UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2006
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 333-57103
MACK-CALI REALTY, L.P. |
| (Exact Name of Registrant as specified in its charter) |
Delaware | 22-3315804 |
| (State or other jurisdiction of | (IRS Employer |
| incorporation or organization) | Identification No.) |
343 Thornall Street, Edison, New Jersey | 08837-2206 |
| (Address of principal executive offices) | (Zip code) |
(732) 590-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No ___
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ___ No X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [ X ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer X Accelerated filer ___ Non-accelerated filer ___
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ___ No X
LOCATION OF EXHIBIT INDEX: The index of exhibits is contained herein on page number 123.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of Mack-Cali Realty Corporation’s definitive proxy statement for fiscal year ended December 31, 2006 to be issued in conjunction with Mack-Cali Realty Corporation’s annual meeting of shareholders expected to be held on May 23, 2007 are incorporated by reference in Part III of this Form 10-K. The definitive proxy statement will be filed by Mack-Cali Realty Corporation with the SEC not later than 120 days from the end of the Mack-Cali Realty Corporation’s fiscal year ended December 31, 2006.
FORM 10-K
Table of Contents
PART I | | Page No. | |
| Item 1 | Business | 3 | |
| Item 1A | Risk Factors | 10 | |
| Item 1B | Unresolved Staff Comments | 16 | |
| Item 2 | Properties | 17 | |
| Item 3 | Legal Proceedings | 37 | |
| Item 4 | Submission of Matters to a Vote of Security Holders | 38 | |
| | | | |
PART II | | | |
| Item 5 | Market for Registrant’s Common Equity, Related Stockholder Matters | | |
| | and Issuer Purchases of Equity Securities | 39 | |
| Item 6 | Selected Financial Data | 41 | |
| Item 7 | Management’s Discussion and Analysis of Financial Condition and | | |
| | Results of Operations | 42 | |
| Item 7A | Quantitative and Qualitative Disclosures About Market Risk | 63 | |
| Item 8 | Financial Statements and Supplementary Data | 64 | |
| Item 9 | Changes in and Disagreements with Accountants on Accounting and | | |
| | Financial Disclosure | 64 | |
| Item 9A | Controls and Procedures | 64 | |
| Item 9B | Other Information | 65 | |
| | | | |
PART III | | | |
| Item 10 | Directors, Executive Officers and Corporate Governance | 65 | |
| Item 11 | Executive Compensation | 65 | |
| Item 12 | Security Ownership of Certain Beneficial Owners and Management | | |
| | and Related Stockholder Matters | 65 | |
| Item 13 | Certain Relationships and Related Transactions, and Director Independence | 65 | |
| Item 14 | Principal Accountant Fees and Services | 65 | |
| | | | |
PART IV | | | |
| Item 15 | Exhibits and Financial Statement Schedules | 66 | |
| | | | |
SIGNATURES | | 121 | |
| | | | |
EXHIBIT INDEX | | 123 | |
PART I
ITEM 1. BUSINESS
GENERAL
Mack-Cali Realty, L.P., a Delaware limited partnership (together with its subsidiaries, the “Operating Partnership”), is a majority-owned subsidiary of Mack-Cali Realty Corporation, a Maryland corporation (the “Corporation”). The Operating Partnership owns and operates a real estate portfolio comprised predominantly of Class A office and office/flex properties located primarily in the Northeast. The Operating Partnership performs substantially all commercial real estate leasing, management, acquisition, development and construction services on an in-house basis. The Operating Partnership was formed on May 31, 1994. The Operating Partnership’s executive offices are located at 343 Thornall Street, Edison, New Jersey 08837-2206, and its telephone number is (732) 590-1000. The Corporation has an internet website at www.mack-cali.com.
As of December 31, 2006, the Operating Partnership owned or had interests in 300 properties, aggregating approximately 34.3 million square feet, plus developable land (collectively, the “Properties”), which are leased to over 2,200 tenants. The Properties are comprised of: (a) 255 wholly-owned or Operating Partnership-controlled properties consisting of 150 office buildings and 95 office/flex buildings aggregating approximately 28.5 million square feet, six industrial/warehouse buildings totaling approximately 387,400 square feet, two stand-alone retail properties totaling approximately 17,300 square feet, and two land leases (collectively, the “Consolidated Properties”); and (b) 44 buildings, which are primarily office properties, aggregating approximately 5.4 million square feet, and a 350-room hotel, which are owned by unconsolidated joint ventures in which the Operating Partnership has investment interests. Unless otherwise indicated, all references to square feet represent net rentable area. As of December 31, 2006, the office, office/flex, industrial/warehouse and stand-alone retail properties included in the Consolidated Properties were 92.0 percent leased. Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2006, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases that expire at the period end date. Leases that expire as of December 31, 2006 aggregate 103,477 square feet, or 0.4 percent of the net rentable square footage. The Properties are located in seven states, primarily in the Northeast, and the District of Columbia. See Item 2: Properties.
The general partner of the Operating Partnership is the Corporation, which has elected to be treated and has operated so as to qualify as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). The common stock, par value $0.01, of the Corporation (the “Common Stock”) is listed on the New York Stock Exchange under the symbol “CLI.” Substantially all of the Corporation’s interests in the Properties are held through, and its operations are conducted through, the Operating Partnership, or through entities controlled by the Operating Partnership. As of February 16, 2007, 67,792,367 shares of Common Stock were outstanding. Also, as of February 16, 2007, the Corporation owned an 81.6 percent general partnership interest in the Operating Partnership. As used herein, the term “Units” refers to common limited partnership interests in the Operating Partnership. Units are redeemable for an equal number of shares of Common Stock or cash.
In May 2006, in conjunction with the completion of the Gale Company acquisition, the Operating Partnership acquired The Gale Construction Company and its related companies, which offer a full complement of professional services in the areas of construction management, general contracting and advisory services.
The Operating Partnership’s strategy has been to focus its operations, acquisition and development of office properties in markets and sub-markets where it believes it is, or can become, a significant and preferred owner and operator. The Operating Partnership plans to continue this strategy by expanding through acquisitions and/or development in Northeast markets where it has, or can achieve, similar status. The Operating Partnership believes that its Properties have excellent locations and access and are well-maintained and professionally managed. As a result, the Operating Partnership believes that its Properties attract high quality tenants and achieve among the highest rental, occupancy and tenant retention rates within their markets. The Operating Partnership also believes that its extensive market knowledge provides it with a significant competitive advantage, which is further enhanced by its strong reputation for, and emphasis on, delivering highly responsive, professional management services. See “Business Strategies.”
The Corporation’s executive officers have been employed by the Corporation and/or its predecessor companies for an average of approximately 19 years.
BUSINESS STRATEGIES
Operations
Reputation: The Operating Partnership has established a reputation as a highly-regarded landlord with an emphasis on delivering quality tenant services in buildings it owns and/or manages. The Operating Partnership believes that its continued success depends in part on enhancing its reputation as an operator of choice, which will facilitate the retention of current tenants and the attraction of new tenants. The Operating Partnership believes it provides a superior level of service to its tenants, which should in turn, allow the Operating Partnership to outperform the market with respect to occupancy rates, as well as improve tenant retention.
Communication with tenants: The Operating Partnership emphasizes frequent communication with tenants to ensure first-class service to the Properties. Property management personnel generally are located on site at the Properties to provide convenient access to management and to ensure that the Properties are well-maintained. Property management’s primary responsibility is to ensure that buildings are operated at peak efficiency in order to meet both the Operating Partnership’s and tenants’ needs and expectations. Property management personnel additionally budget and oversee capital improvements and building system upgrades to enhance the Properties’ competitive advantages in their markets and to maintain the quality of the Operating Partnership’s properties.
Additionally, the Operating Partnership’s in-house leasing representatives develop and maintain long-term relationships with the Operating Partnership’s diverse tenant base and coordinate leasing, expansion, relocation and build-to-suit opportunities within the Operating Partnership’s portfolio. This approach allows the Operating Partnership to offer office space in the appropriate size and location to current or prospective tenants in any of its sub-markets.
Growth
The Operating Partnership plans to continue to own and operate a portfolio of properties in high-barrier-to-entry markets, with a primary focus in the Northeast. The Operating Partnership’s primary objectives are to maximize operating cash flow and to enhance the value of its portfolio through effective management, acquisition, development and property sales strategies, as follows:
Internal Growth: The Operating Partnership seeks to maximize the value of its existing portfolio through implementing operating strategies designed to produce the highest effective rental and occupancy rates and lowest tenant installation cost within the markets that it operates. The Operating Partnership continues to pursue internal growth through re-leasing space at higher effective rents with contractual rent increases and developing or redeveloping space for its diverse base of high credit tenants, including New Cingular Wireless PCS LLC, Morgan Stanley and The United States of America - GSA. In addition, the Operating Partnership seeks economies of scale through volume discounts to take advantage of its size and dominance in particular sub-markets, and operating efficiencies through the use of in-house management, leasing, marketing, financing, accounting, legal, development and construction services.
Acquisitions: The Operating Partnership also believes that growth opportunities exist through acquiring operating properties or properties for redevelopment with attractive returns in its core Northeast sub-markets where, based on its expertise in leasing, managing and operating properties, it believes it is, or can become, a significant and preferred owner and operator. The Operating Partnership intends either directly or through joint ventures to acquire, invest in or redevelop additional properties that: (i) are expected to provide attractive initial yields with potential for growth in cash flow from operations; (ii) are well-located, of high quality and competitive in their respective sub-markets; (iii) are located in its existing sub-markets or in sub-markets in which the Operating Partnership can become a significant and preferred owner and operator; and (iv) it believes have been under-managed or are otherwise capable of improved performance through intensive management, capital improvements and/or leasing that should result in increased effective rental and occupancy rates.
Development: The Operating Partnership seeks to selectively develop additional properties either directly or through joint ventures where it believes such development will result in a favorable risk-adjusted return on investment in coordination with the above operating strategies. Such development primarily will occur: (i) when leases have been executed prior to construction; (ii) in stable core Northeast sub-markets where the demand for such space exceeds available supply; and (iii) where the Operating Partnership is, or can become, a significant and preferred owner and operator.
Property Sales: While management’s principal intention is to own and operate its properties on a long-term basis, it periodically assesses the attributes of each of its properties, with a particular focus on the supply and demand fundamentals of the sub-markets in which they are located. Based on these ongoing assessments, the Operating Partnership may, from time to time, decide to sell any of its properties.
Financial
The Operating Partnership currently intends to maintain a ratio of debt-to-undepreciated assets (total debt of the Operating Partnership as a percentage of total undepreciated assets) of 50 percent or less. As of December 31, 2006, the Operating Partnership’s total debt constituted approximately 41.4 percent of total undepreciated assets of the Operating Partnership. The Operating Partnership has three investment grade credit ratings. Standard & Poor’s Rating Services (“S&P”) and Fitch, Inc. (“Fitch”) have each assigned their BBB rating to existing and prospective senior unsecured debt of the Operating Partnership. S&P and Fitch have also assigned their BBB- rating to existing and prospective preferred stock offerings of the Corporation. Moody’s Investors Service (“Moody’s”) has assigned its Baa2 rating to existing and prospective senior unsecured debt of the Operating Partnership and its Baa3 rating to existing and prospective preferred stock offerings of the Corporation. Although there is no limit in the Operating Partnership’s organizational documents on the amount of indebtedness that the Operating Partnership may incur or a requirement for the maintenance of investment grade credit ratings, the Operating Partnership has entered into certain financial agreements which contain covenants that limit the Operating Partnership’s ability to incur indebtedness under certain circumstances. The Operating Partnership intends to conduct its operations so as to best be able to maintain its investment grade rated status. The Operating Partnership intends to utilize the most appropriate sources of capital for future acquisitions, development, capital improvements and other investments, which may include funds from operating activities, proceeds from property and land sales, short-term and long-term borrowings (including draws on the Operating Partnership’s revolving credit facility), and the issuance of additional debt or securities by the Operating Partnership or equity securities by the Corporation.
EMPLOYEES
As of December 31, 2006, the Operating Partnership had no employees. The Corporation had approximately 540 full-time employees.
COMPETITION
The leasing of real estate is highly competitive. The Properties compete for tenants with lessors and developers of similar properties located in their respective markets primarily on the basis of location, rent charged, services provided, and the design and condition of the Properties. The Operating Partnership also experiences competition when attempting to acquire or dispose of real estate, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships, individual investors and others.
REGULATIONS
Many laws and governmental regulations are applicable to the Properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.
Under various laws and regulations relating to the protection of the environment, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances. The presence of such substances may adversely affect the owner’s ability to rent or sell the property or to borrow using such property as collateral and may expose it to liability resulting from any release of, or exposure to, such substances. Persons who arrange for the disposal or treatment of hazardous or toxic substances at another location may also be liable for the costs of re-moval or remediation of such substances at the disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws impose liability for the release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances.
In connection with the ownership (direct or indirect), operation, management and development of real properties, the Operating Partnership may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental penalties and injuries to persons and property.
There can be no assurance that (i) future laws, ordinances or regulations will not impose any material environmental liability, (ii) the current environmental condition of the Properties will not be affected by tenants, by the condition of land or operations in the vicinity of the Properties (such as the presence of underground storage tanks), or by third parties unrelated to the Operating Partnership, or (iii) the Operating Partnership’s assessments reveal all environmental liabilities and that there are no material environmental liabilities of which the Operating Partnership is aware. If compliance with the various laws and regulations, now existing or hereafter adopted, exceeds the Operating Partnership’s budgets for such items, the Operating Partnership’s ability to make expected distributions to security holders could be adversely affected.
There are no other laws or regulations which have a material effect on the Operating Partnership’s operations, other than typical federal, state and local laws affecting the development and operation of real property, such as zoning laws.
INDUSTRY SEGMENTS
The Operating Partnership operates in two industry segments: (i) real estate; and (ii) construction services. As of December 31, 2006, the Operating Partnership does not have any foreign operations and its business is not seasonal. In May 2006, in conjunction with the Operating Partnership’s acquisition of the Gale Company and related businesses, the Operating Partnership acquired a business specializing solely in construction and related services whose operations comprise the Operating Partnership’s construction services segment. Please see our financial statements attached hereto and incorporated by reference herein for financial information relating to our industry segments.
RECENT DEVELOPMENTS
The Operating Partnership’s core markets continue to be weak. The percentage leased in the Operating Partnership’s consolidated portfolio of stabilized operating properties increased to 92.0 percent at December 31, 2006 as compared to 91.0 percent at December 31, 2005 and 91.2 percent at December 31, 2004. Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2006, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases that expire at the period end date. Leases that expire as of the period end date aggregate 103,477 square feet, or 0.4 percent of the net rentable square footage. Excluded from percentage leased at December 31, 2004 was a non-strategic, non-core 318,224 square foot property acquired through a deed in lieu of foreclosure, which was 12.7 percent leased at December 31, 2004 and subsequently sold on February 4, 2005. Market rental rates have declined in most markets from peak levels in late 2000 and early 2001. Rental rates on the Operating Partnership’s space that was re-leased (based on first rents payable) during the year ended December 31, 2006 decreased an average of 0.2 percent compared to rates that were in effect under expiring leases, as compared to a 8.2 percent decrease in 2005 and a 8.7 percent decrease in 2004. The Operating Partnership believes that vacancy rates may continue to increase in most of its markets in 2007. As a result, the Operating Partnership’s future earnings and cash flow may continue to be negatively impacted by current market conditions.
Gale/Green Transactions
On May 9, 2006, the Operating Partnership completed the acquisitions of: (i) The Gale Company and certain of its related businesses, which engage in construction, property management, facilities management, and leasing services (collectively, the “Gale Company”); (ii) three office properties; and (iii) indirect interests in a portfolio of office properties, located primarily in New Jersey, which were owned indirectly by The Gale Company and its affiliates (“Gale”) and affiliates of SL Green Realty Corp. (“SL Green”). The agreements (“Gale/Green Agreements”) to complete the aforementioned acquisitions (collectively, the “Gale/Green Transactions”) required that the Operating Partnership complete all of the acquisitions. Simultaneous with the completion of the Gale/Green Transactions, The Gale Company’s President, Mark Yeager, was named an executive vice president of the Company.
Under the Gale/Green Agreements, the Operating Partnership acquired 100 percent of the ownership interests in three office properties located in New Jersey, aggregating 518,257 square feet (the “Wholly-Owned Properties”).
Also, as part of the Gale/Green Agreements, the Operating Partnership entered into a joint venture with an entity controlled by SL Green (in which Stanley C. Gale has an interest), known as Mack-Green-Gale LLC (“Mack-Green”), to hold an approximate 96 percent interest and act as general partner of Gale SLG NJ Operating Partnership, L.P. (the “OP LP”). The OP LP owns 100 percent of entities which own 25 office properties (collectively, the“OP LP Properties”) which aggregate 3.5 million square feet (consisting of 17 office properties aggregating 2.3 million square feet located in New Jersey and eight properties aggregating 1.2 million square feet located in Troy, Michigan), as well as a minor, non-controlling interest in four office properties aggregating 419,000 square feet located in Naperville, Illinois.
Mr. Gale has agreed to pay Mark Yeager, an executive officer of the Corporation, 49 percent of any payments he receives on account of Mr. Gale’s interest with SL Green in Mack-Green.
