"This set of acquisitions, upon completion, will increase the size of our property portfolio by nearly 10%, with significant penetration in the strongest submarkets," says Mitchell E. Hersh, president/CEO of Mack-Cali, who will also take on the titles of chairman and CEO of Gale. "Even more important, in terms of our long-term business strategy will be the acquisition of one of the well-respected names in commercial real estate.

"We believe that this will produce substantial added value by enhancing our revenue stream immediately and then provide a solid platform for long-term growth," Hersh says. "One other important benefit to us and our shareholders from this transaction is the establishment of a partnership with SL Green." The latter, of course, has an ownership interest in part of Gale's portfolio, which it will retain.

The agreement calls for Gale to retain its name and maintain its headquarters in Florham Park, operating as a division of Mack-Cali. Mark Yeager will remain in place as the Gale Co.'s president, and Gale Co. founder, chairman/CEO Stanley C. Gale will stay involved as non-executive vice chairman. Stan Gale, meanwhile, will continue in his role as chairman of the separate, privately owned Gale Holdings/International, based in New York with offices in Boston and Asia, overseeing the company's non-New Jersey operations including a major mixed-use project in South Korea.

"By aligning our interests with Mack-Cali, we will have the opportunity to build our platform and grow to levels previously unimaginable," Gale says. "We welcome this opportunity to combine our strengths. Our organizations have competed and done business with each other for generations."

According to the agreement, the final purchase price will be based on an earn-out formula with an initial payment of $10 million in common operating partnership units in Mack-Cali Realty LP, and $12 million in cash, with a total consideration of up to $40 million. It also calls for the acquisition of ownership interests from a joint venture of Gale and SL Green in 12 class A properties totaling 1.7 million sf, valued at $337 million in Northern and Central New Jersey, and one-half of ownership interests in another eight properties totaling 1.1 million sf, valued at $168 million. SL Green and Stan Gale will retain the remaining 50% interest in the latter, which Mack-Cali will manage.

According to Hersh, Mack-Cali will finance the deal through a combination of the assumption of and placement of new mortgage debt, drawings on the REIT's credit facility, cash and the issuance of common operating partnership units. The Schonbraun McCann Group and Eastdil Secured orchestrated the deal, which will boost Mack-Cali's holdings to 290 properties totaling nearly 33 million sf. About 21.9 million of that is in New Jersey.

Instant Insights /

UPDATE: Mack-Cali Will Buy Gale for $545M

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