Mack-Cali Realty Corp. (NYSE:CLI)

NetscribeREIT (42.46) Submitted: 2/28/2007 8:54:05 AM : Start Price: $36.53 CLI Score: -25.57

Mack-Cali Realty (CLI) is a fully-integrated, self-administered and self-managed real estate investment trust (REIT). Its portfolio predominantly comprises of Class A office and office/flex properties located primarily in the Northeastern region. The company owns or has interest in 300 properties, aggregating around 34.3 million square feet, plus developable land, which are leased to over 2,200 tenants.

The US office real estate industry’s fundamentals are improving continuously, thanks to factors like increase in job growth rate and economic expansion that have driven national office vacancies down to around 13% in third quarter of 2006 from a high 18% in fourth quarter of 2003. Similar trend has been noticed in Boston, Massachusetts and New York City that witnessed improvement in metropolitan office area-wise employment of 1.2% and 0.9% respectively for Nov. 06. This augurs well with the company, as it owns more than 70% of its rental revenue from suburban New York and New Jersey. Moreover, it is expected that for the fiscal 2007, New York will continue to see positive net absorption, backed by low new supply and positive rent rolls.

During the fiscal 2006, the company’s base rents for same-store properties enhanced by 1.4% on account of increase in the percentage of space leased. As a part of its business strategy, the company has been successfully able to move out of non-core Western markets by selling its Denver and San Francisco portfolios. This will now enable them to concentrate lucrative Northeast and Mid-Atlantic regions, where office rents are on an upsurge. Rentals would be pushed up by supply-constrained market and company’s presence in well-established markets like New York should be able to gain most out of it.