Mack-Cali Realty's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Mack-Cali Realty Corp. ( CLI)

Q4 2011 Earnings Call

February 9, 2012 10:00 am ET

Executives

Mitchell E. Hersh – President, Chief Executive Officer and Member of the Executive Committee of the Board of Directors

Barry Lefkowitz – Executive Vice President and Chief Financial Officer

Analysts

John W. Guinee, III – Stifel, Nicolaus & Company, Inc.

Sheila K. McGrath – Keefe, Bruyette & Woods, Inc.

Jordan Sadler – KeyBanc Capital Markets

Joshua Attie – Citigroup

David Anderson – Green Street Advisors

James Feldman – Bank of America/Merrill Lynch

Sloan Bohlen – Goldman Sachs & Co.

Presentation

Operator

Good day and welcome to the Mack-Cali Realty Corporation Fourth Quarter 2011 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the call over to the President and Chief Executive Officer, Mr. Mitchell Hersh. Please go ahead sir.

Mitchell E. Hersh

Thank you, operator. Good morning everyone and thank you for joining Mack-Cali’s fourth quarter 2011 earnings conference call and year end 2011 call. With me today is Barry Lefkowitz, Executive Vice President and Chief Financial Officer.

On a legal note, I must remind everyone that certain information discussed on this call may constitute forward-looking statements within the meaning of the Federal Securities Law. Although we believe the estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. We refer you to our press release and annual and quarterly reports filed with the SEC for risk factors that could impact the Company.

First, I’d like to review some of our results and activities for the quarter and generally what we’re seeing in our markets, and then Barry will review our financial results. As we reported this morning generally, it has been pretty much steady as she goes, which we consider in these extraordinary times to be a very good thing.

FFO for the fourth quarter of 2011 was $0.68 per diluted share, and for the year ending December 31, 2011, it was $2.80 per share.

We did have an active quarter including leasing activity of about 774,000 square feet that included almost a quarter of a million square feet of new leases and the balance renewals. Our tenant retention was about 73% of outgoing space for the quarter. We ended the quarter at 88.3% leased up slightly from last quarter’s 88.2%.

For the full-year, we signed 572 transactions, totaling over 4.2 million square feet and of that, 1.2 million square feet were in new leases. The 3 million square feet of renewal transactions produced a full-year tenant retention rate of 68% of outgoing space. Further testament to the fact that tenants would rather remain in place with strong landlords.

Rents roll down in the quarter by 7.2% compared to last quarter’s 3.4% roll down. And for the year, we had a rent roll down of 6.2%, obviously this fluctuates quarter-to-quarter, but the trend is still a challenging market.

Lease rollover for 2012, are approximately 10% of base rent or slightly in excess of $62 million. I assure you we’re working very hard to accomplish renewals and new leases, the deal with the lease expirations in 2012 and beyond.

Our leasing costs for the quarter were approximately $3.30 per square foot per year down slightly from last quarter’s number of $3.40. For the year 2011, our leasing costs averaged $3.80 per square foot per year, pretty much market conditions prevailing throughout our marketplace.

Despite a challenging environment, our portfolio continues to outperform virtually every market in which we operate. With our leased rates exceeding market averages in Northern and Central New Jersey, Westchester, Washington D.C. and of course, doing extremely well along the waterfront.

While we did anticipate a particularly challenging fourth quarter with known expirations and move outs, we saw a solid leasing activity and in fact, as stated before, we’re able to slightly increase our occupancy rate. As far as activities for the quarter are concerned, we previously announced during the quarter that we entered into a joint venture with Ironstate development company to develop luxury multi-family rental towers on the Jersey City Waterfront, north of Plaza 5 and Harborside.

The first phase of the project will consist of a streetscape retail level and a parking pedestal, which in turn will support two high-rise towers including approximately 630 apartments in each tower.

In total, we anticipate building 2,500 units in four towers at harbor side into that two principle phases of that, we currently anticipate about 21% of the units as studio apartments, 62% as one bedroom and the balance as two bedroom. We’re very excited about this project. The project will be built on land owned by Mack-Cali within our harbor side financial center. We have a great partner, we’re well along in the process with big city agencies, and we anticipate at present a fourth quarter 2012 ground breaking and expect residents to take occupancy in these magnificent towers two years or sooner there after.

Also as previously mentioned in the quarter, we are working with a number of our land sites repositioning one right now in Morris County, New Jersey, taking a 30 acre parcel that’s zoned for office and research, and converting that to big box retail. We have a signed letter of intent for a major retail tenant finalizing the lease documents while moving forward with the planning process in what I might add is a very receptive community to see land put to work and tax ratables created.

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