Mack-Cali Realty is making its office-to-multifamily pivot official.
On Friday, the New Jersey-based real estate investment trust will begin trading on the New York Stock Exchange under the ticker symbol VRE, reflecting its name change to Veris Residential.
The REIT has spent the last several months retreating from the suburban office market, its former bread and butter, tallying more than $1 billion in property sales in New Jersey since March.
The shift in focus has coincided with a board and C-suite shakeup that saw the departure of CEO Michael DeMarco and the subsequent appointment of developer MaryAnne Gilmartin as interim CEO in July 2020. Mahbod Nia — a former head of NorthStar Realty Europe, who joined Mack-Cali’s board around the same time — became CEO in March and has been leading the company’s pivot.
“We want to go back to the basics of what REITs are intended to do: Focus on one thing that you’re good at. We believe that’s multifamily,” Nia said. “We believe the fundamentals of multifamily are really strong and support rental growth going forward in the markets that we’re in and looking to be in.”
The sales of suburban office portfolios were also necessary to pay down debts that will mature in the next few years, he added.
The firm’s recent deals include a 1.2 million square foot building in Jersey City that it sold to the Birch Group for $380 million in September; a four-building, 843,000-square-foot portfolio in Short Hills, New Jersey, also to the Birch Group, for $255 million in April; and a four-building 946,000-square-foot complex near the Metropark train station in Iselin, New Jersey to Opal Holdings for $254 million in March.
The REIT formerly known as Mack-Cali is also in the process of selling two additional office properties totaling 1.8 million square feet — 101 Hudson Street in Jersey City and 111 River Street in Hoboken — for $590 million.
After these sales, which are set to close in the first quarter of 2022, the firm’s operations will be driven by its 21 Class A multifamily properties in the Northeast, mainly in New Jersey and Massachusetts.
About 70 percent of its net operating income in the third quarter was attributed to its multifamily portfolio. Once its ongoing multifamily development in Jersey City — the 750-unit Haus25 complex at 25 Christopher Columbus Drive — is completed next year and stabilized, that share is expected to rise to 75 percent, according to the firm.
Its remaining non-residential portfolio includes four office properties totaling 3.1 million square feet, all located within the Harborside complex in Jersey City; two hotels; and 14 development sites, chief financial officer David Smetana said on a recent earnings call.
Nia said the REIT is willing to sell its remaining office properties to become a company that’s truly focused on multifamily, though he hasn’t set any timeline for that process.
Mack-Cali is shrinking its office portfolio at a time when the Garden State’s office market faces massive uncertainty. New Jersey office leasing volume totaled 1.3 million square feet in the third quarter, less than half the second quarter’s volume of 3 million square feet, according to Avison Young’s quarterly market report. The decline stood in stark contrast to Manhattan’s office market, which has begun to recover in recent months thanks to pent-up demand from some tenants who finally resumed leasing.
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