-Cali

Michael DeMarco, Mack-Cali

It’s an aggressive program. “We are going to set ambitious but achievable goals,” DeMarco said. Mack-Cali endeavors to create, over the next three years, a collection consisting of 20 million square feet of office space and 15,000 apartment units that meet its acquisition criteria. The REIT begins with a good foundation, as a portion of its existing portfolio consists of 4.3 million square feet of waterfront office space and 3,400 luxury multifamily residences.

Of course, the portfolio conversion will require more than a little money, so Mack-Cali will finance the investments with as much as $800 million in proceeds from the sale of certain properties. “We’ll exit non-core assets, not leaving any money on the table,” DeMarco added. Rudin continued the thought. “Why would we be exiting properties? It’s either the wrong product as we go forward with our plan; it’s in a particularly slow growth market; or presents the opportunity for significant repurposing,” Rudin added.

However, investors needn’t pull out their checkbooks just yet. “By the way,” he added, “we are under no rush to sell–that’s why we’ve taken a significant number options, and one of them has not been to immediately go on the marketplace.”

Mack-Cali will also reposition certain assets, including the 3 million-square-foot mixed-use Harborside complex in Jersey City, which will benefit form a $25 million investment. Additionally, a handful of suburban properties in Parsippany and Paramus, N.J., and White Plains, N.Y., will be submitted to a $20 million renovation program.

But there’s more to 20/15 than buying, selling and repositioning. Mack-Cali will also transfer its multi-family subsidiary, Roseland, to a distinct subsidiary, Roseland Property Trust. The move will allow for greater portfolio performance disclosure. “We will provide further disclosure on Roseland, we will provide disclosure about a number of different topics and we intend to do that for the next couple of quarters until we get it perfect,” DeMarco added. “We intend to be the easiest company to understand because we started as the worst company to understand to begin with.

If all goes as planned, Mack-Cali will achieve its mission of rebuilding operational excellence, continually improving operating efficiencies and, in a few years, attain a fortress balance sheet–all means to a specific end. “Our whole purpose in this process is to drive NAV [net asset value] for the next 39 months,” DeMarco concluded.

LINKS:
Mack-Cali

Mack-Cali Taps CBRE as Leasing Agent for Harborside M-U Project on Jersey City Waterfront http://www.cpexecutive.com/regions/mid-atlantic/mack-cali-taps-cbre-as-leasing-agent-for-harborside-m-u-project-on-jersey-city-waterfront/1004100925.html