WRAPUP 2-Office REITs Q4 beats market, see 2010 below view

Thu Feb 11, 2010 3:10pm EST

* Mack-Cali, Alexandria post Q4 FFO beats Street

* Higher base rents, lower oper expenses drive Q4 growth

* Both REITs forecast FY10 FFO below Wall St. (Recasts, adds details, conf call comments)

Feb 11 (Reuters) - Real estate investment trusts Mack-Cali Realty Corp (CLI.N) and Alexandria Real Estate Equities Inc (ARE.N) reported quarterly funds from operations that edged past market estimates, but projected 2010 FFO below consensus view.

Pasadena, California-based Alexandria Real Estate Equities Inc (ARE.N) said conversion of notes in 2010 is expected to dilute full-year FFO per share, and forecast FFO of $4.42 cents a share. This missed market expectations by 4 cents, according to Thomson Reuters I/B/E/S.

Separately, Edison, New Jersey-based Mack-Cali cut its outlook range by 10 cents to between $2.70 and $2.90 a share, from its outlook provided in October last year, citing a mortgage refinancing.

Earlier in January, Mack-Cali refinanced its $150 million secured loan with The Prudential Insurance Co of America.

On a conference call with analysts, Chief Executive Mitchell Hersh said Mack-Cali decided to refinance the existing loan, with the interest rate for the same having been cut by 95 basis points.

However, consolidated in-service portfolio leasing rose only marginally to 90.1 percent, suggesting that a recovery of the commercial real estate sector is still some distance away.

The sector has been battered by mounting job losses, high vacancies and declining rentals, with an uptick not expected before 2011.

Hersh said that while the economy seemed to be improving, Mack-Cali would take a conservative view at this juncture.

"While there was a GDP expansion in the fourth quarter, a lot of that was driven by inventory re-building and not in any way associated with traction in the job market, he said.

However, in an annual economic report to Congress on Thursday, the White House has predicted the creation of 95,000 jobs a month, on average, this year. [nN11235724]

Q4 BEATS STREET

For the fourth-quarter ended Dec 31, Mack-Cali posted FFO of $55.3 million, or 60 cents a share, compared with $50.9 million, or 63 cents a share a year earlier.

Excluding a non-cash impairment charge of $16.6 million, the office REIT posted FFO of $78 cents a share.

Analysts on average, were expecting the REIT to report FFO of 76 cents a share, according to Thomson Reuters I/B/E/S.

Alexandria Real Estate posted fourth-quarter FFO of $54.3 million, or $1.09 a share compared with FFO of $47.2 million, or $1.48 a share a year earlier.

Operating costs for the quarter dipped 12 percent to $86 million.

Analysts were expecting the company to report FFO of $1.08 a share.

FFO, a performance measure for REITs, removes the profit-reducing effect of depreciation, a non-cash accounting item.

Shares of Mack-Cali were up 14 cents at $31.14, while those of Alexandria Real Estate were down 78 cents at $56.56 in afternoon trade Wednesday on the New York Stock Exchange. (Reporting by Biswarup Gooptu in Bangalore; Editing by Gopakumar Warrier)