Feb. 13--Mack-Cali Realty Corp., the Edison-based real estate investment trust, reported declines in earnings in the fourth quarter and all of 2008, another sign of trouble in the commercial real estate market.

Mack-Cali, which owns 22 office properties in Bergen and two in Passaic counties, reported Thursday that it earned $50.9 million in funds from operations, or 63 cents a share, in the fourth quarter, down from $73 million, or 89 cents a share, in the period in 2007 -- a 30 percent drop.

For all of 2008, the decline was much less pronounced. The company reported $279 million in funds from operations, or $3.46 a share, in all of 2008, down 5 percent from 2007, when it reported $294 million in funds from operations, or $3.56 a share.

Funds from operations, or FFO, is a widely used measure of real estate investment trusts' performance. To maintain federal tax breaks, REITs must distribute more than 90 percent of their taxable income to shareholders.

In a conference call with stock analysts Thursday morning, Mitchell Hersh, the company's president and chief executive officer, touted mortgages Mack-Cali recently has secured but expressed caution about the economy ahead.

Hersh said the recession seems different from other downturns and noted continuing turmoil in the financial markets that has led banks to pull tenants' credit lines.

"My best estimate is that this is going to be a long period of adjustment," Hersh said. The markets probably won't improve until much later in the year, he said. "There will be a lot less leverage."

While the economy may rebound at the end of the year, job growth related to infrastructure projects to be funded by the federal government likely won't result in more leasing, Hersh said.

"I am not confident necessarily that the job growth that we're going to see is going to result in much demand for office" space, except for some tenants that could benefit from the spending, he said.

Tight credit markets have pinched the REIT industry in recent months. Because financing has become too expensive or unavailable, many REITs have suspended dividends or given out stock instead to save cash, taking advantage of a new Internal Revenue Service rule. Mack-Cali has not invoked that option.

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