Mack-Cali Late to the (Follow-On) Party

Guess Mack-Cali (CLI) figures better late than never, especially when you have the REIT dilution powerhouse behind you. CLI yesterday announced it will issue a total of 7,475,000 shares with Merrill (BAC) as lead underwriter. Use of proceeds: "To repay borrowings under its unsecured revolving credit facility" which has as syndication agent...pause... Bank Of America.

Unfortunately the $180 million of max proceeds will not really help BofA with their total bank exposure... Curiously CLI is not even covered by the dynamic ML REIT duo of SS (Schmidt-Sakwa). Which does not mean the two have not been busy - here are their latest actions over just the past 3 days - finding the mildly optimistic report is harder than Where's Waldo:

Duke Realty (DRE): We are raising our '09 and '10 estimates while our PO increases from $9 to $10. Maintain Neutral rating.

Kimco (KIM): Maintaining Buy rating due to KIM's improved balance sheet strength as a result of its add-on offering. While retail fundamentals should remain weak for 09, KIM should be one of the survivors.

Boston Properties (BXP): BXP's 1Q results solid; increasing FFO. BXP reported normalized 1Q09 FFOPS of $1.30/share when you exclude the $0.19 one-time, non-cash impairment charge related to the suspension of construction at 250 West 55th Street.

ProLogis Trust (PLD): Significant progress toward deleveraging. PLD has taken meaningful steps to improve its balance sheet although it comes with a near-term cost of earnings dilution. We are trimming our '09 and '10 estimates while our PO falls to $9.50.

Avalon Bay (AVB): Despite stronger than expected Q1 results we are lowering our rating from Buy to Neutral due to the recent stock price gains coupled with weakening fundamentals. Our new PO is $55 (up from $49).

Equity Residential (EQR): EQR reported 1Q09 FFO of $0.57 which was a few pennies above our forecast. We are raising our '09 and '10 FFO estimates by a nickel while our PO increases from $18.00 to $18.50.

Corporate Office Properties Trust (OFC): OFC reported $0.67, $0.08 ahead of our estimate. We maintain our 09 estimate of $2.41 while our NAV stays flat at $21 and our PO remains at $22, in line with our forward NAV estimate

Weingarten Realty (WRI): Maintaining 09 Est., despite 1Q surprise: We are maintaining our price objective of $13 for WRI. This assumes a 5% discount to its forward NAV. Maintain Underperform based on PO and WRI recent outperformance of REIT sector.

AMB Property Corp (AMB): Well positioned to weather the storm. AMB reported better than expected Q1 results due to higher than expected gains on development sales. We are maintaining our Neutral rating but raising our PO from $16 to $19 per share.

SL Green (SLG): SLG's results beat on one-time items. SLG reported 1Q09 FFO of $1.48. We are increasing our 09 FFOPS estimate by $0.17 to $5.67, while our PO increased $2 to $16.50, in line with our forward NAV estimate.

Now that all REITs are solidly recapitalized and chasing the 3 still non-bankrupt retail tenants with 100%-off rent offers, maybe it is time for the custodians to allow investors to short again. One of these days SPY and IWR may finally not be Hard To Borrow - who knows?

Mack-Cali Realty Corporation Announces Commencement of Public Offering of Common Stock

Business Wire

EDISON, N.J. -- April 30, 2009

Mack-Cali Realty Corporation (the “Company”) (NYSE: CLI) today announced that it has commenced a public offering of 6,500,000 shares of common stock. In addition, the Company expects to grant to the underwriters for the public offering an option for 30 days to purchase up to 975,000 additional shares of common stock to cover overallotments, if any. Merrill Lynch & Co. and Deutsche Bank Securities will serve as the joint book-running managers.

The Company plans to use the net proceeds from the offering to repay borrowings under its unsecured revolving credit facility and for general corporate purposes.

This offering will be made pursuant to a prospectus supplement to the Company’s prospectus, dated November 26, 2008, filed as part of the Company’s effective $2 billion shelf registration statement. This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor will there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

Comments

[malach hamo...:]

CLI's wait of a few weeks after the others sold additional equity was quite fortuitous. It sold at a much more favorable price with either a greater amount of proceeds or far less dilution than had it sold 2-3 weeks ago.

Now we know where all that money "sitting on the sidelines" is going; it's recapitalizing the REITs.

May 01 07:25 AM

[yellowhoard:]

So, when I drive by vacant strip malls and office buildings, I need to stop believing my lying eyes.

May 01 08:47 AM

[kelm:]

They have not yet realized they are dead. Its rather like the post-death neuro-electrical activity - they keep developing malls on autopilot. There are new ones in-work here in the Midwest not far from empty ones.

May 01 08:58 AM

[REITBull:]

Not all CRE are REITs, but I get the point.


On May 01 08:47 AM yellowhoard wrote:

> So, when I drive by vacant strip malls and office buildings, I need
> to stop believing my lying eyes.

