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Mack-Cali Reports Flurry of Leases, Including E-Trade

New Jersey's Largest Office Landlord Sees Leasing Demand Through 2018
August 2, 2018
Mack-Cali Realty Corp., New Jersey’s largest office landlord, expects to complete $170 million in transactions during the remainder of the year as it sheds underperforming office properties to concentrate on development on the Hudson waterfront, the so-called Gold Coast, and renovating prime suburban office campuses.

The Jersey City, NJ-based real estate investment trust has been in a transition mode since Chief Executive Michael DeMarco joined in 2015, selling many of its older properties that it considers underperforming.

The company's leasing of 453,337 square feet of office space in the second quarter this year has been followed by a burst of additional activity that includes a 132,000-square-foot renewal and expansion by E-Trade Financial Services after the quarter closed.

Overall, the company signed an additional 271,000 square feet of leases in the first month of the third quarter, including the E-Trade deal, according to DeMarco. The Manhattan-based online financial services company is getting $20 million in New Jersey tax incentives to enlarge its operation in Jersey City.

"E-Trade was done at excellent terms," DeMarco told analysts during a second-quarter conference call on Thursday. "To date, the interest in the waterfront and suburbs has continued to be at a greater level than in 2017 [...] There has been no increase in concessions. The rental rates are being accepted."

DeMarco noted that the REIT, New Jersey's largest, had not sold any properties in the second quarter, though he added Mack-Cali is preparing to sell its flex properties, 3.5 million square feet at four separate portfolios in Westchester, NY, and one in Connecticut.

"We’re going to market it as single individual deals, we’re starting it now, and we’re also thinking about doing one large global deal," DeMarco said.

In the second quarter, Mack-Cali executed 51 leases in its consolidated commercial portfolio totaling 453,337 square feet. Of those, 19 for 209,020 square feet, or 46 percent, were new leases and 32 for 244,317 square feet, or 54 percent, were renewals and other tenant retention transactions.

Subsequent to the quarter’s end, Mack-Cali signed the 132,000-square-foot lease renewal at Harborside 2 at 200 Hudson St., Jersey City, NJ, including 26,000 square feet of expansion space.

The REIT also signed a 67,000 square-foot lease at 100 Overlook in Princeton, NJ, with Trustees of Princeton University.

In June, the state Economic Development Corp. offered E-Trade $20 million in tax incentives over a 10-year span to relocate its customer technical services operation, located in the Philippines, to Harborside 2, where the online financial services firm already had about 107,000 square feet. The Jersey City expansion will bring 250 jobs back to the United States, DeMarco said.

"Our team’s leasing efforts resulted in good progress as we signed over 453,000 square feet of leases in the quarter and an additional 271,000 in the first month of the third quarter," DeMarco said in a statement.

"Traffic and interest continue to be strong both in our waterfront portfolio and our suburban assets; our pipeline of deals has grown since last quarter," he said. "However, the pace of conversion from prospect to signed lease continues to be a lengthy process. With residential lease-ups in peak season, we are excited by the level of interest, which has translated into excellent absorption. With non-core asset sales essentially complete, the team’s focus remains squarely on leasing, recognizing that as a critical catalyst to drive results and value for our shareholders."

In the quarter Mack-Cali landed the fifth-largest office lease in North Jersey, with insurer Plymouth Rock Assurance taking 130,000 square feet at 581 Main St., Woodbridge, NJ.

In the statement it issued, Mack-Cali said that as of June 30 its core office portfolio was 83.2 percent leased, as compared to 85.2 percent at the end of the first quarter.

"The change in percent leased is primarily due to 400,000 square feet of expected move-outs in the waterfront portfolio, partially offset by positive net absorption in the Class A suburban and suburban portfolios," the company said.

Those tenant departures included insurer AIG exiting 271,000 square feet at 101 Hudson St. in Jersey City, and publisher Wiley vacating 92,000 square feet at 111 River St. in Hoboken.

Mack-Cali said in the second quarter its Class A suburban portfolio was 94.5 percent leased; flex space was 92.1 percent leased; suburban properties were 82.6 percent leased; and waterfront properties were 72.9 leased.

Leases signed in the second quarter in the company’s core office portfolio, excluding flex, had cash starting rents of $32.38 per square foot, according to the REIT.

Linda Moss, Northern New Jersey Market Reporter  CoStar Group   
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