The Gale Company, the Wholly-Owned Properties, and the interest in Mack-Green were acquired by the Operating Partnership for a total initial acquisition cost of approximately $245 million consisting of: (i) the issuance by the Operating Partnership of 224,719 common units of the Operating Partnership; (ii) the payment of a total of approximately $194 million in cash, which was primarily funded through borrowing under the Operating Partnership’s revolving credit facility; and (iii) the assumption of $39.9 million in existing mortgage indebtedness on two of the Wholly-Owned Properties. Mr. Gale has agreed to transfer to Mark Yeager 33,700 of his common units of the Operating Partnership on April 30, 2009, provided that Mr. Yeager’s employment with the Corporation has not been terminated involuntarily without cause (“Employment Continuation”) prior to such date. Additionally, the agreement to acquire the Gale Company (“Gale Agreement”) contains earn-out provisions providing for the payment of contingent purchase consideration of up to $18 million in cash based upon the achievement of Gross Income and NOI (as such terms are defined in the Gale Agreement) targets and other events for The Gale Company for the three years following the closing date.
Mr. Gale has agreed to pay to Mr. Yeager 49 percent of all amounts he receives pursuant to the Gale Agreement earn-out provisions, subject to certain conditions including Mr. Yeager’s Employment Continuation.
The Operating Partnership has not yet obtained all the information necessary to finalize its estimates to complete the purchase price allocations related to the Gale/Green Transactions. The purchase price allocations will be finalized once the information identified by the Operating Partnership has been received, which should not be longer than one year from the date of acquisition.
In addition, the Gale Agreement provides for the Operating Partnership to acquire certain other ownership interests in up to 11 real estate projects (the “Non-Portfolio Properties”), subject to obtaining certain third party consents and the satisfaction of various project-related and/or other conditions. Each of the Operating Partnership’s acquired interests in the Non-Portfolio Properties will provide for the initial distributions of net cash flow solely to the Operating Partnership, and thereafter an affiliate of Mr. Gale (“Gale Affiliate”) has participation rights (“Gale Participation Rights”) in 50 percent of the excess net cash flow remaining after the distribution to the Operating Partnership of the aggregate amount equal to the sum of: (a) the Operating Partnership’s capital contributions, plus (b) an internal rate of return (“IRR”) of 10 percent per annum, accruing on the date or dates of the Operating Partnership’s investments.
Mr. Gale has agreed to pay to Mr. Yeager 49 percent of any payments he receives with respect to the Gale Participation Rights, subject to adjustments for payments Mr. Yeager receives from his direct interests in such rights and subject to, in certain cases, Mr. Yeager’s Employment Continuation. Mr. Gale has also agreed to pay to Mr. Yeager 49 percent of the distributions he receives with respect to Mr. Gale’s interest in certain land located in Florham Park, New Jersey, which is one of the Non-Portfolio Properties not yet acquired by the Operating Partnership. Such distribution may include the amounts Mr. Gale receives from the conveyance of his interest in the Florham Park land to the Operating Partnership.
With respect to the arrangements between Mr. Gale and Mr. Yeager regarding the Gale Agreement earn-out provisions and the Florham Park land, they have agreed to consider offering payments to certain persons that have been employed by certain subsidiaries of The Gale Company, which may include current employees of the Corporation.
Through December 31, 2006, the Operating Partnership has completed acquisitions of eight of the interests in the Non-Portfolio Properties, which included the acquisitions of interests in: a 527,015 square foot, mixed-use office/retail complex; a 416,429 square-foot multi-tenanted office property; a 139,750 square-foot fully-leased office property; an office property in development; two vacant land parcels (one of which Mr. Yeager has a 16.49 percent interest in the Participation Rights) and two pre-developed projects. The aggregate cost of the completed acquisitions was approximately $25.6 million.
Pursuant to Mr. Gale’s agreements with Mr. Yeager, as described herein, Mr. Yeager received approximately $5.6 million during the year ended December 31, 2006.
In connection with the Operating Partnership’s acquisition of the Gale Company, Mr. Gale and certain other affiliates of Gale are restricted from competing with the Operating Partnership or hiring the Corporation’s employees for a period of four years expiring on May 9, 2010.
Property Acquisitions
The Operating Partnership acquired the following office properties during the year ended December 31, 2006: (dollars in thousands)
| | | | | | |
| Acquisition | | | # of | Rentable | Acquisition |
| Date | Property/Address | Location | Bldgs. | Square Feet | Cost |
| 02/28/06 | Capital Office Park (a) | Greenbelt, Maryland | 7 | 842,258 | $166,011 |
| 05/09/06 | 35 Waterview Boulevard (b) (c) | Parsippany, New Jersey | 1 | 172,498 | 33,586 |
| 05/09/06 | 105 Challenger Road (b) (d) | Ridgefield Park, New Jersey | 1 | 150,050 | 34,960 |
| 05/09/06 | 343 Thornall Street (b) (e) | Edison, New Jersey | 1 | 195,709 | 46,193 |
| 07/31/06 | 395 W. Passaic Street (f) | Rochelle Park, New Jersey | 1 | 100,589 | 22,219 |
| | | | | |
| Total Property Acquisitions: | | 11 | 1,461,104 | $302,969 |
| |
| (a) This transaction was funded primarily through the assumption of $63.2 million of mortgage debt and the issuance of 1.9 million common operating partnership units valued at $87.2 million. |
(b) The property was acquired as part of the Gale/Green Transactions. |
(c) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility and the assumption of $20.4 million of mortgage debt. |
(d) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility and the assumption of $19.5 million of mortgage debt. |
(e) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility. |
(f) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility and the assumption of $13.1 million of mortgage debt. |
For a discussion of the ownership interests in Mack-Green, see Note 4: Investments in Unconsolidated Joint Ventures - Mack-Green-Gale LLC - to our financial statements included within this annual report on Form 10-K.
Sales
The Operating Partnership sold the following office properties during the year ended December 31, 2006: (dollars in thousands)
| | | | | | | | |
| | | | | Rentable | Net | Net | Realized |
| Sale | | | # of | Square | Sales | Book | Gain/ |
| Date | Property/Address | Location | Bldgs. | Feet | Proceeds | Value | (Loss) |
| 06/28/06 | Westage Business Center | Fishkill, New York | 1 | 118,727 | $ 14,765 | $ 10,872 | $ 3,893 |
| 06/30/06 | 1510 Lancer Drive | Moorestown, New Jersey | 1 | 88,000 | 4,146 | 3,134 | 1,012 |
| 11/10/06 | Colorado portfolio | Various cities, Colorado | 19 | 1,431,610 | 193,404 | 165,072 | 28,332 |
| 12/21/06 | California portfolio | San Francisco, California | 2 | 450,891 | 124,182 | 97,814 | 26,368 |
| | | | | | | |
| Total Office Property Sales: | | 23 | 2,089,228 | $336,497 | $276,892 | $59,605 |
On November 6, 2006, the Operating Partnership sold substantially all of its 50-percent interest in G&G Martco, a joint venture which owned a 305,618 square foot office building located in San Francisco, California for approximately $16.3 million, realizing a gain on the sale of approximately $10.8 million.
On November 7, 2006, the Operating Partnership sold 10.1 acres of developable land adjacent to its Horizon Center properties in Hamilton Township, New Jersey, for net sales proceeds of approximately $1.5 million, realizing a gain of approximately $1.1 million from the sale.
Investments in Marketable Securities
In 2005, the Operating Partnership purchased approximately 1.5 million shares of common stock in CarrAmerica Realty Corporation. From January 1, 2006 through January 25, 2006, the Operating Partnership purchased an additional 336,500 shares in CarrAmerica for a total purchase price of approximately $11.9 million. During the three months ended March 31, 2006, the Operating Partnership sold all of its 1,804,800 shares of CarrAmerica common stock, realizing a gain of approximately $15.1 million.
FINANCING ACTIVITY
On January 24, 2006, the Operating Partnership issued $100 million face amount of 5.80 percent senior unsecured notes due January 15, 2016 with interest payable semi-annually in arrears, and $100 million face amount of 5.25 percent senior unsecured notes due January 15, 2012 with interest payable semi-annually in arrears. The total proceeds from the issuances, including accrued interest on the 5.80 percent notes of approximately $200.8 million, were used to reduce outstanding borrowings under the Operating Partnership’s unsecured facility.
On February 7, 2007, the Corporation completed an underwritten offer and sale of 4,650,000 shares of its common stock and used the net proceeds, which totaled approximately $252 million (after offering costs), primarily to pay down the outstanding borrowings under the Operating Partnership’s revolving credit facility and for general corporate purposes. Concurrent with this transaction, the Corporation purchased from the Operating Partnership 4,650,000 of its outstanding common units for approximately $252 million.
AVAILABLE INFORMATION
The Corporation’s internet website is www.mack-cali.com. The Operating Partnership makes available free of charge on or through the Corporation’s website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission. In addition, the Corporation’s internet website includes other items related to corporate governance matters, including, among other things, the Corporation’s corporate governance guidelines, charters of various committees of the Board of Directors of the Corporation, and the Corporation’s code of business conduct and ethics applicable to all employees, officers and directors of the Corporation. The Corporation intends to disclose on its internet website any amendments to or waivers from its code of business conduct and ethics as well as any amendments to its corporate governance principles or the charters of various committees of the Board of Directors. Copies of these documents may be obtained, free of charge, from our internet website. Any shareholder of the Corporation also may obtain copies of these documents, free of charge, by sending a request in writing to: Mack-Cali Investor Relations Department, 343 Thornall Street, Edison, NJ 08837-2206.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
We consider portions of this report, including the documents incorporated by reference, to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of such act. Such forward-looking statements relate to, without limitation, our future economic performance, plans and objectives for future operations and projections of revenue and other financial items. Forward-looking statements can be identified by the use of words such as “may,” “will,” “plan,” “should,” “expect,” “anticipate,” “estimate,” “continue” or comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.
Among the factors about which we have made assumptions are:
| · | changes in the general economic climate and conditions, including those affecting industries in which our principal tenants operate; |
| · | the extent of any tenant bankruptcies or of any early lease terminations; |
| · | our ability to lease or re-lease space at current or anticipated rents; |
| · | changes in the supply of and demand for office, office/flex and industrial/warehouse properties; |
| · | changes in interest rate levels; |
| · | changes in operating costs; |
| · | our ability to obtain adequate insurance, including coverage for terrorist acts; |
| · | the availability of financing; |
| · | changes in governmental regulation, tax rates and similar matters; and |
| · | other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated. |
For further information on factors which could impact us and the statements contained herein, see Item 1A: Risk Factors. We assume no obligation to update and supplement forward-looking statements that become untrue because of subsequent events.
ITEM 1A. RISK FACTORS
Our results from operations and ability to make distributions on our equity and debt service on our indebtedness may be affected by the risk factors set forth below. All investors should consider the following risk factors before deciding to purchase securities of the Operating Partnership. The Operating Partnership refers to itself as “we” or “our” in the following risk factors.
Declines in economic activities in the Northeastern office markets could adversely affect our operating results.
A majority of our revenues are derived from our properties located in the Northeast, particularly in New Jersey, New York and Pennsylvania. Adverse economic developments in this region could adversely impact the operations of our properties and, therefore, our profitability. Because our portfolio consists primarily of office and office/flex buildings (as compared to a more diversified real estate portfolio), a decline in the economy and/or a decline in the demand for office space may adversely affect our ability to make distributions or payments to our investors.
Our performance is subject to risks associated with the real estate industry.
General: Our business and our ability to make distributions or payments to our investors depend on the ability of our properties to generate funds in excess of operating expenses (including scheduled principal payments on debt and capital expenditures). Events or conditions that are beyond our control may adversely affect our operations and the value of our properties. Such events or conditions could include:
| · | changes in the general economic climate; |
| · | changes in local conditions such as an oversupply of office space, a reduction in demand for office space, or reductions in office market rental rates; |
| · | decreased attractiveness of our properties to tenants; |
| · | competition from other office and office/flex properties; |
| · | our inability to provide adequate maintenance; |
| · | increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents; |
| · | changes in laws and regulations (including tax, environmental, zoning and building codes, and housing laws and regulations) and agency or court interpretations of such laws and regulations and the related costs of compliance; |
| · | changes in interest rate levels and the availability of financing; |
| · | the inability of a significant number of tenants to pay rent; |
| · | our inability to rent office space on favorable terms; and |
| · | civil unrest, earthquakes, acts of terrorism and other natural disasters or acts of God that may result in uninsured |
Financially distressed tenants may be unable to pay rent: If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord and protecting our investments. If a tenant files for bankruptcy, a potential court judgment rejecting and terminating such tenant’s lease could adversely affect our ability to make distributions or payments to our investors.
Renewing leases or re-letting space could be costly: If a tenant does not renew its lease upon expiration or terminates its lease early, we may not be able to re-lease the space. If a tenant does renew its lease or we re-lease the space, the terms of the renewal or new lease, including the cost of required renovations or concessions to the tenant, may be less favorable than the current lease terms which could adversely affect our ability to make distributions or payments to our investors.
Our insurance coverage on our properties may be inadequate: We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire and flood. We cannot guarantee that the limits of our current policies will be sufficient in the event of a catastrophe to our properties. We cannot guarantee that we will be able to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, while our current insurance policies insure us against loss from terrorist acts and toxic mold, in the future insurance companies may no longer offer coverage against these types of losses, or, if offered, these types of insurance may be prohibitively expensive. If any or all of the foregoing should occur, we may not have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. Should an uninsured loss or a loss in excess of our insured limits occur, we could lose all or a portion of the capital we have invested in a property or properties, as well as the anticipated future revenue from the property or properties. Nevertheless, we might remain obligated for any mortgage debt or other financial obligations related to the property or properties. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our ability to make distributions or payments to our investors.
Illiquidity of real estate limits our ability to act quickly: Real estate investments are relatively illiquid. Such illiquidity may limit our ability to react quickly in response to changes in economic and other conditions. If we want to sell an investment, we might not be able to dispose of that investment in the time period we desire, and the sales price of that investment might not recoup or exceed the amount of our investment. The prohibition in the Internal Revenue Code of 1986, as amended (the “Code”), and related regulations on a real estate investment trust holding property for sale also may restrict our ability to sell property. In addition, we acquired a significant number of our properties from individuals to whom we issued Units as part of the purchase price. In connection with the acquisition of these properties, in order to preserve such individual’s income tax deferral, we contractually agreed not to sell or otherwise transfer the properties for a specified period of time, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate individuals for the income tax consequences of the recognition of such built-in-gains. As of December 31, 2006, 50 of our properties, with an aggregate net book value of approximately $1.3 billion, were subject to these restrictions, which expire periodically through 2016. For those properties where such restrictions have lapsed, we are generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the appropriate individuals. 88 of our properties, with an aggregate net book value of approximately $809.0 million, have lapsed restrictions and are subject to these conditions. The above limitations on our ability to sell our investments could adversely affect our ability to make distributions or payments to our investors.
Americans with Disabilities Act compliance could be costly: Under the Americans with Disabilities Act of 1990 (“ADA”), all public accommodations and commercial facilities must meet certain federal requirements related to access and use by disabled persons. Compliance with the ADA requirements could involve removal of structural barriers from certain disabled persons’ entrances. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses. Although we believe that our properties are substantially in compliance with present requirements, noncompliance with the ADA or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against us. Such costs may adversely affect our ability to make distributions or payments to our investors.
Environmental problems are possible and may be costly: Various federal, state and local laws and regulations subject property owners or operators to liability for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner or operator was responsible for or even knew of the presence of such substances. The presence of or failure to properly remediate hazardous or toxic substances (such as toxic mold) may adversely affect our ability to rent, sell or borrow against contaminated property and may impose liability upon us for personal injury to persons exposed to such substances. Various laws and regulations also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances at another location for the costs of removal or remediation of such substances at the disposal or treatment facility. These laws often impose liability whether or not the person arranging for such disposal ever owned or operated the disposal facility. Certain other environmental laws and regulations impose liability on owners or operators of property for injuries relating to the release of asbestos-containing or other materials into the air, water or otherwise into the environment. As owners and operators of property and as potential arrangers for hazardous substance disposal, we may be liable under such laws and regulations for removal or remediation costs, governmental penalties, property damage, personal injuries and related expenses. Payment of such costs and expenses could adversely affect our ability to make distributions or payments to our investors.
