In our view, Mack-Cali's liquidity is adequate to meet uses over the next 18
to 24 months.
-- We estimate that Mack-Cali will generate between $250 million and $260
million annually of FFO in 2012 and 2013.
-- Other sources of liquidity include an unrestricted cash balance that
totaled $21.5 million at Sept. 30, 2012, as well as availability under the
REIT's $600 million unsecured revolving credit facility.
-- Mack-Cali's unsecured credit facility matures in October 2015
(excluding a one-year extension option) and currently carries an interest rate
of LIBOR plus 125 bps. The facility is expandable under certain circumstances
to $1 billion.
-- At Oct. 23, 2012, Mack-Cali had $223 million outstanding under its
credit facility, $99 million of which was related to the acquisition of
Roseland Partners. However, we believe these borrowings were largely repaid
with proceeds from the REIT's November 2012 offering of $250 million of senior
-- Remaining 2012 debt maturities (including scheduled amortization) are
modest ($14 million), and the company could temporarily refinance the 2013 and
2014 maturities, which total $115 million and $346 million, respectively,
under the unsecured revolving credit facility if financial market conditions
were to deteriorate significantly.
-- Mack-Cali continues to maintain a substantial pool of unencumbered
assets: about 80% of the portfolio's total square footage at Sept. 30, 2012,
was free and clear of mortgage debt. We expect Mack-Cali to selectively raise
secured financings, predominantly associated with refinancing existing
mortgages at maturity.
-- We estimate that Mack-Cali's annual maintenance capital expenditure
needs will total roughly $70 million to $80 million, slightly above historical
levels due to higher expenses that may be required to attract and retain
The stable outlook reflects our expectation that Mack-Cali will continue to
maintain low leverage and healthy DSC metrics relative to its peers despite
our expectation that office fundamentals in its core geographic markets will
remain weak over the next 12 months. We expect Mack-Cali to expand its
investment in multifamily residential properties in a measured way that does
not meaningfully affect balance sheet metrics or exceed the REIT's management
and operational capabilities. We would consider revising the outlook to
negative if the company's operating results weaken meaningfully as a result of
higher vacancies or tenant bankruptcies such that the company's DSC falls
below 2.4x and total coverage drops below 1.0x. We could also lower the rating
if Mack-Cali experiences operational missteps as it pursues investment
opportunities outside of its historical areas of geographic and property
expertise. Our expectation for a protracted recovery in certain of the
company's core markets (including central and northern New Jersey) presently
preclude positive momentum to the outlook or rating in the 12 to 24 months.