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Mack-Cali not for sale as REIT doubles down on waterfront strategy

Mack-Cali is shoring up its balance sheet by suspending shareholder dividends for the rest of the year.

And interim CEO Maryanne Gilmartin has vowed she’s committed to steering the REIT to profitability without holding a fire sale.

“We are acting decisively to execute our strategy and fortify our balance sheet given the uncertainty of the ongoing pandemic,” said MaryAnne Gilmartin, Board Chair and Interim Chief Executive Officer.

“We continue to move expeditiously to sell our suburban office assets, deliver new multifamily units and explore programmatic solutions to our Harborside leasing efforts that amplify the unique value of that campus.”

Gilmartin – who was appointed interim CEO this summer following a major reshuffle of the REIT’s board and exit of longtime boss Michael DeMarco – has told analysts she has no plans to make the job permanent.

But she said that isn’t stopping her pushing ahead with the REIT’s stated plan to sell off suburban assets to focus on its waterfront portfolio as a means of creating more value for shareholders who backed the restructuring of the company’s board.

The company’s second quarter revenues fell to $72.65 million from $86.60 million, falling well below analysts’ expectations.

And, over the summer, Mack-Cali missed out on two huge waterfront deals that saw pharma giant Merck and American International Group (AIG) lease a combined 340,000 s/f at Goldman Sachs’ 30 Hudson Street tower.

However, during the 2Q earnings call, Gilmartin was optimistic that while disappointing, it “does speak to our ability to be in front of the right tenants.”

“I think having a top three building in the market like Plaza 5 will speak to those tenants, those future tenants in the future, and given the fact that we have a lot of different types of products right in the same area, different sized floor plates, different pricing structures, I like our odds moving forward,” said added.

Plaza 5 in the Harborside campus

The move to suspend the dividend provides “financial flexibility” to support leasing initiatives at the Harborside campus on the Jersey City waterfront, which is currently 78.6 percent leased.

And while the pandemic has paused discussions on some leasing business, Gilmartin said Mack-Cali is in negotiations for 200,000 s/f of space with tenants from the technology, financial services and insurance sectors.

It’s residential subsidiary Roseland’s also has several development projects in the pipeline and set for delivering in the next 12 to 24 months, including  673 units in Port Imperial at both Capstone and RiverHouse 9 and The Upton at Short Hills, a 193-unit luxury community near the Short Hills Mall. The 750-unit Charlotte in jersey City is scheduled for delivery in the first quarter of 2022.

Roseland chairman Marshall B. Tycher said COVID-related delays caused the company to revise delivery schedules to account for, on average 90-day delays.

But Tycher said Roseland is continuing pre-development activities on three potential Hudson River starts including Harborside 8, a 679-unit tower which will be adjacent to its corporate headquarters at Harborside 3; the Park Parcel at Port Imperial, a 302-unit mid-rise development to be constructed over -looking a 17-acre City Park and a second phase of Urby, a proposed 796-unit tower adjacent to its first Urby project.

While analysts remain stoic on the company’s long-term outlook as the board’s new guard works to clear a profitable path forward during a global pandemic, Gilmartin said during the earnings call that a wholesale sell off was definitely not in the cards.

MARYANNE GILMARTIN

“The near-term strategy is to stabilize and empower the management team here at Mack-Cali, sell the suburban assets and lease office space on the Waterfront,” said Gilmartin.

“And then inside of that strategy, there is the broader thinking around where does the company go, and what strategic alternatives are available for the company.

“Given where we are in the middle of a pandemic, it’s difficult for us to give any sense of how opportunistic we can be. What we’re not going to do is sell the company on a fire sale, and we need to be strategic, and that is the work of the day.”

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