Competition for acquisitions may result in increased prices for properties: We plan to acquire additional properties in New Jersey, New York and Pennsylvania and in the Northeast generally. We may be competing for investment opportunities with entities that have greater financial resources. Several office building developers and real estate companies may compete with us in seeking properties for acquisition, land for development and prospective tenants. Such competition may adversely affect our ability to make distributions or payments to our investors by:
| · | reducing the number of suitable investment opportunities offered to us; |
| · | increasing the bargaining power of property owners; |
| · | interfering with our ability to attract and retain tenants; |
| · | increasing vacancies which lowers market rental rates and limits our ability to negotiate rental rates; and/or |
| · | adversely affecting our ability to minimize expenses of operation. |
Development of real estate could be costly: As part of our operating strategy, we may acquire land for development or construct on owned land, under certain conditions. Included among the risks of the real estate development business are the following, which may adversely affect our ability to make distributions or payments to our investors:
| · | financing for development projects may not be available on favorable terms; |
| · | long-term financing may not be available upon completion of construction; and |
| · | failure to complete construction on schedule or within budget may increase debt service expense and construction costs. |
Property ownership through joint ventures could subject us to the contrary business objectives of our co-venturers: We, from time to time, invest in joint ventures or partnerships in which we do not hold a controlling interest in the assets underlying the entities in which we invest, including joint ventures in which (i) we own a direct interest in an entity which controls such assets, or (ii) we own a direct interest in an equity which owns indirect interests, through one or more intermediaries, of such assets. These investments involve risks that do not exist with properties in which we own a controlling interest with respect to the underlying assets, including the possibility that our co-venturers or partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives. Because we lack a controlling interest, our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. While we seek protective rights against such contrary actions, there can be no assurance that we will be successful in procuring any such protective rights, or if procured, that the rights will be sufficient to fully protect us against contrary actions. Our organizational documents do not limit the amount of available funds that we may invest in joint ventures or partnerships. If the objectives of our co-venturers or partners are inconsistent with ours, it may adversely affect our ability to make distributions or payments to our investors.
Our real estate construction management activities are subject to risks particular to third-party construction projects.
As a result of the Gale/Green Transactions, we now perform fixed price construction services for third parties and we are subject to a variety of risks unique to these activities. If construction costs of a project exceed original estimates, such costs may have to be absorbed by us, thereby making the project less profitable than originally estimated, or possibly not profitable at all. In addition, a construction project may be delayed due to government or regulatory approvals, supply shortages, or other events and circumstances beyond our control, or the time required to complete a construction project may be greater than originally anticipated. If any such excess costs or project delays were to be material, such events may adversely effect our cash flow and liquidity and thereby impact our ability to pay dividends or make distributions to our investors.
Debt financing could adversely affect our economic performance.
Scheduled debt payments and refinancing could adversely affect our financial condition: We are subject to the risks normally associated with debt financing. These risks, including the following, may adversely affect our ability to make distributions or payments to our investors:
| · | our cash flow may be insufficient to meet required payments of principal and interest; |
| · | payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses; |
| · | we may not be able to refinance indebtedness on our properties at maturity; and |
| · | if refinanced, the terms of refinancing may not be as favorable as the original terms of the related indebtedness. |
As of December 31, 2006, we had total outstanding indebtedness of $2.2 billion comprised of $1.6 billion of senior unsecured notes, outstanding borrowings of $145.0 million under our $600.0 million revolving credit facility and approximately $383.5 million of mortgage loans payable and other obligations indebtedness. We may have to refinance the principal due on our current or future indebtedness at maturity, and we may not be able to do so.
If we are unable to refinance our indebtedness on acceptable terms, or at all, events or conditions that may adversely affect our ability to make distributions or payments to our investors include the following:
| · | we may need to dispose of one or more of our properties upon disadvantageous terms; |
| · | prevailing interest rates or other factors at the time of refinancing could increase interest rates and, therefore, our interest expense; |
| · | if we mortgage property to secure payment of indebtedness and are unable to meet mortgage payments, the mortgagee could foreclose upon such property or appoint a receiver to receive an assignment of our rents and leases; and |
| · | foreclosures upon mortgaged property could create taxable income without accompanying cash proceeds and, therefore, hinder our ability to meet the real estate investment trust distribution requirements of the Internal Revenue Code. |
We are obligated to comply with financial covenants in our indebtedness that could restrict our range of operating activities: The mortgages on our properties contain customary negative covenants, including limitations on our ability, without the prior consent of the lender, to further mortgage the property, to enter into new leases outside of stipulated guidelines or to materially modify existing leases. In addition, our credit facility contains customary requirements, including restrictions and other limitations on our ability to incur debt, debt to assets ratios, secured debt to total assets ratios, interest coverage ratios and minimum ratios of unencumbered assets to unsecured debt. The indentures under which our senior unsecured debt have been issued contain financial and operating covenants including coverage ratios and limitations on our ability to incur secured and unsecured debt. These covenants limit our flexibility in conducting our operations and create a risk of default on our indebtedness if we cannot continue to satisfy them.
Rising interest rates may adversely affect our cash flow: As of December 31, 2006, outstanding borrowings of approximately $145.0 million under our revolving credit facility bear interest at variable rates. We may incur additional indebtedness in the future that also bears interest at variable rates. Variable rate debt creates higher debt service requirements if market interest rates increase. Higher debt service requirements could adversely affect our ability to make distributions or payments to our investors and/or cause us to default under certain debt covenants.
Our degree of leverage could adversely affect our cash flow: We fund acquisition opportunities and development partially through short-term borrowings (including our revolving credit facility), as well as from proceeds from property sales and undistributed cash. We expect to refinance projects purchased with short-term debt either with long-term indebtedness or equity financing depending upon the economic conditions at the time of refinancing. The Board of Directors of Mack-Cali Realty Corporation, our general partner, has a general policy of limiting the ratio of our indebtedness to total undepreciated
assets (total debt as a percentage of total undepreciated assets) to 50 percent or less, although there is no limit in Mack-Cali Realty Corporation’s or our organizational documents on the amount of indebtedness that we may incur. However, we have entered into certain financial agreements which contain financial and operating covenants that limit our ability under certain circumstances to incur additional secured and unsecured indebtedness. The Board of Directors of Mack-Cali Realty Corporation could alter or eliminate its current policy on borrowing at any time at its discretion. If this policy were changed, we could become more highly leveraged, resulting in an increase in debt service that could adversely affect our cash flow and our ability to make distributions or payments to our investors and/or could cause an increased risk of default on our obligations.
We are dependent on external sources of capital for future growth: To qualify as a real estate investment trust, Mack-Cali Realty Corporation must distribute to its shareholders each year at least 90 percent of its net taxable income, excluding any net capital gain. Because of this distribution requirement, it is not likely that we will be able to fund all future capital needs, including for acquisitions and developments, from income from operations. Therefore, we will have to rely on third-party sources of capital, which may or may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of things, including the market’s perception of our growth potential and our current and potential future earnings. Moreover, additional equity offerings by Mack-Cali Realty Corporation may result in substantial dilution of its shareholders’ interests, and additional debt financing may substantially increase our leverage.
Competition for skilled personnel could increase our labor costs.
We compete with various other companies in attracting and retaining qualified and skilled personnel. We depend on our ability to attract and retain skilled management personnel who are responsible for the day-to-day operations of our company. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel. We may not be able to offset such added costs by increasing the rates we charge our tenants. If there is an increase in these costs or if we fail to attract and retain qualified and skilled personnel, our business and operating results could be harmed.
We are dependent on the key personnel of Mack-Cali Realty Corporation whose continued service is not guaranteed.
We are dependent upon the executive officers of Mack-Cali Realty Corporation for strategic business direction and real estate experience. While we believe that we could find replacements for these key personnel, loss of their services could adversely affect our operations. Mack-Cali Realty Corporation has entered into an employment agreement (including non-competition provisions) which provides for a continuous four-year employment term with each of Mitchell E. Hersh, Barry Lefkowitz and Roger W. Thomas, a continuous one-year employment term with Michael A. Grossman, and a three-year employment term with Mark Yeager which, as of May 9, 2009, shall convert to a continuous one-year employment term. Mack-Cali Realty Corporation does not have key man life insurance for its executive officers.
Certain provisions of Maryland law and our charter and bylaws as well as our stockholder rights plan could hinder, delay or prevent changes in control.
Certain provisions of Maryland law, the charter, bylaws and stockholder rights plan of Mack-Cali Realty Corporation have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change in control. These provisions include the following:
Classified Board of Directors: The Board of Directors of Mack-Cali Realty Corporation is divided into three classes with staggered terms of office of three years each. The classification and staggered terms of office of our directors make it more difficult for a third party to gain control of the board of directors. At least two annual meetings of Mack-Cali Realty Corporation stockholders, instead of one, generally would be required to affect a change in a majority of the board of directors.
Removal of Directors: Under Mack-Cali Realty Corporation’s charter, subject to the rights of one or more classes or series of preferred stock to elect one or more directors, a director may be removed only for cause and only by the affirmative vote of at least two-thirds of all votes entitled to be cast by Mack-Cali Realty Corporation’s stockholders generally in the election of directors. Neither the Maryland General Corporation Law nor Mack-Cali Realty Corporation’s charter define the term “cause.” As a result, removal for “cause” is subject to Maryland common law and to judicial interpretation and review in the context of the facts and circumstances of any particular situation.
Number of Directors, Board Vacancies, Term of Office: Mack-Cali Realty Corporation has, in its bylaws, elected to be subject to certain provisions of Maryland law which vest in the Board of Directors the exclusive right to determine the number of directors and the exclusive right, by the affirmative vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum, to fill vacancies on the board. These provisions of Maryland law, which are applicable even if other provisions of Maryland law or the charter or bylaws provide to the contrary, also provide that any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, rather than the next annual meeting of stockholders as would otherwise be the case, and until his or her successor is elected and qualifies.
Stockholder Requested Special Meetings: Mack-Cali Realty Corporation’s bylaws provide that its stockholders have the right to call a special meeting only upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast by the stockholders at such meeting.
Advance Notice Provisions for Stockholder Nominations and Proposals: Mack-Cali Realty Corporation’s bylaws require advance written notice for stockholders to nominate persons for election as directors at, or to bring other business before, any meeting of stockholders. This bylaw provision limits the ability of stockholders to make nominations of persons for election as directors or to introduce other proposals unless Mack-Cali Realty Corporation is notified in a timely manner prior to the meeting.
Exclusive Authority of the Board to Amend the Bylaws: Mack-Cali Realty Corporation’s bylaws provide that its board of directors has the exclusive power to adopt, alter or repeal any provision of the bylaws or to make new bylaws. Thus, Mack-Cali Realty Corporation’s stockholders may not effect any changes to its bylaws.
Preferred Stock: Under Mack-Cali Realty Corporation’s charter, its Board of Directors has authority to issue preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of its stockholders.
Duties of Directors with Respect to Unsolicited Takeovers: Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations. The duties of directors of Maryland corporations do not require them to (a) accept, recommend or respond to any proposal by a person seeking to acquire control of the corporation, (b) authorize the corporation to redeem any rights under, or modify or render inapplicable, any stockholders rights plan, (c) make a determination under the Maryland Business Combination Act or the Maryland Control Share Acquisition Act, or (d) act or fail to act solely because of the effect of the act or failure to act may have on an acquisition or potential acquisition of control of the corporation or the amount or type of consideration that may be offered or paid to the stockholders in an acquisition. Moreover, under Maryland law the act of a director of a Maryland corporation relating to or affecting an acquisition or potential acquisition of control is not subject to any higher duty or greater scrutiny than is applied to any other act of a director. Maryland law also contains a statutory presumption that an act of a director of a Maryland corporation satisfies the applicable standards of conduct for directors under Maryland law.
Ownership Limit: In order to preserve Mack-Cali Realty Corporation’s status as a real estate investment trust under the Code, Mack-Cali Realty Corporation’s charter generally prohibits any single stockholder, or any group of affiliated stockholders, from beneficially owning more than 9.8 percent of its outstanding capital stock unless its Board of Directors waives or modifies this ownership limit.
Maryland Business Combination Act: The Maryland Business Combination Act provides that unless exempted, a Maryland corporation may not engage in business combinations, including mergers, dispositions of 10 percent or more of its assets, certain issuances of shares of stock and other specified transactions, with an “interested stockholder” or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. An interested stockholder is generally a person owning or
controlling, directly or indirectly, 10 percent or more of the voting power of the outstanding stock of the Maryland corporation. Mack-Cali Realty Corporation’s Board of Directors has exempted from this statute business combinations between it or the Operating Partnership and certain affiliated individuals and entities. However, unless the Board of Directors adopts other exemptions, the provisions of the Maryland Business Combination Act will be applicable to business combinations with other persons.
Maryland Control Share Acquisition Act: Maryland law provides that “control shares” of a corporation acquired in a “control share acquisition” shall have no voting rights except to the extent approved by a vote of two-thirds of the votes eligible to cast on the matter under the Maryland Control Share Acquisition Act. “Control Shares” means shares of stock that, if aggregated with all other shares of stock previously acquired by the acquirer, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of the voting power: one-tenth or more but less than one-third, one-third or more but less than a majority or a majority or more of all voting power. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions.
If voting rights of control shares acquired in a control share acquisition are not approved at a stockholder’s meeting, then subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a stockholder’s meeting and the acquirer becomes entitled to vote a majority of the shares of stock entitled to vote, all other stockholders may exercise appraisal rights. Mack-Cali Realty Corporation’s bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any acquisitions of shares by certain affiliated individuals and entities, any directors, officers or employees of Mack-Cali Realty Corporation and any person approved by the Board of Directors prior to the acquisition by such person of control shares. Any control shares acquired in a control share acquisition which are not exempt under the foregoing provisions of Mack-Cali Realty Corporation’s bylaws will be subject to the Maryland Control Share Acquisition Act.
Stockholder Rights Plan: Mack-Cali Realty Corporation has adopted a stockholder rights plan that may discourage any potential acquirer from acquiring more than 15 percent of its outstanding common stock since, upon this type of acquisition without approval of the Board of Directors, all other common stockholders will have the right to purchase a specified amount of common stock at a substantial discount from market price.
Consequences of failure to qualify as a real estate investment trust could adversely affect our financial condition. Failure to maintain ownership limits could cause Mack-Cali Realty Corporation to lose its qualification as a real estate investment trust: In order for Mack-Cali Realty Corporation to maintain its qualification as a real estate investment trust, not more than 50 percent in value of its outstanding stock may be actually and/or constructively owned by five or fewer individuals (as defined in the Code to include certain entities). Mack-Cali Realty Corporation has limited the ownership of its outstanding shares of its common stock by any single stockholder to 9.8 percent of the outstanding shares of its common stock. The Board of Directors of Mack-Cali Realty Corporation could waive this restriction if they were satisfied, based upon the advice of tax counsel or otherwise, that such action would be in the best interests of Mack-Cali Realty Corporation and would not affect its qualification as a real estate investment trust. Common stock of Mack-Cali Realty Corporation acquired or transferred in breach of the limitation may be redeemed by Mack-Cali Realty Corporation for the lesser of the price paid and the average closing price for the 10 trading days immediately preceding redemption or sold at the direction of Mack-Cali Realty Corporation. Mack-Cali Realty Corporation may elect to redeem such shares of common stock for Units, which are nontransferable except in very limited circumstances. Any transfer of shares of common stock which, as a result of such transfer, causes Mack-Cali Realty Corporation to be in violation of any ownership limit will be deemed void. Although Mack-Cali Realty Corporation currently intends to continue to operate in a manner which will enable it to continue to qualify as a real estate investment trust, it is possible that future economic, market, legal, tax or other considerations may cause Mack-Cali Realty Corporation’s Board of Directors to revoke the election for it to qualify as a real estate investment trust. Under Mack-Cali Realty Corporation’s organizational documents, its Board of Directors can make such revocation without the consent of Mack-Cali Realty Corporation’s stockholders.
In addition, the consent of the holders of at least 85 percent of our partnership units is required: (i) to merge (or permit the merger of) us with another unrelated person, pursuant to a transaction in which we are not the surviving entity; (ii) to dissolve, liquidate or wind up or (iii) to convey or otherwise transfer all or substantially all of our assets. As of February 16, 2007, Mack-Cali Realty Corporation, as general partner, owns approximately 81.6 percent of our outstanding common partnership units.
Tax liabilities as a consequence of failure to qualify as a real estate investment trust: Mack-Cali Realty Corporation has elected to be treated and has operated so as to qualify as a real estate investment trust for federal income tax purposes since its taxable year ended December 31, 1994. Although Mack-Cali Realty Corporation believes it will continue to operate in such manner, it cannot guarantee that it will do so. Qualification as a real estate investment trust involves the satisfaction of various requirements (some on an annual and some on a quarterly basis) established under highly technical and complex tax provisions of the Internal Revenue Code. Because few judicial or administrative interpretations of such provisions exist and qualification determinations are fact sensitive, Mack-Cali Realty Corporation cannot assure you that it will qualify as a real estate investment trust for any taxable year.
If Mack-Cali Realty Corporation fails to qualify as a real estate investment trust in any taxable year, it will be subject to the following:
| · | it will not be allowed a deduction for dividends paid to shareholders; |
| · | it will be subject to federal income tax at regular corporate rates, including any alternative minimum tax, if applicable; and |
| · | unless it is entitled to relief under certain statutory provisions, it will not be permitted to qualify as a real estate investment trust for the four taxable years following the year during which it was disqualified. |
A loss of Mack-Cali Realty Corporation’s status as a real estate investment trust could have an adverse effect on us. Failure to qualify as a real estate investment trust also would eliminate the requirement that Mack-Cali Realty Corporation pay dividends to its stockholders.
Other tax liabilities: Even if Mack-Cali Realty Corporation qualifies as a real estate investment trust, it is subject to certain federal, state and local taxes on its income and property and, in some circumstances, certain other state and local taxes. In addition, its taxable REIT subsidiaries will be subject to federal, state and local income tax for income received in connection with certain non-customary services performed for tenants and/or third parties.
