Oct. 30--Mack-Cali Realty Corp., New Jersey's largest office landlord, reported a 9 percent drop in funds from operations in the third quarter, from the same period a year ago. But the company boosted its forecast, lifting the shares by more than 5 percent.

The Edison-based real estate investment trust reported $75 million in funds from operations, or 81 cents a share, in the third quarter, down from $82.1 million, or $1.02, from the same period a year ago.

Funds from operations, or FFO, is a common measure of performance for real estate investment trusts, which must distribute 90 percent of their taxable income to shareholders to maintain federal tax breaks.

Mack-Cali reported $19.1 million, or 24 cents a share, in net income in the third quarter, down from $22.6 million, or 34 cents, from the same period last year.

The earnings decline comes as the commercial real estate sector suffers growing distress. Vacancies have increased as companies have laid off workers and stopped expanding during the recession, decreasing landlords' rental incomes and real estate values.

"We are navigating through this economic storm pretty well," said Mitchell Hersh, Mack-Cali president and chief executive officer, in a conference call with analysts Thursday morning.

The company also raised its forecast for the year, projecting shares would earn $3.25 to $3.29 a share in FFO, an increase from earlier guidance of $3.15 to $3.25 a share. The company's shares climbed more than 5 percent to $31.90 Thursday in New York Stock Exchange trading.

Mack-Cali owns about 4 million square feet of office space in Bergen County, making it the county's largest office landlord.

While the commercial real estate markets in which Mack-Cali operates have slowed, Hersh said they have improved from a year ago following the collapse of the investment bank Lehman Brothers.

"Some of that anxiety has clearly left the room," Hersh said.

Mack-Cali said third-quarter net income slid 15 percent to $19.1 million, or 24 cents a share from $22.6 million, or 34 cents, from the same period last year. Revenue dropped 5 percent to $194 million in the third quarter.

Among Mack-Cali's notable leases in third quarter was a 10-year renewal by tax and auditing firm KPMG LLP for nearly 100,000 square feet in two buildings on Tice Boulevard and Chestnut Ridge Road in Woodcliff Lake.

Mack-Cali's portfolio of nearly 300 buildings -- mostly in New Jersey but also in New York, Connecticut, Pennsylvania, Maryland and Washington, D.C. -- was 90 percent occupied in the third quarter.

That's down slightly from an occupancy rate of 90.6 percent in the second quarter, but healthy given that northern New Jersey had an overall office vacancy rate of 17.3 percent in the third quarter, according to commercial real estate brokerage Cushman & Wakefield.

Mack-Cali shares have outperformed a Bloomberg office REIT index so far this year, rising about 30 percent in value. The 14-member index has gained 16 percent this year.

E-mail: tangel@northjersey.com

-----

To see more of The Record or to subscribe to the newspaper, go to http://www.northjersey.com.

Copyright (c) 2009, The Record, Hackensack, N.J.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

NYSE:CLI, NYSE:LEH,

A service of YellowBrix, Inc.