News Archive:

Real Estate Forum

Black's Guide

New York Times

Black's Guide

Real Estate Forum

Black's Guide

Real Estate N.Y.

O & I Properties

Core-Market Focus

Mack-Caliís new leadershipóCEO Thomas A. Rizk, president and COO Mitchell Hersh, chairman John J. Cali and executive committee chairman William L. Mack, the group responsible for the firmís strategic direction ó say they do not plan to become a national REIT. Their near-term focus is on their core Northeast markets and building on their significant presence in the Southwest.

But given the firmís capital access and its development expertise, many see those goals as modest. As PaineWebber analyst Paul Adornato put it in an October research report: "The addition of Mack senior management should allow Mack-Cali to compete more effectively with the largest and most sophisticated public real estate companies."

The merger follows a philosophy Cali has pursued throughout its young public life, says Mr. Rizk, who previously served as president and CEO of Cali. "If you compare us to other significant companies in the industry, youíll find one or two important differences," he says. "Our philosophy has been to focus on markets where we can be in a majority position with the best assets, then put together the best management teams made up of the guys who have been on the ground and have been the most successful."


Westlakes Office Park in Berwyn, Pa., a May 1997 buy that hiked the Cali portfolio by 440,000 square foot.

The Cali family business was started in 1949 by Mr. Cali his brother Angelo and Edward Leshowitz. John Caliís son, Brant B., and Angeloís son, John B., later joined the company and became chief operating officer and chief administrative officer, respectively.

"We started in the residential market and built a lot of housing, including condos and apartments," John J. recalls. "All of them in New Jersey. In the late 1960s, the market demographics turned and some opportunities came our way in suburban office development. When we decided to enter the office-building business, we made a couple of basic assumptions: We would provide attractive places for people to work and seek properties with multiple tenants."

The strategy paid off as Cali built a tenant base with such names as Bankers Trust Co., Dow Jones and AT&T, Caliís largest tenant. The organization survived New Jerseyís office market bust in the last recession by holding onto cash. "We had the same problem as any developer," Mr. Cali says. "We came through the bad times very well because we saved our money. We did not distribute any cash flows. So we had the money to pay for tenant improvements and that kept our offices filled."

Mr. Cali, now 79, also wanted to make sure he did not leave an estate that would be overburdened with taxes. "Our offices were doing well, but we werenít making a lot of money," he says. "There were people who wanted to buy our properties. But to sell them and pay the recapture taxes would have been a very tough thing to do."

Meanwhile. Mr. Rizk, whose work as a real estate and tax attorney helped him develop expertise in finance and the capital markets, had begun trying to find an underwriter to help take Cali public. He had watched with admiration as Cali Realty went public in 1993.

"But there was an obstacle," he says. "People thought the Cali deal was successful because it was based in Washington, D.C., and thatís a very sexy market. New Jersey was one of the largest office markets in the country and it was one of the best-kept secrets."

It took Mr. Rizk a year to convince Prudential Securities to lead an underwriting team, for which the underwriter signed on Smith Barney and PaineWebber as co-managers, even though Cali had assets of about $300 million and equity of $200 million.


The Westchester Financial Center in White Plains joined the Cali portfolio as a result of its $440-million merger with Elmsford, N.Y. based Robert Martin Co.

After the transaction was completed, the firm began acquiring office properties from suburban Philadelphia to Fairfield County, Conn. The 1.9-million-square-foot Harborside Financial Center, on the Hudson River in Jersey City, was one of its most notable acquisitions. Harborside, purchased in the fall of 1996, increased the portfolio by 40% and was followed a few months later by the announcement of a $440-million merger agreement with the Robert Martin Co., based in Elmsford, N.Y.

Robert Martin was the dominant owner in its core areas, which covered Westchester Countyís 32-million-square-foot office market and Fairfield County, which has 37 million feet of office inventory. Robert Martinís holdings included the 1.4-million-square-foot Cross Westchester Executive Park in Elmsford and the 670,000-square-foot South Westchester Executive Park in Yonkers. Its 600 tenants included Bank of America, Eastman Kodak, McGraw Hill and Time Warner. For the Robert Martin merger, Cali paid $211 million in cash, assumed $185 million in debt and issued $44 million worth of operating partnership units. It also increased the Cali portfolio to 11.3 million feet of class A space.

<< Previous

Page  1   2   3   4   5

Next >>