Risk of changes in the tax law applicable to real estate investment trusts: Since the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any of such legislative action may prospectively or retroactively modify our and Mack-Cali Realty Corporation’s tax treatment and, therefore, may adversely affect taxation of us, Mack-Cali Realty Corporation, and/or our investors.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
PROPERTY LIST
As of December 31, 2006, the Operating Partnership’s Consolidated Properties consisted of 251 in-service office, office/flex and industrial/warehouse properties, as well as two stand-alone retail properties and two land leases. The Consolidated Properties are located primarily in the Northeast. The Consolidated Properties are easily accessible from major thoroughfares and are in close proximity to numerous amenities. The Consolidated Properties contain a total of approximately 28.9 million square feet, with the individual properties ranging from 6,216 to 1,246,283 square feet. The Consolidated Properties, managed by on-site employees, generally have attractively landscaped sites and atriums in addition to quality design and construction. The Operating Partnership’s tenants include many service sector employers, including a large number of professional firms and national and international businesses. The Operating Partnership believes that all of its properties are well-maintained and do not require significant capital improvements.
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Office Properties |
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| | | | | | | | | 2006 |
| | | | Percentage | 2006 | 2006 | | 2006 | Average |
| | | Net | Leased | Base | Effective | | Average | Effective |
| | | Rentable | as of | Rent | Rent | Percentage | Base Rent | Rent |
| | Year | Area | 12/31/06 | ($000’s) | ($000’s) | of Total 2006 | Per Sq. Ft. | Per Sq. Ft. |
Property Location | Built | (Sq. Ft.) | (%) (a) | (b) (c) | (c) (d) | Base Rent (%) | ($) (c) (e) | ($) (c) (f) |
| | | | | | | | | |
NEW JERSEY | | | | | | | | |
| | | | | | | | | |
Atlantic County | | | | | | | | |
Egg Harbor | | | | | | | | |
| 100 Decadon Drive | 1987 | 40,422 | 100.0 | 954 | 907 | 0.18 | 23.60 | 22.44 |
| 200 Decadon Drive | 1991 | 39,922 | 100.0 | 936 | 872 | 0.17 | 23.45 | 21.84 |
| | | | | | | | | |
Bergen County | | | | | | | | |
Fair Lawn | | | | | | | | |
| 17-17 Route 208 North | 1987 | 143,000 | 100.0 | 3,463 | 2,960 | 0.64 | 24.22 | 20.70 |
Fort Lee | | | | | | | | |
| One Bridge Plaza | 1981 | 200,000 | 54.4 | 2,549 | 2,371 | 0.47 | 23.43 | 21.79 |
| 2115 Linwood Avenue | 1981 | 68,000 | 62.6 | 1,253 | 1,017 | 0.23 | 29.44 | 23.89 |
Little Ferry | | | | | | | | |
| 200 Riser Road | 1974 | 286,628 | 100.0 | 2,066 | 1,916 | 0.38 | 7.21 | 6.68 |
Montvale | | | | | | | | |
| 95 Chestnut Ridge Road | 1975 | 47,700 | 100.0 | 796 | 729 | 0.15 | 16.69 | 15.28 |
| 135 Chestnut Ridge Road | 1981 | 66,150 | 88.9 | 1,440 | 1,173 | 0.26 | 24.49 | 19.95 |
Paramus | | | | | | | | |
| 15 East Midland Avenue | 1988 | 259,823 | 100.0 | 5,597 | 5,440 | 1.03 | 21.54 | 20.94 |
| 140 East Ridgewood Avenue | 1981 | 239,680 | 92.1 | 4,844 | 4,218 | 0.89 | 21.94 | 19.11 |
| 461 From Road | 1988 | 253,554 | 98.6 | 6,064 | 6,044 | 1.11 | 24.26 | 24.18 |
| 650 From Road | 1978 | 348,510 | 93.8 | 7,884 | 6,894 | 1.45 | 24.12 | 21.09 |
| 61 South Paramus Avenue | 1985 | 269,191 | 99.0 | 6,649 | 5,906 | 1.22 | 24.95 | 22.16 |
Ridgefield Park | | | | | | | | |
| 105 Challenger Road (g) | 1992 | 150,050 | 87.5 | 2,759 | 2,527 | 0.51 | 32.36 | 29.64 |
Rochelle Park | | | | | | | | |
| 120 Passaic Street | 1972 | 52,000 | 99.6 | 1,402 | 1,322 | 0.26 | 27.07 | 25.53 |
| 365 West Passaic Street | 1976 | 212,578 | 97.6 | 4,177 | 3,742 | 0.77 | 20.13 | 18.04 |
| 395 West Passaic Street (g) | 1979 | 100,589 | 90.2 | 918 | 794 | 0.17 | 23.98 | 20.74 |
Upper Saddle River | | | | | | | | |
| 1 Lake Street | 1973/94 | 474,801 | 100.0 | 7,465 | 7,465 | 1.37 | 15.72 | 15.72 |
| 10 Mountainview Road | 1986 | 192,000 | 100.0 | 4,352 | 4,045 | 0.80 | 22.67 | 21.07 |
Woodcliff Lake | | | | | | | | |
| 400 Chestnut Ridge Road | 1982 | 89,200 | 100.0 | 1,950 | 1,456 | 0.36 | 21.86 | 16.32 |
| 470 Chestnut Ridge Road | 1987 | 52,500 | 81.2 | 479 | 455 | 0.09 | 11.24 | 10.67 |
| 530 Chestnut Ridge Road | 1986 | 57,204 | 100.0 | 1,166 | 1,166 | 0.21 | 20.38 | 20.38 |
| 50 Tice Boulevard | 1984 | 235,000 | 100.0 | 6,155 | 5,570 | 1.13 | 26.19 | 23.70 |
| 300 Tice Boulevard | 1991 | 230,000 | 100.0 | 6,155 | 5,504 | 1.13 | 26.76 | 23.93 |
| | | | | | | | | |
Burlington County | | | | | | | | |
Moorestown | | | | | | | | |
| 224 Strawbridge Drive | 1984 | 74,000 | 98.4 | 1,309 | 1,218 | 0.24 | 17.98 | 16.73 |
| 228 Strawbridge Drive | 1984 | 74,000 | 100.0 | 1,043 | 896 | 0.19 | 14.09 | 12.11 |
| 232 Strawbridge Drive | 1986 | 74,258 | 98.8 | 1,446 | 1,400 | 0.27 | 19.71 | 19.08 |
| | | | | | | | | |
Essex County | | | | | | | | |
Millburn | | | | | | | | |
| 150 J.F. Kennedy Parkway | 1980 | 247,476 | 100.0 | 7,454 | 6,462 | 1.37 | 30.12 | 26.11 |
Office Properties |
(Continued) |
| |
| | | | | | | | | 2006 |
| | | | Percentage | 2006 | 2006 | | 2006 | Average |
| | | Net | Leased | Base | Effective | | Average | Effective |
| | | Rentable | as of | Rent | Rent | Percentage | Base Rent | Rent |
| | Year | Area | 12/31/06 | ($000’s) | ($000’s) | of Total 2006 | Per Sq. Ft. | Per Sq. Ft. |
Property Location | Built | (Sq. Ft.) | (%) (a) | (b) (c) | (c) (d) | Base Rent (%) | ($) (c) (e) | ($) (c) (f) |
| | | | | | | | | |
Roseland | | | | | | | | |
| 101 Eisenhower Parkway | 1980 | 237,000 | 93.9 | 5,522 | 5,014 | 1.01 | 24.81 | 22.53 |
| 103 Eisenhower Parkway | 1985 | 151,545 | 87.5 | 3,026 | 2,629 | 0.56 | 22.82 | 19.83 |
| 105 Eisenhower Parkway | 2001 | 220,000 | 85.8 | 4,126 | 3,088 | 0.76 | 21.86 | 16.36 |
| | | | | | | | | |
Hudson County | | | | | | | | |
Jersey City | | | | | | | | |
| Harborside Financial Center Plaza 1 | 1983 | 400,000 | 92.8 | 3,930 | 3,475 | 0.72 | 10.59 | 9.36 |
| Harborside Financial Center Plaza 2 | 1990 | 761,200 | 100.0 | 17,838 | 16,694 | 3.27 | 23.43 | 21.93 |
| Harborside Financial Center Plaza 3 | 1990 | 725,600 | 98.5 | 17,870 | 16,780 | 3.28 | 25.00 | 23.48 |
| Harborside Financial Center Plaza 4-A | 2000 | 207,670 | 99.1 | 6,749 | 5,903 | 1.24 | 32.79 | 28.68 |
| Harborside Financial Center Plaza 5 | 2002 | 977,225 | 97.5 | 35,570 | 29,406 | 6.53 | 37.33 | 30.86 |
| 101 Hudson Street | 1992 | 1,246,283 | 100.0 | 29,822 | 26,212 | 5.47 | 23.93 | 21.03 |
| | | | | | | | | |
Mercer County | | | | | | | | |
Hamilton Township | | | | | | | | |
| 600 Horizon Drive | 2002 | 95,000 | 100.0 | 1,373 | 1,373 | 0.25 | 14.45 | 14.45 |
Princeton | | | | | | | | |
| 103 Carnegie Center | 1984 | 96,000 | 84.9 | 2,311 | 2,029 | 0.42 | 28.35 | 24.89 |
| 3 Independence Way | 1983 | 111,300 | 49.9 | 884 | 702 | 0.16 | 15.92 | 12.64 |
| 100 Overlook Center | 1988 | 149,600 | 100.0 | 3,975 | 3,431 | 0.73 | 26.57 | 22.93 |
| 5 Vaughn Drive | 1987 | 98,500 | 94.0 | 2,431 | 2,120 | 0.45 | 26.26 | 22.90 |
| | | | | | | | | |
Middlesex County | | | | | | | | |
East Brunswick | | | | | | | | |
| 377 Summerhill Road | 1977 | 40,000 | 100.0 | 353 | 346 | 0.06 | 8.83 | 8.65 |
Edison | | | | | | | | |
| 343 Thornall Street (c) (g) | 1991 | 195,709 | 100.0 | 1,953 | 1,608 | 0.36 | 15.37 | 12.65 |
Piscataway | | | | | | | | |
| 30 Knightsbridge Road, Bldg 3 | 1977 | 160,000 | 100.0 | 2,465 | 2,465 | 0.45 | 15.41 | 15.41 |
| 30 Knightsbridge Road, Bldg 4 | 1977 | 115,000 | 100.0 | 1,771 | 1,771 | 0.33 | 15.40 | 15.40 |
| 30 Knightsbridge Road, Bldg 5 | 1977 | 332,607 | 43.6 | 1,275 | 1,080 | 0.23 | 8.79 | 7.45 |
| 30 Knightsbridge Road, Bldg 6 | 1977 | 72,743 | 62.9 | -- | -- | -- | -- | -- |
Plainsboro | | | | | | | | |
| 500 College Road East | 1984 | 158,235 | 95.7 | 4,031 | 3,807 | 0.74 | 26.62 | 25.14 |
Woodbridge | | | | | | | | |
| 581 Main Street | 1991 | 200,000 | 100.0 | 4,586 | 4,346 | 0.84 | 22.93 | 21.73 |
| | | | | | | | | |
Monmouth County | | | | | | | | |
Freehold | | | | | | | | |
| 2 Paragon Way | 1989 | 44,524 | 64.8 | 648 | 502 | 0.12 | 22.46 | 17.40 |
| 3 Paragon Way | 1991 | 66,898 | 58.4 | 770 | 699 | 0.14 | 19.71 | 17.89 |
| 4 Paragon Way | 2002 | 63,989 | 100.0 | 1,168 | 900 | 0.21 | 18.25 | 14.06 |
| 100 Willbowbrook | 1988 | 60,557 | 74.8 | 812 | 721 | 0.15 | 17.93 | 15.92 |
Holmdel | | | | | | | | |
| 23 Main Street | 1977 | 350,000 | 100.0 | 4,039 | 3,187 | 0.74 | 11.54 | 9.11 |
| | | | | | | | | |
Office Properties |
(Continued) |
| |
| | | | | | | | | 2006 |
| | | | Percentage | 2006 | 2006 | | 2006 | Average |
| | | Net | Leased | Base | Effective | | Average | Effective |
| | | Rentable | as of | Rent | Rent | Percentage | Base Rent | Rent |
| | Year | Area | 12/31/06 | ($000’s) | ($000’s) | of Total 2006 | Per Sq. Ft. | Per Sq. Ft. |
Property Location | Built | (Sq. Ft.) | (%) (a) | (b) (c) | (c) (d) | Base Rent (%) | ($) (c) (e) | ($) (c) (f) |
| | | | | | | | | |
Middletown | | | | | | | | |
| One River Center Bldg 1 | 1983 | 122,594 | 100.0 | 3,064 | 2,633 | 0.56 | 24.99 | 21.48 |
| One River Center Bldg 2 | 1983 | 120,360 | 100.0 | 2,775 | 2,738 | 0.51 | 23.06 | 22.75 |
| One River Center Bldg 3 | 1984 | 214,518 | 93.6 | 4,374 | 4,329 | 0.80 | 21.78 | 21.56 |
Neptune | | | | | | | | |
| 3600 Route 66 | 1989 | 180,000 | 100.0 | 2,400 | 2,171 | 0.44 | 13.33 | 12.06 |
Wall Township | | | | | | | | |
| 1305 Campus Parkway | 1988 | 23,350 | 92.4 | 393 | 368 | 0.07 | 18.22 | 17.06 |
| 1350 Campus Parkway | 1990 | 79,747 | 99.9 | 1,564 | 1,423 | 0.29 | 19.63 | 17.86 |
| | | | | | | | | |
Morris County | | | | | | | | |
Florham Park | | | | | | | | |
| 325 Columbia Turnpike | 1987 | 168,144 | 99.4 | 4,093 | 3,652 | 0.75 | 24.49 | 21.85 |
Morris Plains | | | | | | | | |
| 250 Johnson Road | 1977 | 75,000 | 100.0 | 1,579 | 1,385 | 0.29 | 21.05 | 18.47 |
| 201 Littleton Road | 1979 | 88,369 | 88.9 | 1,783 | 1,582 | 0.33 | 22.70 | 20.14 |
Morris Township | | | | | | | | |
| 412 Mt. Kemble Avenue | 1986 | 475,100 | 33.5 | 81 | 81 | 0.01 | 0.51 | 0.51 |
Parsippany | | | | | | | | |
| 4 Campus Drive | 1983 | 147,475 | 96.9 | 2,634 | 2,308 | 0.48 | 18.43 | 16.15 |
| 6 Campus Drive | 1983 | 148,291 | 87.2 | 2,376 | 1,906 | 0.44 | 18.37 | 14.74 |
| 7 Campus Drive | 1982 | 154,395 | -- | -- | -- | -- | -- | -- |
| 8 Campus Drive | 1987 | 215,265 | 100.0 | 6,306 | 5,534 | 1.16 | 29.29 | 25.71 |
| 9 Campus Drive | 1983 | 156,495 | 86.9 | 3,720 | 3,149 | 0.68 | 27.35 | 23.16 |
| 4 Century Drive | 1981 | 100,036 | 71.9 | 1,592 | 1,444 | 0.29 | 22.13 | 20.08 |
| 5 Century Drive | 1981 | 79,739 | 67.2 | 1,951 | 1,950 | 0.36 | 36.41 | 36.39 |
| 6 Century Drive | 1981 | 100,036 | 69.9 | 28 | 22 | 0.01 | 0.40 | 0.31 |
| 2 Dryden Way | 1990 | 6,216 | 100.0 | 93 | 93 | 0.02 | 14.96 | 14.96 |
| 4 Gatehall Drive | 1988 | 248,480 | 85.4 | 5,190 | 4,707 | 0.95 | 24.46 | 22.18 |
| 2 Hilton Court | 1991 | 181,592 | 100.0 | 5,089 | 4,600 | 0.93 | 28.02 | 25.33 |
| 1633 Littleton Road | 1978 | 57,722 | 100.0 | 1,131 | 1,131 | 0.21 | 19.59 | 19.59 |
| 600 Parsippany Road | 1978 | 96,000 | 94.7 | 1,235 | 1,020 | 0.23 | 13.58 | 11.22 |
| 1 Sylvan Way | 1989 | 150,557 | 100.0 | 3,499 | 3,103 | 0.64 | 23.24 | 20.61 |
| 5 Sylvan Way | 1989 | 151,383 | 100.0 | 3,929 | 3,592 | 0.72 | 25.95 | 23.73 |
| 7 Sylvan Way | 1987 | 145,983 | 100.0 | 3,219 | 2,803 | 0.59 | 22.05 | 19.20 |
| 35 Waterview Boulevard (g) | 1990 | 172,498 | 92.2 | 2,774 | 2,491 | 0.51 | 26.86 | 24.12 |
