A view of Harborside 3 in Jersey City — Courtesy: Mack-Cali Realty Corp.
By Joshua Burd
Mack-Cali Realty Corp. reaped more than $500 million last year from the sale of buildings and joint venture interests, with additional sales slated for 2018 as it winds down its plan to right-size and reposition its vast portfolio.
The real estate investment trust said Thursday that it completed three property sales totaling $56 million in value during the fourth quarter of 2017. The activity brought its total disposition activity for the year to $528 million, including $416 million from property and $112 million in joint venture interests.
Mack-Cali detailed the figures in a year-end report to shareholders, noting it expects to sell another $400 million worth of property by the end of the second quarter of this year. That will “conclude the company’s major disposition program,” the Jersey City-based REIT said, while adding that future sales could occur on a select one-off basis.
Meantime, Mack-Cali has also continued to grow its residential pipeline in top-tier submarkets through new acquisitions and construction, which is spearheaded by its Roseland subsidiary.
“We made considerable progress during 2017 in repositioning our office portfolio and converting subordinate interests in our Roseland residential portfolio into majority owned positions,” Mack-Cali CEO Michael J. DeMarco said. “Our office disposition activity has allowed us to further streamline property operations and deepen our focus on core markets.
“As Roseland’s developments are put into service, we anticipate its contribution to operating income will grow meaningfully over the next three years.”
The REIT in Q4 also acquired 25 Christopher Columbus Drive, a residential development site on the Jersey City waterfront, for $53 million using the proceeds from dispositions as part of a 1031 exchange. Development is expected to begin this year, with plans calling for a tower that will include 718 units.
All told, the company said it made $395 million in office building acquisitions and $212 million in residential development sites in 2017, largely by using proceeds from sales. Mack-Cali also purchased a multifamily property valued at $315 million in conjunction with Rockpoint Capital and by assuming a mortgage of $165 million.
Additionally, the real estate giant provided an update on leasing within its office portfolio, where it had 87.6 percent occupancy at year-end. In the report, the company said it leased 439,070 square feet of office space in Q4.
It’s now expected to grapple with some 889,000 square feet of tenant move-outs in its Hudson waterfront portfolio throughout 2018, Mack-Cali said. Those tenants include Allergan, Wiley, AIG, SunAmerica and Deutsche Bank, all of which have recently expired leases or are leases that are set to expire in the coming months.
“While leasing in the fourth quarter did not meet our expectations, for 2018 the company is laser focused on waterfront leasing and executing an additional $400 million of non-core dispositions,” DeMarco said. “Our approach positions Mack-Cali for (net asset value) accretion and stronger earnings growth potential in the years ahead.”
