Property firm UDR exploring deal with Mack-Cali Realty: sources

New York

US multi-family apartment firm UDR Inc is exploring a merger with Mack-Cali Realty Corp, an owner of multi-family rental properties and commercial office space, people familiar with the matter said on Thursday.

UDR's interest coincides with a board committee established by Mack-Cali to review its strategic options and is mulling over whether to pursue a sale of the company. Mack-Cali said on Thursday that it would follow the committee's recommendation to sell its suburban office portfolio totalling approximately 6.6 million square feet.

UDR is in talks about partnering on its bid for Mack-Cali with investment firm Rizk Ventures CEO Thomas Rizk, and has contacted Mack-Cali to express its interest, the sources said. Mr Rizk was CEO of Mack-Cali from 1997 to 1999, and previously led Cali Realty, whose merger with Mack Company created Mack-Cali in 1997.

UDR and Rizk Ventures are discussing whether to make an offer for the entirety of Mack-Cali, using debt financing to help fund the deal, two of the sources said. Mack-Cali has a market capitalisation of US$1.8 billion, and total debt as of the end of September of US$3.2 billion.

UDR is interested in the company's residential properties, while Rizk is eying some of its commercial offices space, according to the sources. UDR and Mack-Cali did not immediately respond to requests for comment, while Rizk Ventures declined to comment.

Mack-Cali shares rose 3.8 per cent to US$21.68, while UDR shares spiked 3.3 per cent to US$47.69 on the news in afterhours trading in New York on Thursday.

Mack-Cali has a property portfolio across six states in north-eastern United States, but has been shedding many suburban properties to focus on Jersey City's waterfront area overlooking New York City, where it owns luxury apartments and offices. It is betting this prime location will shield it from the high vacancy and low rents seen in suburban markets. REUTERS