| 5 Wood Hollow Road | 1979 | 317,040 | 96.7 | 5,758 | 4,963 | 1.06 | 18.78 | 16.19 |
| | | | | | | | | |
Passaic County | | | | | | | | |
Clifton | | | | | | | | |
| 777 Passaic Avenue | 1983 | 75,000 | 100.0 | 1,517 | 1,375 | 0.28 | 20.23 | 18.33 |
Totowa | | | | | | | | |
| 999 Riverview Drive | 1988 | 56,066 | 100.0 | 1,079 | 962 | 0.20 | 19.25 | 17.16 |
| | | | | | | | | |
Somerset County | | | | | | | | |
Basking Ridge | | | | | | | | |
| 222 Mt. Airy Road | 1986 | 49,000 | 60.7 | 615 | 462 | 0.11 | 20.68 | 15.53 |
| 233 Mt. Airy Road | 1987 | 66,000 | 100.0 | 1,315 | 1,103 | 0.24 | 19.92 | 16.71 |
Office Properties |
(Continued) |
| |
| | | | | | | | | 2006 |
| | | | Percentage | 2006 | 2006 | | 2006 | Average |
| | | Net | Leased | Base | Effective | | Average | Effective |
| | | Rentable | as of | Rent | Rent | Percentage | Base Rent | Rent |
| | Year | Area | 12/31/06 | ($000’s) | ($000’s) | of Total 2006 | Per Sq. Ft. | Per Sq. Ft. |
Property Location | Built | (Sq. Ft.) | (%) (a) | (b) (c) | (c) (d) | Base Rent (%) | ($) (c) (e) | ($) (c) (f) |
| | | | | | | | | |
Bernards | | | | | | | | |
| 106 Allen Road | 2000 | 132,010 | 97.0 | 3,027 | 2,273 | 0.56 | 23.64 | 17.75 |
Bridgewater | | | | | | | | |
| 721 Route 202/206 | 1989 | 192,741 | 97.0 | 3,984 | 3,757 | 0.73 | 21.31 | 20.10 |
| | | | | | | | | |
Union County | | | | | | | | |
Clark | | | | | | | | |
| 100 Walnut Avenue | 1985 | 182,555 | 99.8 | 4,737 | 4,145 | 0.87 | 26.00 | 22.75 |
Cranford | | | | | | | | |
| 6 Commerce Drive | 1973 | 56,000 | 88.1 | 1,116 | 988 | 0.20 | 22.62 | 20.03 |
| 11 Commerce Drive (c) | 1981 | 90,000 | 92.7 | 1,020 | 860 | 0.19 | 12.23 | 10.31 |
| 12 Commerce Drive | 1967 | 72,260 | 95.1 | 991 | 817 | 0.18 | 14.42 | 11.89 |
| 14 Commerce Drive | 1971 | 67,189 | 87.3 | 1,232 | 1,190 | 0.23 | 21.00 | 20.29 |
| 20 Commerce Drive | 1990 | 176,600 | 100.0 | 4,332 | 3,806 | 0.80 | 24.53 | 21.55 |
| 25 Commerce Drive | 1971 | 67,749 | 100.0 | 1,436 | 1,351 | 0.26 | 21.20 | 19.94 |
| 65 Jackson Drive | 1984 | 82,778 | 95.5 | 1,918 | 1,706 | 0.35 | 24.26 | 21.58 |
New Providence | | | | | | | | |
| 890 Mountain Avenue | 1977 | 80,000 | 87.1 | 1,775 | 1,672 | 0.33 | 25.47 | 24.00 |
| | | | | | | | | |
Total New Jersey Office | | 17,537,754 | 91.7 | 354,747 | 316,402 | 65.13 | 22.40 | 19.97 |
| | | | | | | | | |
NEW YORK | | | | | | | | |
| | | | | | | | | |
Rockland County | | | | | | | | |
Suffern | | | | | | | | |
| 400 Rella Boulevard | 1988 | 180,000 | 100.0 | 4,296 | 3,826 | 0.79 | 23.87 | 21.26 |
| | | | | | | | | |
Westchester County | | | | | | | | |
Elmsford | | | | | | | | |
| 100 Clearbrook Road (c) | 1975 | 60,000 | 99.5 | 1,131 | 1,040 | 0.21 | 18.94 | 17.42 |
| 101 Executive Boulevard | 1971 | 50,000 | 45.3 | 511 | 462 | 0.09 | 22.56 | 20.40 |
| 555 Taxter Road | 1986 | 170,554 | 100.0 | 4,173 | 3,499 | 0.77 | 24.47 | 20.52 |
| 565 Taxter Road | 1988 | 170,554 | 100.0 | 4,052 | 3,511 | 0.74 | 23.76 | 20.59 |
| 570 Taxter Road | 1972 | 75,000 | 95.9 | 1,843 | 1,708 | 0.34 | 25.62 | 23.75 |
Hawthorne | | | | | | | | |
| 1 Skyline Drive | 1980 | 20,400 | 99.0 | 388 | 365 | 0.07 | 19.21 | 18.07 |
| 2 Skyline Drive | 1987 | 30,000 | 98.9 | 475 | 412 | 0.09 | 16.01 | 13.89 |
| 7 Skyline Drive | 1987 | 109,000 | 95.3 | 2,532 | 2,324 | 0.46 | 24.37 | 22.37 |
| 17 Skyline Drive | 1989 | 85,000 | 51.7 | 719 | 713 | 0.13 | 16.36 | 16.22 |
| 19 Skyline Drive | 1982 | 248,400 | 100.0 | 4,471 | 4,174 | 0.82 | 18.00 | 16.80 |
| | | | | | | | | |
| | | | | | | | | |
Office Properties |
(Continued) |
| |
| | | | | | | | | 2006 |
| | | | Percentage | 2006 | 2006 | | 2006 | Average |
| | | Net | Leased | Base | Effective | | Average | Effective |
| | | Rentable | as of | Rent | Rent | Percentage | Base Rent | Rent |
| | Year | Area | 12/31/06 | ($000’s) | ($000’s) | of Total 2006 | Per Sq. Ft. | Per Sq. Ft. |
Property Location | Built | (Sq. Ft.) | (%) (a) | (b) (c) | (c) (d) | Base Rent (%) | ($) (c) (e) | ($) (c) (f) |
| | | | | | | | | |
Tarrytown | | | | | | | | |
| 200 White Plains Road | 1982 | 89,000 | 97.9 | 1,824 | 1,655 | 0.33 | 20.93 | 18.99 |
| 220 White Plains Road | 1984 | 89,000 | 92.0 | 1,819 | 1,670 | 0.33 | 22.22 | 20.40 |
White Plains | | | | | | | | |
| 1 Barker Avenue | 1975 | 68,000 | 97.3 | 1,743 | 1,621 | 0.32 | 26.34 | 24.50 |
| 3 Barker Avenue | 1983 | 65,300 | 91.0 | 1,631 | 1,494 | 0.30 | 27.45 | 25.14 |
| 50 Main Street | 1985 | 309,000 | 98.0 | 9,249 | 8,496 | 1.70 | 30.54 | 28.06 |
| 11 Martine Avenue | 1987 | 180,000 | 90.8 | 4,889 | 4,368 | 0.90 | 29.91 | 26.73 |
| 1 Water Street | 1979 | 45,700 | 100.0 | 1,011 | 878 | 0.19 | 22.12 | 19.21 |
Yonkers | | | | | | | | |
| 1 Executive Boulevard | 1982 | 112,000 | 100.0 | 2,779 | 2,484 | 0.51 | 24.81 | 22.18 |
| 3 Executive Plaza | 1987 | 58,000 | 100.0 | 1,472 | 1,281 | 0.27 | 25.38 | 22.09 |
| | | | | | | | | |
Total New York Office | | 2,214,908 | 94.7 | 51,008 | 45,981 | 9.36 | 24.31 | 21.92 |
| | | | | | | | | |
PENNSYLVANIA | | | | | | | | |
| | | | | | | | | |
Chester County | | | | | | | | |
Berwyn | | | | | | | | |
| 1000 Westlakes Drive | 1989 | 60,696 | 95.7 | 1,592 | 1,515 | 0.29 | 27.41 | 26.08 |
| 1055 Westlakes Drive | 1990 | 118,487 | 90.2 | 2,885 | 2,334 | 0.53 | 26.99 | 21.84 |
| 1205 Westlakes Drive | 1988 | 130,265 | 63.8 | 2,234 | 1,954 | 0.41 | 26.88 | 23.51 |
| 1235 Westlakes Drive | 1986 | 134,902 | 97.7 | 2,789 | 2,436 | 0.51 | 21.16 | 18.48 |
| | | | | | | | | |
Delaware County | | | | | | | | |
Lester | | | | | | | | |
| 100 Stevens Drive | 1986 | 95,000 | 100.0 | 2,551 | 2,358 | 0.47 | 26.85 | 24.82 |
| 200 Stevens Drive | 1987 | 208,000 | 100.0 | 5,598 | 5,252 | 1.03 | 26.91 | 25.25 |
| 300 Stevens Drive | 1992 | 68,000 | 100.0 | 1,592 | 1,254 | 0.29 | 23.41 | 18.44 |
Media | | | | | | | | |
| 1400 Providence Road - Center I | 1986 | 100,000 | 96.8 | 2,038 | 1,838 | 0.37 | 21.05 | 18.99 |
| 1400 Providence Road - Center II | 1990 | 160,000 | 95.8 | 3,346 | 2,921 | 0.61 | 21.83 | 19.06 |
| | | | | | | | | |
Montgomery County | | | | | | | | |
Bala Cynwyd | | | | | | | | |
| 150 Monument Road | 1981 | 125,783 | 98.4 | 2,387 | 2,286 | 0.44 | 19.29 | 18.47 |
Blue Bell | | | | | | | | |
| 4 Sentry Parkway | 1982 | 63,930 | 94.1 | 1,373 | 1,368 | 0.25 | 22.82 | 22.74 |
| 5 Sentry Parkway East | 1984 | 91,600 | 30.5 | 1,185 | 1,152 | 0.22 | 42.42 | 41.23 |
| 5 Sentry Parkway West | 1984 | 38,400 | 100.0 | 590 | 572 | 0.11 | 15.36 | 14.90 |
| 16 Sentry Parkway | 1988 | 93,093 | 100.0 | 2,268 | 2,156 | 0.42 | 24.36 | 23.16 |
| 18 Sentry Parkway | 1988 | 95,010 | 97.6 | 2,040 | 1,900 | 0.37 | 22.00 | 20.49 |
King of Prussia | | | | | | | | |
| 2200 Renaissance Boulevard | 1985 | 174,124 | 74.9 | 3,329 | 3,052 | 0.61 | 25.53 | 23.40 |
Lower Providence | | | | | | | | |
| 1000 Madison Avenue | 1990 | 100,700 | 75.8 | 768 | 622 | 0.14 | 10.06 | 8.15 |
Plymouth Meeting | | | | | | | | |
| 1150 Plymouth Meeting Mall | 1970 | 167,748 | 92.9 | 2,981 | 2,446 | 0.55 | 19.13 | 15.70 |
| | | | | | | | | |
Total Pennsylvania Office | | 2,025,738 | 88.8 | 41,546 | 37,416 | 7.62 | 23.09 | 20.79 |
| | | | | | | | | |
Office Properties |
(Continued) |
| |
| | | | | | | | | 2006 |
| | | | Percentage | 2006 | 2006 | | 2006 | Average |
| | | Net | Leased | Base | Effective | | Average | Effective |
| | | Rentable | as of | Rent | Rent | Percentage | Base Rent | Rent |
| | Year | Area | 12/31/06 | ($000’s) | ($000’s) | of Total 2006 | Per Sq. Ft. | Per Sq. Ft. |
Property Location | Built | (Sq. Ft.) | (%) (a) | (b) (c) | (c) (d) | Base Rent (%) | ($) (c) (e) | ($) (c) (f) |
| | | | | | | | | |
CONNECTICUT | | | | | | | | |
| | | | | | | | | |
Fairfield County | | | | | | | | |
Greenwich | | | | | | | | |
| 500 West Putnam Avenue | 1973 | 121,250 | 96.3 | 3,337 | 3,153 | 0.61 | 28.58 | 27.00 |
Norwalk | | | | | | | | |
| 40 Richards Avenue | 1985 | 145,487 | 80.6 | 2,544 | 2,239 | 0.47 | 21.69 | 19.09 |
Shelton | | | | | | | | |
| 1000 Bridgeport Avenue | 1986 | 133,000 | 93.6 | 2,188 | 1,775 | 0.40 | 17.58 | 14.26 |
Stamford | | | | | | | | |
| 1266 East Main Street | 1984 | 179,260 | 76.2 | 3,627 | 3,453 | 0.67 | 26.55 | 25.28 |
| | | | | | | | | |
Total Connecticut Office | | 578,997 | 85.5 | 11,696 | 10,620 | 2.15 | 23.62 | 21.45 |
| | | | | | | | | |
DISTRICT OF COLUMBIA | | | | | | | | |
| | | | | | | | | |
Washington | | | | | | | | |
| 1201 Connecticut Avenue, NW | 1940 | 169,549 | 100.0 | 5,090 | 4,758 | 0.93 | 30.02 | 28.06 |
| 1400 L Street, NW | 1987 | 159,000 | 90.6 | 4,839 | 4,667 | 0.89 | 33.59 | 32.40 |
| | | | | | | | | |
Total District of Columbia Office | | 328,549 | 95.5 | 9,929 | 9,425 | 1.82 | 31.66 | 30.05 |
| | | | | | | | | |
MARYLAND | | | | | | | | |
| | | | | | | | | |
Prince George’s County | | | | | | | | |
Greenbelt | | | | | | | | |
| 9200 Edmonston Road (g) | 1973 | 38,690 | 100.0 | 774 | 699 | 0.14 | 23.78 | 21.48 |
| 6301 Ivy Lane (g) | 1979 | 112,003 | 86.1 | 1,564 | 1,335 | 0.29 | 19.28 | 16.46 |
| 6303 Ivy Lane (g) | 1980 | 112,047 | 87.4 | 2,040 | 1,826 | 0.37 | 24.77 | 22.17 |
| 6305 Ivy Lane (g) | 1982 | 112,022 | 73.6 | 1,387 | 1,127 | 0.25 | 20.00 | 16.25 |
| 6404 Ivy Lane (g) | 1987 | 165,234 | 77.9 | 2,274 | 1,815 | 0.42 | 21.00 | 16.76 |
| 6406 Ivy Lane (g) | 1991 | 163,857 | 100.0 | 2,275 | 2,066 | 0.42 | 16.51 | 14.99 |
| 6411 Ivy Lane (g) | 1984 | 138,405 | 90.8 | 2,359 | 2,067 | 0.43 | 22.32 | 19.55 |
Lanham | | | | | | | | |
| 4200 Parliament Place | 1989 | 122,000 | 91.2 | 2,832 | 2,627 | 0.52 | 25.45 | 23.61 |
| | | | | | | | | |
Total Maryland Office | | 964,258 | 87.6 | 15,505 | 13,562 | 2.84 | 21.18 | 18.49 |
| | | | | | | | | |
TOTAL OFFICE PROPERTIES | | 23,650,204 | 91.4 | 484,431 | 433,406 | 88.92 | 22.76 | 20.35 |
| | | | | | | | | |
| | | | | | | | | |
Office/Flex Properties |
| |
| |
| | | | | | | | | 2006 |
| | | | Percentage | 2006 | 2006 | | 2006 | Average |
| | | Net | Leased | Base | Effective | | Average | Effective |
| | | Rentable | as of | Rent | Rent | Percentage | Base Rent | Rent |
| | Year | Area | 12/31/06 | ($000’s) | ($000’s) | of Total 2006 | Per Sq. Ft. | Per Sq. Ft. |
Property Location | Built | (Sq. Ft.) | (%) (a) | (b) (c) | (c) (d) | Base Rent (%) | ($) (c) (e) | ($) (c) (f) |
| | | | | | | | | |
NEW JERSEY | | | | | | | | |
| | | | | | | | | |
Burlington County | | | | | | | | |
Burlington | | | | | | | | |
| 3 Terri Lane | 1991 | 64,500 | 90.4 | 452 | 369 | 0.08 | 7.75 | 6.33 |
| 5 Terri Lane | 1992 | 74,555 | 91.7 | 608 | 516 | 0.11 | 8.89 | 7.55 |
Moorestown | | | | | | | | |
| 2 Commerce Drive | 1986 | 49,000 | 76.3 | 330 | 301 | 0.06 | 8.83 | 8.05 |
| 101 Commerce Drive | 1988 | 64,700 | 100.0 | 275 | 249 | 0.05 | 4.25 | 3.85 |
| 102 Commerce Drive | 1987 | 38,400 | 87.5 | 232 | 184 | 0.04 | 6.90 | 5.48 |
| 201 Commerce Drive | 1986 | 38,400 | 75.0 | 163 | 112 | 0.03 | 5.66 | 3.89 |
| 202 Commerce Drive | 1988 | 51,200 | 100.0 | 307 | 237 | 0.06 | 6.00 | 4.63 |
| 1 Executive Drive | 1989 | 20,570 | 81.1 | 156 | 101 | 0.03 | 9.35 | 6.05 |
| 2 Executive Drive | 1988 | 60,800 | 84.7 | 384 | 364 | 0.07 | 7.46 | 7.07 |
| 101 Executive Drive | 1990 | 29,355 | 99.7 | 274 | 258 | 0.05 | 9.36 | 8.82 |
| 102 Executive Drive | 1990 | 64,000 | 100.0 | 273 | 229 | 0.05 | 4.27 | 3.58 |
| 225 Executive Drive | 1990 | 50,600 | 48.6 | 116 | 112 | 0.02 | 4.72 | 4.55 |
| 97 Foster Road | 1982 | 43,200 | 75.5 | 152 | 137 | 0.03 | 4.66 | 4.20 |
| 1507 Lancer Drive | 1995 | 32,700 | 100.0 | 117 | 108 | 0.02 | 3.58 | 3.30 |