May 01 09:08 AM

[Hmm?!:]

Where is congress....? ......again?

Not necessarily a fan of Rush......but I completely understand his term "the talking heads" in Washington and the media.

May 01 09:28 AM

[conceptwizard:]

maybe its time to buy a strip mall. I could live in one side and sell "green shoots" out of the other.

May 01 11:25 AM

[yellowhoard:]

Wasn't it Chauncy Gardner from the movie "Being There" that said there will be growth in the Spring.

He was an idiot. But because he was well dressed and spoke slowly, everyone thought that he was really deep.

Funny movie. I think of it everytime I hear the talking heads mention the "green shoots".

May 01 01:28 PM

[LKofScotland:]

It was Chauncy Gardner indeed and "a few good men" engineered him to the Presidency of the United States. Be wary of the truth you speak. there is a reason bloggers aren't paid all that well. when "mr. durden" speaks of a real estate collapse that is truly monstrous it actually as much a political as a market story. corruption at this level is a American as America itself and has been here since our founding. of course boston properties is owned by mort zuckerman who is, of course, the owner of a large media empire. think he's going to give "tyler" a job offer? of course maybe the real "tyler" is a real estate speculator driving prices lower in order to profit from a collapse he is helping engineer? sometimes "the market" can be a confusing place. money in a nation "going for broke" is not, however. uncle sam is coming out and saying to the american people "you ain't got any but we're gonna get ours." feelin' the love yet? be careful what you ask for, you just might get it.

May 01 03:25 PM

[Emerald:]

All REIT's are not created equal. First, many REIT's are using new stock issuance to pay down bank lines, thereby cutting debt exposure (good), but diluting current shareholders at these low prices (bad). Note that many of the underwriters are using the proceeds to pay down their own lines. Yes, it is disclosed in the Offering Memo, but this is incestuous.

Second, retail and office REIT's are facing a leasing storm that theatens to take them under given the high tenant improvement costs they face to replace tenants. Many well capitalized apartment REIT's are under pressure from declining employment, but are good buys at these depressed prices, assuming they have taken care of debt maturities for 2009 and 2010. Examples of these better apartment REIT's are AvalonBay and Equity Residential. This sector will also be the first to rebound and pays a dividend to wait. Be careful shorting REIT's via the SRS because it has large apartment REITs in it and is less likely to have big declines from here. Note : Long EQR.

May 01 04:33 PM

[dcb:]

This is why Goldman is keeping the market up with government consent. They can't go directly to the tax payer, so this is just another one of the back door hidden ways our government is getting money to the banks. (AIG, quant easing, Fed, Treasury, taking shiitty assets on feds balance sheet we will be stick paying for) All part of the program James Quinn writes about in his article. A big mistake many of the writers keep making is not to see how things fit together. They view happenings in isolation when they aren't. One of the few real skills god has given me is to be able to take events that appear unrelated and put them together. I have absolutely no doubt this is the true story.

May 03 09:41 AM

[Gerry Sullivan:]

REITs continue to go up and everyone seems to be mad about it.
They must be short.

People who bet on sports know that the most important thing is
to be on "the right side of the fix." The right side of this fix is to
continue to buy the REIT offerings until they no longer work.

Remember VNO a couple of weeks ago at $43? It's at $52 now.
LaSalle Hotels LHO up 40% in less than 2 weeks. Duke Realty DRE?
Hope you are still not short.

May 05 10:18 AM

[Big K:]

I was looking at the April Value Line report on WRI. It is
shocking to see how this once very successful business has been run
into the ground. While WRI's properties are performing adequately,
unfortunately, the management has trashed the business over the last
decade. They allowed the debt to balloon to $36/share. How does a
fairly small company like this allow their debt to grow to $3.2
billion? The good news is that they have solved the problem by adding
more shares, reducing the debt to somewhere between $20- $26/share.
The bad news is the debt is now $20-$26/share. If they kept all the
dividends to pay off the debt, at the now lofty new dividend rate of
$1/year, it would take 20 years to pay off this debt.

This is what killed the REIT industry. Borrow, borrow and borrow some
more, and don't pay down any debt, just roll it over. Oops, credit is
cut off to the debt junkies. The drinking party is over.
Accordingly, WRI will stagger in a stuporous hangover for years, and
that is if the retail situation doesn't get any worse. Now that
rolling the debt over may no longer be an option, WRI is a potential
bankruptcy candidate, despite a fairly robust business. It's time to
remove the fools in the executive suite and replace with people who
know how to balance a checkbook.

May 24 01:16 PM

[Freya:]

Think in terms of Nathan Rothchild, who sold continuously until everyone Believed, then bought at the bottom of a Panic he created.

On 4/29, 6 insiders at BAC acquired about 110,000 shares, Total cost about $950K.

Bernanke made an announcement on 05/01 that Commercial Mortgages are now under the Fed's protection.

It almost feels like a Dog fight, Treasury/Obama vs FED. Free the Banks or keep them enslaved.

May 02 04:31 AM