Mack-Cali Announces Major Operational Strategy Shift
John Jordan | September 2015
EDISON, NJ—The new leadership of Mack-Cali Realty Corp. say the company will embark on a new direction that will focus on waterfront and transit-oriented office properties as well as luxury multi-family properties.
In terms of the company’s suburban assets, which include holdings in Westchester County, the company intends to spend $20 million upgrading those properties. These upgrades to properties also located in Parsippany and Paramus, NJ, will include lobby renovations, cafes and lounges, childcare centers, renovated restrooms, and conference and fitness centers. This will transform these buildings to Class A properties, thus driving occupancy, presenting the opportunity for higher rents, and enhancing Mack-Cali’s position as a key player in these markets, the company stated.
Other major initiatives announced on Sept. 10 by CEO Mitchell Rudin and President Michael DeMarco include the transfer of multi-family subsidiary Roseland to a distinct subsidiary—Roseland Property Trust on Sept. 30, 2015. The company has also identified $600 million to $800 million in non-core assets it will sell to help finance its three-year capital program. Disposition of these properties is planned and Mack-Cali will retain brokers who will work to ensure that each property draws the highest price possible, the company stated.
According to the plan released by Mack-Cali, none of those properties are located in Westchester County where it maintains both office and flex space holdings.
Committed to Unlocking Value
“Our team is committed to unlocking value for our stakeholders by refocusing the company to take advantage of our Class A assets and expanding our luxury multi-family holdings,” said Rudin. “People today want to live, work, and play in the same area. They want transit options—how they get to work is almost as important as where they work. Changes we are making to our portfolio and improvements we are making in our efficiency will create a sleeker, more responsive company that is better able to achieve its long-term goals and meet the future needs of our tenants and residents.”
Mack-Cali plans to focus on “Gold Coast” waterfront properties in Jersey City, Weehawken, Hoboken, and West New York.
“Our actions over the last 100 days are just the beginning of a company-wide overhaul designed to create value, while continuing to enhance transparency and disclosure for our investors,” said DeMarco. “We will be disciplined in our approach to allocating capital and managing our balance sheet to ensure the maximum amount of earnings growth and drive our stock price to over NAV.”
The proceeds from these sales will fund Mack-Cali’s capital needs, including the company’s further expansion in markets such as Jersey City where it is completing the 69-story, 763-unit URL® Harborside project with its partner Ironstate Development Company. URL® Harborside will be the tallest project in New Jersey when completed. The company also plans to relocate their headquarters to Jersey City in the first half of 2016.
Mack-Cali’s focus on the waterfront will include both commercial and residential properties. The company currently owns 4.3 million square feet of waterfront office space and 3,400 luxury multi-family units.
Today, also under development is M2, a 311-unit tower that will join the existing Marbella, a 412-unit, 40-story luxury high rise near Harborside, at the end of 2015. The company also has an interest in Monaco, which consists of 523 luxury apartments on the waterfront overlooking Lower Manhattan.
The transfer of Roseland to a distinct subsidiary will enable enhanced portfolio performance disclosure. RPT will execute development, construction, financing, and property management while building out and monetizing a geographically diverse portfolio. This will include the strategic repurposing of select Mack-Cali office holdings to multi-family use. The residential portfolio currently includes 6,826 units that are either operating or are “in-construction.” By 2018, the new plan calls for that number to more than double, to approximately 14,843 total residential units operating or “in-construction.”
“Our expansive planned growth under the Roseland brand will solidify our position as a premier multi-family residential developer, owner, and operator in the Northeast,” said Marshall Tycher, president of Roseland. “We will continue to develop assets that are in close proximity to office space, transit, retail, and other quality of life amenities that today’s urban professional requires in a home.”
The company will also embark on an approximately $25-million repositioning of Harborside, a mixed-use complex on the Jersey City waterfront to capitalize on spectacular Manhattan skyline views, abundant nearby housing, and access to major regional transportation options. Harborside will take advantage of its premier waterfront location to add relevant retail, fitness, and food concepts, including restaurants and bars. The reimagined Harborside will include incubator and communal workspace, as well as state-of-the-art technology infrastructure. There is a meaningful long-term growth opportunity to attract TAMI (technology, arts, media, and information) tenants to this transformed development.
Improving operating efficiencies is also a key part of the company’s strategic shift, Mack-Cali officials stated. During the first 100 days under new leadership, the company has identified approximately $25 million in savings, which will fund the suburban asset upgrades. These cost savings will be accomplished by assessing staffing levels, reducing G&A, rebidding professional services, and refinancing for 2016 and 2017 interest expense savings.