| 1245 North Church Street | 1998 | 52,810 | 62.1 | 362 | 349 | 0.07 | 11.04 | 10.64 |
| 1247 North Church Street | 1998 | 52,790 | 77.5 | 398 | 360 | 0.07 | 9.73 | 8.80 |
| 1256 North Church Street | 1984 | 63,495 | 100.0 | 435 | 360 | 0.08 | 6.85 | 5.67 |
| 840 North Lenola Road | 1995 | 38,300 | 100.0 | 367 | 300 | 0.07 | 9.58 | 7.83 |
| 844 North Lenola Road | 1995 | 28,670 | 100.0 | 180 | 133 | 0.03 | 6.28 | 4.64 |
| 915 North Lenola Road | 1998 | 52,488 | 100.0 | 296 | 224 | 0.05 | 5.64 | 4.27 |
| 2 Twosome Drive | 2000 | 48,600 | 100.0 | 408 | 378 | 0.07 | 8.40 | 7.78 |
| 30 Twosome Drive | 1997 | 39,675 | 100.0 | 144 | 125 | 0.03 | 3.63 | 3.15 |
| 31 Twosome Drive | 1998 | 84,200 | 100.0 | 471 | 470 | 0.09 | 5.59 | 5.58 |
| 40 Twosome Drive | 1996 | 40,265 | 100.0 | 278 | 229 | 0.05 | 6.90 | 5.69 |
| 41 Twosome Drive | 1998 | 43,050 | 77.7 | 224 | 220 | 0.04 | 6.70 | 6.58 |
| 50 Twosome Drive | 1997 | 34,075 | 100.0 | 245 | 228 | 0.04 | 7.19 | 6.69 |
| | | | | | | | | |
Gloucester County | | | | | | | | |
West Deptford | | | | | | | | |
| 1451 Metropolitan Drive | 1996 | 21,600 | 100.0 | 148 | 148 | 0.03 | 6.85 | 6.85 |
| | | | | | | | | |
Mercer County | | | | | | | | |
Hamilton Township | | | | | | | | |
| 100 Horizon Center Boulevard | 1989 | 13,275 | 100.0 | 192 | 166 | 0.04 | 14.46 | 12.50 |
| 200 Horizon Drive | 1991 | 45,770 | 100.0 | 591 | 537 | 0.11 | 12.91 | 11.73 |
| 300 Horizon Drive | 1989 | 69,780 | 100.0 | 1,123 | 1,029 | 0.21 | 16.09 | 14.75 |
| 500 Horizon Drive | 1990 | 41,205 | 100.0 | 613 | 584 | 0.11 | 14.88 | 14.17 |
| | | | | | | | | |
Office/Flex Properties |
(Continued) |
| |
| | | | | | | | | 2006 |
| | | | Percentage | 2006 | 2006 | | 2006 | Average |
| | | Net | Leased | Base | Effective | | Average | Effective |
| | | Rentable | as of | Rent | Rent | Percentage | Base Rent | Rent |
| | Year | Area | 12/31/06 | ($000’s) | ($000’s) | of Total 2006 | Per Sq. Ft. | Per Sq. Ft. |
Property Location | Built | (Sq. Ft.) | (%) (a) | (b) (c) | (c) (d) | Base Rent (%) | ($) (c) (e) | ($) (c) (f) |
| | | | | | | | | |
Monmouth County | | | | | | | | |
Wall Township | | | | | | | | |
| 1325 Campus Parkway | 1988 | 35,000 | 100.0 | 655 | 476 | 0.12 | 18.71 | 13.60 |
| 1340 Campus Parkway | 1992 | 72,502 | 100.0 | 917 | 684 | 0.17 | 12.65 | 9.43 |
| 1345 Campus Parkway | 1995 | 76,300 | 100.0 | 933 | 685 | 0.17 | 12.23 | 8.98 |
| 1433 Highway 34 | 1985 | 69,020 | 68.3 | 373 | 317 | 0.07 | 7.91 | 6.72 |
| 1320 Wyckoff Avenue | 1986 | 20,336 | 100.0 | 178 | 168 | 0.03 | 8.75 | 8.26 |
| 1324 Wyckoff Avenue | 1987 | 21,168 | 100.0 | 220 | 202 | 0.04 | 10.39 | 9.54 |
| | | | | | | | | |
Passaic County | | | | | | | | |
Totowa | | | | | | | | |
| 1 Center Court | 1999 | 38,961 | 100.0 | 534 | 415 | 0.10 | 13.71 | 10.65 |
| 2 Center Court | 1998 | 30,600 | 99.3 | 244 | 230 | 0.04 | 8.03 | 7.57 |
| 11 Commerce Way | 1989 | 47,025 | 100.0 | 552 | 511 | 0.10 | 11.74 | 10.87 |
| 20 Commerce Way | 1992 | 42,540 | 38.5 | 99 | 94 | 0.02 | 6.04 | 5.74 |
| 29 Commerce Way | 1990 | 48,930 | 100.0 | 711 | 563 | 0.13 | 14.53 | 11.51 |
| 40 Commerce Way | 1987 | 50,576 | 100.0 | 687 | 651 | 0.13 | 13.58 | 12.87 |
| 45 Commerce Way | 1992 | 51,207 | 64.5 | 360 | 290 | 0.07 | 10.90 | 8.78 |
| 60 Commerce Way | 1988 | 50,333 | 85.8 | 580 | 499 | 0.11 | 13.43 | 11.55 |
| 80 Commerce Way | 1996 | 22,500 | 88.7 | 305 | 271 | 0.06 | 15.28 | 13.58 |
| 100 Commerce Way | 1996 | 24,600 | 100.0 | 333 | 296 | 0.06 | 13.54 | 12.03 |
| 120 Commerce Way | 1994 | 9,024 | 100.0 | 125 | 114 | 0.02 | 13.85 | 12.63 |
| 140 Commerce Way | 1994 | 26,881 | 99.5 | 374 | 342 | 0.07 | 13.98 | 12.79 |
| | | | | | | | | |
Total New Jersey Office/Flex | | 2,189,531 | 90.6 | 18,494 | 15,925 | 3.40 | 9.32 | 8.03 |
| | | | | | | | | |
NEW YORK | | | | | | | | |
| | | | | | | | | |
Westchester County | | | | | | | | |
Elmsford | | | | | | | | |
| 11 Clearbrook Road | 1974 | 31,800 | 100.0 | 415 | 392 | 0.08 | 13.05 | 12.33 |
| 75 Clearbrook Road | 1990 | 32,720 | 100.0 | 702 | 672 | 0.13 | 21.45 | 20.54 |
| 125 Clearbrook Road | 2002 | 33,000 | 100.0 | 712 | 592 | 0.13 | 21.58 | 17.94 |
| 150 Clearbrook Road | 1975 | 74,900 | 100.0 | 931 | 857 | 0.17 | 12.43 | 11.44 |
| 175 Clearbrook Road | 1973 | 98,900 | 100.0 | 1,553 | 1,444 | 0.29 | 15.70 | 14.60 |
| 200 Clearbrook Road | 1974 | 94,000 | 99.8 | 1,222 | 1,118 | 0.22 | 13.03 | 11.92 |
| 250 Clearbrook Road | 1973 | 155,000 | 97.3 | 1,427 | 1,262 | 0.26 | 9.46 | 8.37 |
| 50 Executive Boulevard | 1969 | 45,200 | 98.2 | 480 | 464 | 0.09 | 10.81 | 10.45 |
| 77 Executive Boulevard | 1977 | 13,000 | 100.0 | 233 | 222 | 0.04 | 17.92 | 17.08 |
| 85 Executive Boulevard | 1968 | 31,000 | 93.8 | 343 | 317 | 0.06 | 11.80 | 10.90 |
| 300 Executive Boulevard | 1970 | 60,000 | 100.0 | 581 | 550 | 0.11 | 9.68 | 9.17 |
| 350 Executive Boulevard | 1970 | 15,400 | 98.8 | 296 | 272 | 0.05 | 19.45 | 17.88 |
| 399 Executive Boulevard | 1962 | 80,000 | 100.0 | 968 | 941 | 0.18 | 12.10 | 11.76 |
| 400 Executive Boulevard | 1970 | 42,200 | 100.0 | 782 | 703 | 0.14 | 18.53 | 16.66 |
| 500 Executive Boulevard | 1970 | 41,600 | 100.0 | 641 | 578 | 0.12 | 15.41 | 13.89 |
Office/Flex Properties |
(Continued) |
| |
| | | | | | | | | 2006 |
| | | | Percentage | 2006 | 2006 | | 2006 | Average |
| | | Net | Leased | Base | Effective | | Average | Effective |
| | | Rentable | as of | Rent | Rent | Percentage | Base Rent | Rent |
| | Year | Area | 12/31/06 | ($000’s) | ($000’s) | of Total 2006 | Per Sq. Ft. | Per Sq. Ft. |
Property Location | Built | (Sq. Ft.) | (%) (a) | (b) (c) | (c) (d) | Base Rent (%) | ($) (c) (e) | ($) (c) (f) |
| | | | | | | | | |
| 525 Executive Boulevard | 1972 | 61,700 | 83.6 | 807 | 714 | 0.15 | 15.65 | 13.84 |
| 1 Westchester Plaza | 1967 | 25,000 | 100.0 | 332 | 316 | 0.06 | 13.28 | 12.64 |
| 2 Westchester Plaza | 1968 | 25,000 | 100.0 | 502 | 482 | 0.09 | 20.08 | 19.28 |
| 3 Westchester Plaza | 1969 | 93,500 | 100.0 | 556 | 468 | 0.10 | 5.95 | 5.01 |
| 4 Westchester Plaza | 1969 | 44,700 | 99.8 | 645 | 605 | 0.12 | 14.46 | 13.56 |
| 5 Westchester Plaza | 1969 | 20,000 | 88.9 | 297 | 260 | 0.05 | 16.70 | 14.62 |
| 6 Westchester Plaza | 1968 | 20,000 | 100.0 | 330 | 312 | 0.06 | 16.50 | 15.60 |
| 7 Westchester Plaza | 1972 | 46,200 | 100.0 | 790 | 778 | 0.14 | 17.10 | 16.84 |
| 8 Westchester Plaza | 1971 | 67,200 | 100.0 | 935 | 861 | 0.17 | 13.91 | 12.81 |
Hawthorne | | | | | | | | |
| 200 Saw Mill River Road | 1965 | 51,100 | 100.0 | 656 | 602 | 0.12 | 12.84 | 11.78 |
| 4 Skyline Drive | 1987 | 80,600 | 92.2 | 1,248 | 1,092 | 0.23 | 16.79 | 14.69 |
| 5 Skyline Drive | 1980 | 124,022 | 100.0 | 1,629 | 1,511 | 0.30 | 13.13 | 12.18 |
| 6 Skyline Drive | 1980 | 44,155 | 100.0 | 312 | 311 | 0.06 | 7.07 | 7.04 |
| 8 Skyline Drive | 1985 | 50,000 | 98.7 | 711 | 362 | 0.13 | 14.41 | 7.34 |
| 10 Skyline Drive | 1985 | 20,000 | 100.0 | 240 | 204 | 0.04 | 12.00 | 10.20 |
| 11 Skyline Drive | 1989 | 45,000 | 100.0 | 803 | 760 | 0.15 | 17.84 | 16.89 |
| 12 Skyline Drive | 1999 | 46,850 | 85.1 | 663 | 440 | 0.12 | 16.63 | 11.04 |
| 15 Skyline Drive | 1989 | 55,000 | 73.3 | 632 | 630 | 0.12 | 15.68 | 15.63 |
Yonkers | | | | | | | | |
| 100 Corporate Boulevard | 1987 | 78,000 | 98.3 | 1,432 | 1,348 | 0.26 | 18.68 | 17.58 |
| 200 Corporate Boulevard South | 1990 | 84,000 | 99.8 | 1,401 | 1,324 | 0.26 | 16.71 | 15.79 |
| 4 Executive Plaza | 1986 | 80,000 | 100.0 | 1,006 | 805 | 0.18 | 12.58 | 10.06 |
| 6 Executive Plaza | 1987 | 80,000 | 100.0 | 1,341 | 1,268 | 0.25 | 16.76 | 15.85 |
| 1 Odell Plaza | 1980 | 106,000 | 96.8 | 1,486 | 1,409 | 0.27 | 14.48 | 13.73 |
| 3 Odell Plaza | 1984 | 71,065 | 100.0 | 1,597 | 1,481 | 0.29 | 22.47 | 20.84 |
| 5 Odell Plaza | 1983 | 38,400 | 99.6 | 614 | 592 | 0.11 | 16.05 | 15.48 |
| 7 Odell Plaza | 1984 | 42,600 | 99.6 | 734 | 704 | 0.13 | 17.30 | 16.59 |
| | | | | | | | | |
Total New York Office/Flex | | 2,348,812 | 97.7 | 32,985 | 30,023 | 6.03 | 14.37 | 13.08 |
| | | | | | | | | |
CONNECTICUT | | | | | | | | |
| | | | | | | | | |
Fairfield County | | | | | | | | |
Stamford | | | | | | | | |
| 419 West Avenue | 1986 | 88,000 | 100.0 | 1,263 | 1,106 | 0.23 | 14.35 | 12.57 |
| 500 West Avenue | 1988 | 25,000 | 82.3 | 389 | 345 | 0.07 | 18.91 | 16.77 |
| 550 West Avenue | 1990 | 54,000 | 100.0 | 884 | 879 | 0.16 | 16.37 | 16.28 |
| 600 West Avenue | 1999 | 66,000 | 100.0 | 804 | 767 | 0.15 | 12.18 | 11.62 |
| 650 West Avenue | 1998 | 40,000 | 100.0 | 555 | 424 | 0.10 | 13.88 | 10.60 |
| | | | | | | | | |
Total Connecticut Office/Flex | | 273,000 | 98.4 | 3,895 | 3,521 | 0.71 | 14.50 | 13.11 |
| | | | | | | | | |
| | | | | | | | | |
TOTAL OFFICE/FLEX PROPERTIES | 4,811,343 | 94.5 | 55,374 | 49,469 | 10.14 | 12.18 | 10.88 |
Industrial/Warehouse, Retail and Land Lease Properties |
| |
| | | | | | | | | 2006 |
| | | | Percentage | 2006 | 2006 | | 2006 | Average |
| | | Net | Leased | Base | Effective | | Average | Effective |
| | | Rentable | as of | Rent | Rent | Percentage | Base Rent | Rent |
| | Year | Area | 12/31/06 | ($000’s) | ($000’s) | of Total 2006 | Per Sq. Ft. | Per Sq. Ft. |
Property Location | Built | (Sq. Ft.) | (%) (a) | (b) (c) | (c) (d) | Base Rent (%) | ($) (c) (e) | ($) (c) (f) |
| | | | | | | | | |
NEW YORK | | | | | | | | |
| | | | | | | | | |
Westchester County | | | | | | | | |
Elmsford | | | | | | | | |
| 1 Warehouse Lane | 1957 | 6,600 | 100.0 | 86 | 84 | 0.02 | 13.03 | 12.73 |
| 2 Warehouse Lane | 1957 | 10,900 | 100.0 | 159 | 133 | 0.03 | 14.59 | 12.20 |
| 3 Warehouse Lane | 1957 | 77,200 | 100.0 | 324 | 293 | 0.06 | 4.20 | 3.80 |
| 4 Warehouse Lane | 1957 | 195,500 | 97.4 | 2,164 | 1,964 | 0.40 | 11.36 | 10.31 |
| 5 Warehouse Lane | 1957 | 75,100 | 97.1 | 964 | 857 | 0.18 | 13.22 | 11.75 |
| 6 Warehouse Lane | 1982 | 22,100 | 100.0 | 513 | 509 | 0.09 | 23.21 | 23.03 |
| | | | | | | | | |
Total Industrial/Warehouse Properties | 387,400 | 98.1 | 4,210 | 3,840 | 0.78 | 11.07 | 10.10 |
| | | | | | | | | |
Westchester County | | | | | | | | |
Tarrytown | | | | | | | | |
| 230 White Plains Road | 1984 | 9,300 | 100.0 | 195 | 183 | 0.04 | 20.97 | 19.68 |
Yonkers | | | | | | | | |
| 2 Executive Boulevard | 1986 | 8,000 | 100.0 | 361 | 361 | 0.07 | 45.13 | 45.13 |
| | | | | | | | | |
Total Retail Properties | | 17,300 | 100.0 | 556 | 544 | 0.11 | 32.14 | 31.45 |
| | | | | | | | | |
Westchester County | | | | | | | | |
Elmsford | | | | | | | | |
| 700 Executive Boulevard | -- | -- | -- | 114 | 114 | 0.02 | -- | -- |
Yonkers | | | | | | | | |
| 1 Enterprise Boulevard | -- | -- | -- | 185 | 183 | 0.03 | -- | -- |
| | | | | | | | | |
Total Land Leases | | -- | -- | 299 | 297 | 0.05 | -- | -- |
| | | | | | | | | |
| | | | | | | | | |
TOTAL PROPERTIES | | 28,866,247 | 92.0 | 544,870 | 487,556 | 100.00 | 20.80 | 18.57 |
| (a) | Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2006, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases expiring December 31, 2006 aggregating 103,477 square feet (representing 0.4 percent of the Operating Partnership’s total net rentable square footage) for which no new leases were signed. |
| (b) | Total base rent for 2006, determined in accordance with generally accepted accounting principles (“GAAP”). Substantially all of the leases provide for annual base rents plus recoveries and escalation charges based upon the tenant’s proportionate share of and/or increases in real estate taxes and certain operating costs, as defined, and the pass through of charges for electrical usage. |
(c) Excludes space leased by the Operating Partnership.
