For Mack-Cali Realty Corp., new leadership means a new direction.The Edison-based real estate investment trust has unveiled a new three-year initiative aimed at transforming the company into one focused on transit-oriented office buildings along New Jersey’s Hudson River waterfront and a regional portfolio of luxury multifamily properties. That includes steps such as selling up to $800 million worth of office properties, creating a new subsidiary for its Roseland multifamily unit and moving its headquarters to Jersey City.
Mack-Cali unveiled those new plans Thursday, 100 days after Mitchell Rudin and Michael DeMarco took over as CEO and president, respectively. They succeeded longtime CEO Mitchell E. Hersh, who was at the helm when the REIT began to struggle under the weight of its aging suburban office portfolio and then led the company’s shift into the red-hot multifamily sector.
“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 multifamily holdings,” Rudin said in a prepared statement. “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 said it plans to focus on waterfront properties in Jersey City, Weehawken, Hoboken, and West New York. As part of the process, it has identified about $600 million to $800 million in assets that it will sell to help fund capital improvements and further expansion in those markets.
Those plans include a roughly $25 million repositioning of Mack-Cali’s mixed-use Harborside complex on the Jersey City waterfront, according to a news release. The company said the “reimagined Harborside” will include incubator and communal workspace, plus state-of-the-art technology infrastructure aimed at attracting “TAMI,” or technology, arts, media and information, tenants.
Mack-Cali also plans to add new retail, fitness facilities and restaurants and bars to the complex.
The REIT also will continue to focus on the Gold Coast for its residential portfolio. In Jersey City, the company is completing the 69-story, 763-unit URL Harborside project with partner Ironstate Development, while continuing work on several other multifamily projects in the area.
Its steps in the multifamily space will also include transferring its Roseland subsidiary to a distinct subsidiary known as Roseland Property Trust. The move “will enable enhanced portfolio performance disclosure” and allow the unit to continue to focus on development activities, including repurposing of select Mack-Cali office holdings to multifamily use.
The company acquired what was then known as Roseland Property Co. in 2012, adding one of the state’s premiere luxury multifamily builders as it sought to pivot into the thriving apartment sector. By then, Mack-Cali’s share price had started to tumble amid a real estate downturn that left gaping holes in its suburban office portfolio.
Mack-Cali’s residential portfolio currently includes 6,826 units that are either operating or are in construction, the news release said. By 2018, the new plan calls for that number to more than double, to roughly 14,843 total residential units operating or in construction.
“Our actions over the last 100 days are just the beginning of a companywide overhaul designed to create value, while continuing to enhance transparency and disclosure for our investors,” DeMarco said. “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.”
All told, Mack-Cali also owns 4.3 million square feet of waterfront office space.
That’s not to say Mack-Cali won’t stay in key suburban markets — the REIT said it will undertake a $20 million upgrade of properties in Parsippany, Paramus and White Plains, New York — with the aim of transforming them into Class A buildings, boosting occupancy and boosting its standing in those markets. The upgrades will include lobby renovations, cafes and lounges, child care centers, renovated restrooms, and conference and fitness centers.
The improvements are being funded by roughly $25 million in savings identified during the first 100 days under Rudin and DeMarco, the news release said. These savings will be accomplished by assessing staffing levels, reducing general and administrative expenses, rebidding professional services and refinancing for 2016 and 2017 interest expense savings.