(d) Total base rent for 2006 minus total 2006 amortization of tenant improvements, leasing commissions and other concessions and costs, determined in accordance with GAAP.
| (e) | Base rent for 2006 divided by net rentable square feet leased at December 31, 2006. For those properties acquired during 2006, amounts are annualized, as per Note g. |
| (f) | Effective rent for 2006 divided by net rentable square feet leased at December 31, 2006. For those properties acquired during 2006, amounts are annualized, as described in Note g. |
| (g) | As this property was acquired by the Operating Partnership during 2006, the amounts represented in 2006 base rent and 2006 effective rent reflect only that portion of the year during which the Operating Partnership owned the property. Accordingly, these amounts may not be indicative of the property’s full year results. For comparison purposes, the amounts represented in 2006 average base rent per sq. ft. and 2006 average effective rent per sq. ft. for this property have been calculated by taking 2006 base rent and 2006 effective rent for such property and annualizing these partial-year results, dividing such annualized amounts by the net rentable square feet leased at December 31, 2006. These annualized per square foot amounts may not be indicative of the property’s results had the Operating Partnership owned the property for the entirety of 2006. |
PERCENTAGE LEASED
The following table sets forth the year-end percentages of square feet leased in the Operating Partnership’s stabilized operating Consolidated Properties for the last five years:
| | Percentage of |
December 31, | Square Feet Leased (%) (a) |
| 2006 | 92.0 |
| | |
| 2005 | 91.0 |
| | |
| 2004 (b) | 91.2 |
| | |
| 2003 | 91.5 |
| | |
| 2002 | 92.3 |
| | |
| (a) | Percentage of square-feet leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases that expire at the period end date. |
| (b) | Excluded from percentage leased at December 31, 2004 is a non-strategic, non-core 318,224 square foot property acquired through a deed in lieu of foreclosure, which was 12.7 percent leased at December 31, 2004 and subsequently sold on February 4, 2005. |
SIGNIFICANT TENANTS
The following table sets forth a schedule of the Operating Partnership’s 50 largest tenants for the Consolidated Properties as of December 31, 2006 based upon annualized base rental revenue:
| | | | Percentage of | | Percentage | |
| | | | Operating | | Total | |
| | | Annualized | Partnership | Square | Operating | Year of |
| | Number of | Base Rental | Annualized Base | Feet | Partnership | Lease |
| | Properties | Revenue ($) (a) | Rental Revenue (%) | Leased | Leased Sq. Ft. (%) | Expiration |
| New Cingular Wireless PCS LLC | 4 | 9,743,293 | 1.6 | 460,973 | 1.9 | 2014 | (b) |
| Morgan Stanley D.W. Inc. | 5 | 9,395,415 | 1.6 | 381,576 | 1.6 | 2013 | (c) |
| United States Of America-GSA | 12 | 8,621,861 | 1.5 | 285,684 | 1.1 | 2015 | (d) |
| Merrill Lynch Pierce Fenner | 3 | 8,613,150 | 1.5 | 501,500 | 1.9 | 2017 | (e) |
| Credit Suisse First Boston | 1 | 7,940,235 | 1.4 | 234,331 | 0.9 | 2012 | (f) |
| Keystone Mercy Health Plan | 2 | 7,897,031 | 1.4 | 303,149 | 1.2 | 2015 | |
| National Union Fire Insurance | 1 | 7,711,023 | 1.3 | 317,799 | 1.2 | 2012 | |
| Prentice-Hall Inc. | 1 | 7,694,097 | 1.3 | 474,801 | 1.8 | 2014 | |
| DB Services New Jersey, Inc. | 1 | 7,551,990 | 1.3 | 281,920 | 1.1 | 2017 | |
| Forest Laboratories Inc. | 2 | 6,961,107 | 1.2 | 202,857 | 0.8 | 2017 | (g) |
| Cendant Operations Inc. | 2 | 6,839,418 | 1.2 | 296,934 | 1.1 | 2011 | (h) |
| Allstate Insurance Company | 10 | 6,455,295 | 1.1 | 269,594 | 1.0 | 2017 | (i) |
| Toys 'R' Us - NJ Inc. | 1 | 6,072,651 | 1.1 | 242,518 | 0.9 | 2012 | |
| ICAP Securities USA LLC | 1 | 5,973,008 | 1.0 | 159,834 | 0.6 | 2017 | |
| American Institute of Certified Public | | | | | | | |
| Accountants | 1 | 5,817,181 | 1.0 | 249,768 | 1.0 | 2012 | |
| TD Ameritrade Online Holdings | 1 | 5,637,193 | 1.0 | 184,222 | 0.7 | 2015 | |
| IBM Corporation | 3 | 5,562,770 | 1.0 | 310,263 | 1.2 | 2012 | (j) |
| KPMG, LLP | 3 | 4,784,243 | 0.8 | 181,025 | 0.7 | 2012 | (k) |
| National Financial Services | 1 | 4,346,765 | 0.8 | 112,964 | 0.4 | 2012 | |
| Bank Of Tokyo-Mitsubishi Ltd. | 1 | 4,228,795 | 0.7 | 137,076 | 0.5 | 2009 | |
| AT&T Corp. | 1 | 3,805,000 | 0.7 | 275,000 | 1.1 | 2014 | |
| Vonage America Inc. | 1 | 3,780,000 | 0.7 | 350,000 | 1.3 | 2017 | |
| Samsung Electronics America | 1 | 3,678,028 | 0.6 | 131,300 | 0.5 | 2010 | |
| Citigroup Global Markets Inc. | 5 | 3,492,988 | 0.6 | 132,475 | 0.5 | 2016 | (l) |
| E*Trade Financial Corporation | 1 | 3,456,141 | 0.6 | 106,573 | 0.4 | 2022 | |
| Lehman Brothers Holdings Inc. | 1 | 3,420,667 | 0.6 | 207,300 | 0.8 | 2010 | |
| Montefiore Medical Center | 5 | 3,397,583 | 0.6 | 163,529 | 0.6 | 2019 | (m) |
| Hewlett-Packard Company | 1 | 3,346,048 | 0.6 | 163,857 | 0.6 | 2007 | |
| SSB Realty LLC | 1 | 3,321,051 | 0.6 | 114,519 | 0.4 | 2009 | |
| Dow Jones & Company Inc. | 1 | 3,057,773 | 0.5 | 92,312 | 0.4 | 2012 | |
| Daiichi Sankyo Inc. | 2 | 2,872,353 | 0.5 | 90,366 | 0.3 | 2012 | (n) |
| High Point Safety & Insurance | 2 | 2,694,417 | 0.5 | 116,358 | 0.4 | 2020 | |
| American Home Assurance Co. | 2 | 2,686,732 | 0.5 | 131,174 | 0.5 | 2019 | (o) |
| SunAmerica Asset Management | 1 | 2,680,409 | 0.5 | 69,621 | 0.3 | 2018 | |
| Moody’s Investors Service | 1 | 2,671,149 | 0.5 | 91,344 | 0.3 | 2011 | (p) |
| United States Life Ins. Co. | 1 | 2,520,000 | 0.4 | 180,000 | 0.7 | 2013 | |
| New Jersey Turnpike Authority | 1 | 2,455,463 | 0.4 | 100,223 | 0.4 | 2016 | |
| Barr Laboratories Inc. | 2 | 2,450,087 | 0.4 | 109,510 | 0.4 | 2015 | (q) |
| IXIS North America Inc. | 1 | 2,408,679 | 0.4 | 83,629 | 0.3 | 2021 | |
| Movado Group Inc | 1 | 2,283,547 | 0.4 | 90,050 | 0.3 | 2013 | |
| Lonza Inc. | 1 | 2,236,200 | 0.4 | 89,448 | 0.3 | 2007 | |
| Deloitte & Touche USA LLP | 1 | 2,171,275 | 0.4 | 86,851 | 0.3 | 2007 | |
| Regus Business Centre Corp. | 2 | 2,159,029 | 0.4 | 79,805 | 0.3 | 2011 | |
| Computer Sciences Corporation | 3 | 2,136,129 | 0.4 | 109,825 | 0.4 | 2011 | (r) |
| Nextel of New York Inc. | 2 | 2,093,440 | 0.4 | 97,436 | 0.4 | 2014 | (s) |
| Bearingpoint Inc. | 1 | 2,065,834 | 0.4 | 77,956 | 0.3 | 2011 | |
| GAB Robins North America Inc. | 2 | 2,049,674 | 0.4 | 84,649 | 0.3 | 2009 | (t) |
| Norris McLaughlin & Marcus PA | 1 | 2,045,307 | 0.4 | 86,913 | 0.3 | 2017 | |
| Sumitomo Mitsui Banking Corp. | 2 | 2,027,861 | 0.4 | 71,153 | 0.3 | 2016 | |
| UBS Financial Services Inc. | 3 | 1,949,797 | 0.3 | 73,250 | 0.3 | 2016 | (u) |
| | | | | | | |
Totals | | 219,259,182 | 38.3 | 9,245,214 | 35.3 | |
See footnotes on subsequent page.
Significant Tenants Footnotes
| (a) | Annualized base rental revenue is based on actual December 2006 billings times 12. For leases whose rent commences after January 1, 2007, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above. |
| (b) | 50,660 square feet expire 2007; 4,783 square feet expire in 2008; 333,145 square feet expire in 2013; 72,385 square feet expire in 2014. |
| (c) | 19,500 square feet expire in 2008; 7,000 square feet expire in 2009; 48,906 square feet expire in 2010; 306,170 square feet expire in 2013. |
| (d) | 51,049 square feet expire in 2007; 26,710 square feet expire in 2008; 9,901 square feet expire in 2011; 38,690 square feet expire in 2013; 4,879 square feet expire in 2014; 154,455 square feet expire in 2015. |
| (e) | 253,214 square feet expire in 2007; 7,485 square feet expire in 2008; 4,451 square feet expires in 2009; 236,350 square feet expire in 2017. |
| (f) | 152,378 feet expire in 2011; 81,953 square feet expire in 2012. |
| (g) | 22,785 square feet expire in 2010; 180,072 square feet expire in 2017. |
| (h) | 150,951 square feet expire in 2008; 145,983 square feet expire in 2011. |
| (i) | 32,035 square feet expire in 2007; 31,143 square feet expire in 2008; 22,185 square feet expire in 2009; 46,555 square feet expire in 2010; 83,693 square feet expire in 2011; 53,983 square feet expire in 2017. |
| (j) | 61,864 square feet expire in 2010; 248,399 square feet expire in 2012. |
| (k) | 23,807 square feet expire in 2007; 46,440 square feet expire in 2009; 33,397 square feet expires in 2010; 77,381 square feet expire in 2012. |
| (l) | 19,668 square feet expire in 2007; 59,711 square feet expire in 2009; 26,834 square feet expire in 2014; 26,262 square feet expire in 2016. |
| (m) | 48,542 square feet expire in 2009; 5,850 square feet expire in 2014; 7,200 square feet expire in 2016; 30,872 square feet expire in 2017; 71,065 square feet expire in 2019. |
| (n) | 5,315 square feet expire in 2011; 85,051 square feet expire in 2012. |
| (o) | 14,056 square feet expire in 2008; 117,118 square feet expire in 2019. |
| (p) | 43,344 square feet expire in 2009; 36,193 square feet expire in 2010; 11,807 square feet expire in 2011. |
| (q) | 20,000 square feet expire in 2008; 89,510 square feet expire in 2015. |
| (r) | 26,975 square feet expire in 2007; 82,850 square feet expire in 2011. |
| (s) | 62,436 square feet expire in 2010; 35,000 square feet expire in 2014. |
| (t) | 75,049 square feet expire in 2008; 9,600 square feet expire in 2009. |
| (u) | 21,554 square feet expire in 2010; 17,383 square feet expire in 2013; 34,313 square feet expire in 2016. |
SCHEDULE OF LEASE EXPIRATIONS: ALL CONSOLIDATED PROPERTIES
The following table sets forth a schedule of lease expirations for the total of the Operating Partnership’s office, office/flex, industrial/warehouse and stand-alone retail properties included in the Consolidated Properties beginning January 1, 2007, assuming that none of the tenants exercise renewal or termination options:
| | | | | | Average | |
| | | | | | Annual | |
| | | | Percentage Of | | Rent Per Net | |
| | | Net Rentable | Total Leased | Annualized | Rentable | Percentage Of |
| | | Area Subject | Square Feet | Base Rental | Square Foot | Annual Base |
| | Number Of | To Expiring | Represented | Revenue Under | Represented | Rent Under |
Year Of | Leases | Leases | By Expiring | Expiring | By Expiring | Expiring |
Expiration | Expiring (a) | (Sq. Ft.) | Leases (%) | Leases ($) (b) | Leases ($) | Leases (%) |
| | | | | | | |
| 2007 (c) | 272 | 2,091,378 | 8.0 | 44,243,148 | 21.16 | 7.8 |
| | | | | | | |
| 2008 | 375 | 2,686,853 | 10.4 | 54,923,081 | 20.44 | 9.6 |
| | | | | | | |
| 2009 | 346 | 2,419,053 | 9.2 | 54,356,856 | 22.47 | 9.5 |
| | | | | | | |
| 2010 | 343 | 2,850,749 | 10.9 | 60,230,025 | 21.13 | 10.5 |
| | | | | | | |
| 2011 | 339 | 3,438,716 | 13.1 | 77,117,443 | 22.43 | 13.5 |
| | | | | | | |
| 2012 | 206 | 2,511,774 | 9.6 | 58,548,780 | 23.31 | 10.2 |
| | | | | | | |
| 2013 | 145 | 2,436,006 | 9.3 | 54,142,108 | 22.23 | 9.5 |
| | | | | | | |
| 2014 | 75 | 1,524,878 | 5.8 | 32,788,456 | 21.50 | 5.7 |
| | | | | | | |
| 2015 | 57 | 2,136,593 | 8.2 | 45,924,670 | 21.49 | 8.0 |
| | | | | | | |
| 2016 | 47 | 756,090 | 2.9 | 14,439,966 | 19.10 | 2.5 |
| | | | | | | |
| 2017 | 52 | 1,869,363 | 7.1 | 43,255,052 | 23.14 | 7.6 |
| | | | | | | |
| 2018 and thereafter | 53 | 1,449,768 | 5.5 | 32,086,350 | 22.13 | 5.6 |
Totals/Weighted | | | | | | |
Average | 2,310 | 26,171,221 (d) | 100.0 | 572,055,935 | 21.86 | 100.0 |
| (a) | Includes office, office/flex, industrial/warehouse and stand-alone retail property tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases. |
| (b) | Annualized base rental revenue is based on actual December 2006 billings times 12. For leases whose rent commences after January 1, 2007, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above. |
| (c) | Includes leases expiring December 31, 2006 aggregating 103,477 square feet and representing annualized rent of $1,909,260 for which no new leases were signed. |
| (d) | Reconciliation to the Operating Partnership’s total net rentable square footage is as follows: |
| | Square Feet |
| Square footage leased to commercial tenants | 26,171,221 |
| Square footage used for corporate offices, management offices, | |
building use, retail tenants, food services, other ancillary | |
service tenants and occupancy adjustments | 399,991 |
| Square footage unleased | 2,295,035 |
| Total net rentable square footage (does not include | |
land leases) | 28,866,247 |
SCHEDULE OF LEASE EXPIRATIONS: OFFICE PROPERTIES
The following table sets forth a schedule of lease expirations for the office properties beginning January 1, 2007, assuming that none of the tenants exercise renewal or termination options:
| | | | | | Average | |
| | | | | | Annual | |
| | | | Percentage Of | | Rent Per Net | |
| | | Net Rentable | Total Leased | Annualized | Rentable | Percentage Of |
| | | Area Subject | Square Feet | Base Rental | Square Foot | Annual Base |
| | Number Of | To Expiring | Represented By | Revenue Under | Represented | Rent Under |
Year Of | Leases | Leases | Expiring | Expiring | By Expiring | Expiring |
Expiration | Expiring (a) | (Sq. Ft.) | Leases (%) | Leases ($) (b) | Leases ($) | Leases (%) |
| | | | | | | |
| 2007 (c) | 214 | 1,642,707 | 7.7 | 38,852,100 | 23.65 | 7.6 |
| | | | | | | |
| 2008 | 285 | 1,911,710 | 9.0 | 46,403,461 | 24.27 | 9.1 |
| | | | | | | |
| 2009 | 271 | 1,812,739 | 8.5 | 46,270,273 | 25.53 | 9.1 |
| | | | | | | |
| 2010 | 263 | 1,997,684 | 9.4 | 48,563,899 | 24.31 | 9.6 |
| | | | | | | |
| 2011 | 276 | 2,897,514 | 13.7 | 70,958,531 | 24.49 | 14.0 |
| | | | | | | |
| 2012 | 157 | 2,077,170 | 9.8 | 52,378,087 | 25.22 | 10.3 |
| | | | | | | |
| 2013 | 108 | 2,010,703 | 9.5 | 48,194,962 | 23.97 | 9.5 |
| | | | | | | |
| 2014 | 62 | 1,371,378 | 6.5 | 30,612,320 | 22.32 | 6.0 |
| | | | | | | |
| 2015 | 44 | 1,974,442 | 9.3 | 43,908,667 | 22.24 | 8.6 |
| | | | | | | |
| 2016 | 34 | 455,091 | 2.1 | 10,428,710 | 22.92 | 2.1 |
| | | | | | | |
| 2017 | 44 | 1,795,270 | 8.5 | 42,191,404 | 23.50 | 8.3 |
| | | | | | | |
| 2018 and thereafter | 45 | 1,278,703 | 6.0 | 29,663,825 | 23.20 | 5.8 |
Totals/Weighted | | | | | | |
Average | 1,803 | 21,225,111 | 100.0 | 508,426,239 | 23.95 | 100.0 |
| (a) | Includes office tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases. |
| (b) | Annualized base rental revenue is based on actual December 2006 billings times 12. For leases whose rent commences after January 1, 2007, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above. |
| (c) | Includes leases expiring December 31, 2006 aggregating 85,823 square feet and representing annualized rent of $1,691,239 for which no new leases were signed. |
SCHEDULE OF LEASE EXPIRATIONS: OFFICE/FLEX PROPERTIES
The following table sets forth a schedule of lease expirations for the office/flex properties beginning January 1, 2007, assuming that none of the tenants exercise renewal or termination options:
| | | | | | Average | |
| | | | | | Annual | |
| | | | Percentage Of | | Rent Per Net | |
| | | Net Rentable | Total Leased | Annualized | Rentable | Percentage Of |
| | | Area Subject | Square Feet | Base Rental | Square Foot | Annual Base |
| | Number Of | To Expiring | Represented By | Revenue Under | Represented | Rent Under |
Year Of | Leases | Leases | Expiring | Expiring | By Expiring | Expiring |
Expiration | Expiring (a) | (Sq. Ft.) | Leases (%) | Leases ($) (b) | Leases ($) | Leases (%) |
| | | | | | | |
| 2007 (c) | 54 | 434,671 | 9.6 | 5,160,091 | 11.87 | 8.7 |
| | | | | | | |
| 2008 | 87 | 683,774 | 15.0 | 8,043,229 | 11.76 | 13.6 |
| | | | | | | |
| 2009 | 69 | 548,031 | 12.0 | 7,102,195 | 12.96 | 12.0 |
| | | | | | | |
| 2010 | 79 | 825,065 | 18.1 | 11,358,126 | 13.77 | 19.2 |
| | | | | | | |
| 2011 | 62 | 533,602 | 11.7 | 6,063,912 | 11.36 | 10.2 |
| | | | | | | |
| 2012 | 49 | 434,604 | 9.6 | 6,170,693 | 14.20 | 10.4 |
| | | | | | | |
| 2013 | 30 | 370,067 | 8.1 | 5,248,671 | 14.18 | 8.9 |
| | | | | | | |
| 2014 | 13 | 153,500 | 3.4 | 2,176,136 | 14.18 | 3.7 |
| | | | | | | |
| 2015 | 13 | 162,151 | 3.6 | 2,016,003 | 12.43 | 3.4 |
| | | | | | | |
| 2016 | 11 | 165,917 | 3.7 | 2,592,895 | 15.63 | 4.4 |
| | | | | | | |
| 2017 | 8 | 74,093 | 1.6 | 1,063,648 | 14.36 | 1.8 |
| | | | | | | |
| 2018 and thereafter | 7 | 163,065 | 3.6 | 2,197,525 | 13.48 | 3.7 |
Totals/Weighted | | | | | | |
Average | 482 | 4,548,540 | 100.0 | 59,193,124 | 13.01 | 100.0 |
| (a) | Includes office/flex tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases. |
| (b) | Annualized base rental revenue is based on actual December 2006 billings times 12. For leases whose rent commences after January 1, 2007, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above. Includes office/flex tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases. |
| (c) | Includes leases expiring December 31, 2006 aggregating 17,654 square feet and representing annualized rent of $218,021 for which no new leases were signed. |
SCHEDULE OF LEASE EXPIRATIONS: INDUSTRIAL/WAREHOUSE PROPERTIES
The following table sets forth a schedule of lease expirations for the industrial/warehouse properties beginning January 1, 2007, assuming that none of the tenants exercise renewal or termination options:
| | | | | | Average | |
| | | | | | Annual | |
| | | | Percentage Of | | Rent Per Net | |
| | | Net Rentable | Total Leased | Annualized | Rentable | Percentage Of |
| | | Area Subject | Square Feet | Base Rental | Square Foot | Annual Base |
| | Number Of | To Expiring | Represented By | Revenue Under | Represented | Rent Under |
Year Of | Leases | Leases | Expiring | Expiring | By Expiring | Expiring |
Expiration | Expiring (a) | (Sq. Ft.) | Leases (%) | Leases ($) (b) | Leases ($) | Leases (%) |
| | | | | | | |
| 2007 | 4 | 14,000 | 3.7 | 230,957 | 16.50 | 5.7 |
| | | | | | | |
| 2008 | 3 | 91,369 | 24.0 | 476,391 | 5.21 | 11.8 |
| | | | | | | |
| 2009 | 5 | 48,983 | 12.9 | 789,388 | 16.12 | 19.7 |
| | | | | | | |
| 2010 | 1 | 28,000 | 7.4 | 308,000 | 11.00 | 7.7 |
| | | | | | | |
| 2011 | 1 | 7,600 | 2.0 | 95,000 | 12.50 | 2.4 |
| | | | | | | |
| 2013 | 7 | 55,236 | 14.5 | 698,475 | 12.65 | 17.4 |
| | | | | | | |
| 2016 | 2 | 135,082 | 35.5 | 1,418,361 | 10.50 | 35.3 |
Totals/Weighted | | | | | | |
Average | 23 | 380,270 | 100.0 | 4,016,572 | 10.56 | 100.0 |
| (a) | Includes industrial/warehouse tenants only. Excludes leases for amenity, retail, parking and month-to-month industrial/warehouse tenants. Some tenants have multiple leases. |
| (b) | Annualized base rental revenue is based on actual December 2006 billings times 12. For leases whose rent commences after January 1, 2007, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, the historical results may differ from those set forth above. |
SCHEDULE OF LEASE EXPIRATIONS: STAND-ALONE RETAIL PROPERTIES
The following table sets forth a schedule of lease expirations for the stand-alone retail properties beginning January 1, 2007, assuming that none of the tenants exercise renewal or termination options:
| | | | | | Average | |
| | | | | | Annual | |
| | | | Percentage Of | | Rent Per Net | |
| | | Net Rentable | Total Leased | Annualized | Rentable | Percentage Of |
| | | Area Subject | Square Feet | Base Rental | Square Foot | Annual Base |
| | Number Of | To Expiring | Represented By | Revenue Under | Represented | Rent Under |
Year Of | Leases | Leases | Expiring | Expiring | By Expiring | Expiring |
Expiration | Expiring (a) | (Sq. Ft.) | Leases (%) | Leases ($) (b) | Leases ($) | Leases (%) |
| | | | | | | |
| 2009 | 1 | 9,300 | 53.8 | 195,000 | 20.97 | 46.4 |
| | | | | | | |
| 2018 and thereafter | 1 | 8,000 | 46.2 | 225,000 | 28.13 | 53.6 |
Totals/Weighted | | | | | | |
Average | 2 | 17,300 | 100.0 | 420,000 | 24.28 | 100.0 |
| (a) | Includes stand-alone retail property tenants only. |
| (b) | Annualized base rental revenue is based on actual December 2006 billings times 12. For leases whose rent commences after January 1, 2007 annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above. |
INDUSTRY DIVERSIFICATION
The following table lists the Operating Partnership’s 30 largest industry classifications based on annualized contractual base rent of the Consolidated Properties:
| | | Percentage of | | Percentage of |
| | Annualized | Operating | | Total Operating |
| | Base Rental | Partnership | Square | Partnership |
| | Revenue | Annualized Base | Feet | Leased |
Industry Classification (a) | ($) (b) (c) (d) | Rental Revenue (%) | Leased (d) | Sq. Ft. (%) |
| Securities, Commodity Contracts | | | | |
| & Other Financial | 101,287,164 | 17.7 | 3,801,890 | 14.6 |
| Manufacturing | 48,710,080 | 8.5 | 2,324,704 | 9.0 |
| Insurance Carriers & Related Activities | 46,461,377 | 8.1 | 2,070,823 | 7.9 |
| Computer System Design Services | 31,816,449 | 5.6 | 1,504,890 | 5.8 |
| Credit Intermediation & Related Activities | 28,501,580 | 5.0 | 1,148,669 | 4.4 |
| Telecommunications | 25,970,292 | 4.5 | 1,261,689 | 4.8 |
| Legal Services | 24,471,697 | 4.3 | 980,359 | 3.7 |
| Health Care & Social Assistance | 24,343,912 | 4.3 | 1,212,140 | 4.6 |
| Wholesale Trade | 21,918,707 | 3.8 | 1,419,040 | 5.4 |
| Scientific Research/Development | 21,336,995 | 3.7 | 957,503 | 3.7 |
| Other Professional | 18,050,828 | 3.2 | 799,887 | 3.1 |
| Accounting/Tax Prep. | 17,217,047 | 3.0 | 727,887 | 2.8 |
| Retail Trade | 16,272,370 | 2.8 | 980,650 | 3.7 |
| Public Administration | 15,819,365 | 2.8 | 610,340 | 2.3 |
| Advertising/Related Services | 15,240,009 | 2.7 | 634,569 | 2.4 |
| Other Services (except Public Administration) | 12,383,016 | 2.2 | 685,321 | 2.6 |
| Information Services | 10,476,463 | 1.8 | 453,549 | 1.7 |
| Real Estate & Rental & Leasing | 9,745,287 | 1.7 | 451,915 | 1.7 |
| Arts, Entertainment & Recreation | 9,199,907 | 1.6 | 563,141 | 2.2 |
| Broadcasting | 7,428,246 | 1.3 | 474,532 | 1.8 |
| Architectural/Engineering | 7,392,806 | 1.3 | 336,549 | 1.3 |
| Construction | 7,187,628 | 1.3 | 359,355 | 1.4 |
| Utilities | 6,316,637 | 1.1 | 312,222 | 1.2 |
| Data Processing Services | 5,725,405 | 1.0 | 245,949 | 0.9 |
| Transportation | 5,431,003 | 0.9 | 297,239 | 1.1 |
| Educational Services | 5,388,364 | 0.9 | 272,450 | 1.0 |
| Publishing Industries | 4,392,580 | 0.8 | 221,179 | 0.8 |
| Admin & Support, Waste Mgt. | | | | |
| & Remediation Services | 4,023,252 | 0.7 | 258,929 | 1.0 |
| Specialized Design Services | 3,824,875 | 0.7 | 177,950 | 0.7 |
| Management of Companies & Finance | 3,611,995 | 0.6 | 146,335 | 0.6 |
| Other | 12,110,599 | 2.1 | 479,566 | 1.8 |
| | | | | |
Totals | 572,055,935 | 100.0 | 26,171,221 | 100.0 |
| (a) | The Operating Partnership’s tenants are classified according to the U.S. Government’s North American Industrial Classification System (NAICS) which has replaced the Standard Industrial Code (SIC) system. |
| (b) | Annualized base rental revenue is based on actual December 2006 billings times 12. For leases whose rent commences after January 1, 2007, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above. |
| (c) | Includes office, office/flex, industrial/warehouse and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases. |
| (d) | Includes leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2006, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases expiring December 31, 2006 aggregating 103,477 square feet and representing annualized rent of $1,909,260 for which no new leases were signed. |
MARKET DIVERSIFICATION
The following table lists the Operating Partnership’s markets (MSAs), based on annualized contractual base rent of the Consolidated Properties:
| | | Percentage Of | | |
| | | Operating Partnership | | |
| | Annualized Base | Annualized | Total Property | |
| | Rental Revenue | Base Rental | Size Rentable | Percentage Of |
Market (MSA) | ($) (a) (b) (c) | Revenue (%) | Area (b) (c) | Rentable Area (%) |
| Newark, NJ | | | | |
| (Essex-Morris-Union Counties) | 111,232,535 | 19.5 | 5,847,318 | 20.3 |
| Jersey City, NJ | 111,092,277 | 19.5 | 4,317,978 | 15.0 |
| New York, NY | | | | |
| (Westchester-Rockland Counties) | 92,351,278 | 16.1 | 4,968,420 | 17.2 |
| Bergen-Passaic, NJ | 91,713,438 | 16.0 | 4,602,401 | 15.9 |
| Philadelphia, PA-NJ | 54,788,117 | 9.6 | 3,529,994 | 12.2 |
| Washington, DC-MD-VA-WV | 30,725,147 | 5.4 | 1,292,807 | 4.5 |
| Monmouth-Ocean, NJ | 25,299,731 | 4.4 | 1,620,863 | 5.6 |
| Middlesex-Somerset-Hunterdon, NJ | 20,111,613 | 3.5 | 986,760 | 3.4 |
| Trenton, NJ | 16,985,745 | 3.0 | 767,365 | 2.7 |
| Stamford-Norwalk, CT | 13,317,359 | 2.3 | 706,510 | 2.4 |
| Bridgeport, CT | 2,558,828 | 0.4 | 145,487 | 0.5 |
| Atlantic-Cape May, NJ | 1,879,867 | 0.3 | 80,344 | 0.3 |
| | | | | |
Totals | 572,055,935 | 100.0 | 28,866,247 | 100.0 |
| (a) | Annualized base rental revenue is based on actual December 2006 billings times 12. For leases whose rent commences after January 1, 2007, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above. |
| (b) | Includes leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2006, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases expiring December 31, 2006 aggregating 103,477 and representing annualized rent of $1,909,260 for which no new leases were signed. |
| (c) | Includes office, office/flex, industrial/warehouse and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases. |
ITEM 3. LEGAL PROCEEDINGS
On February 12, 2003, the NJSEA selected The Mills Corporation and the Operating Partnership to redevelop the Continental Airlines Arena site (“Arena Site”) for mixed uses, including retail. In March 2003, Hartz Mountain Industries, Inc., (“Hartz”), filed a lawsuit in the Superior Court of New Jersey, Law Division, for Bergen County, seeking to enjoin NJSEA from entering into a contract with the Meadowlands Venture for the redevelopment of the Continental Airlines Arena site. In May 2003, the court denied Hartz’s request for an injunction and dismissed its suit for failure to exhaust administrative remedies. In June 2003, the NJSEA held hearings on Hartz’s protest, and on a parallel protest filed by another rejected developer, Westfield, Inc. (“Westfield”). On September 10, 2003, the NJSEA ruled against Hartz’s and Westfield’s protests. Hartz and Westfield, as well as Elliot Braha and three other taxpayers (collectively “Braha”), thereafter filed appeals from the NJSEA’s final decision. By decision dated May 14, 2004, the Appellate Division of the Superior Court of New Jersey rejected the appellants’ contention that the NJSEA lacks statutory authority to allow retail development of its property. The Appellate Division also remanded Hart’s claim under the Open Public Records Acts, seeking disclosure of additional documents from NJSEA, to the Law Division for further proceedings. The Supreme Court of New Jersey declined to review the Appellate Division’s decision. On August 19, 2004, the Law Division issued a decision resolving Hartz’s Open Public Records Act claim and ordered NJSEA to disclose some, but not all, of the documents Hartz was seeking. The Appellate Division, in a decision rendered on November 24, 2004, upheld the findings of the Law Division in the remand proceeding. The Supreme Court of New Jersey declined to review the Appellate Division’s decision. At Hartz’s request, the NJSEA thereafter held further hearings on December 15 and 16, 2004, to review certain additional facts in support of Hartz’s and Westfield’s bid protest. Braha, as a taxpayer, did not have standing to participate in the supplemental protest hearing. On March 4, 2005, the Hearing Officer rendered his Supplemental Report and Recommendation to the NJSEA, finding no merit in the protests presented by Hartz and Westfield. The NJSEA accepted the Hearing Officer’s Supplemental Report and Recommendation on March 30, 2005 and Hartz and Braha have appealed that decision to the Appellate Division.
In January 2004, Hartz and Westfield also appealed to the Appellate Division of the Superior Court of New Jersey from the NJSEA’s December 2003 approval and execution of the Redevelopment Agreement with the Meadowlands Venture.
In November 2004, Hartz and Westfield filed additional appeals in the Appellate Division challenging NJSEA’s resolution authorizing the execution of the First Amendment to the Redevelopment Agreement with Meadowlands Venture and the ground lease with the Meadowlands Venture.
All of the above appeals were consolidated by the Appellate Division. On August 17, 2006, the Appellate Division issued an opinion affirming NJSEA’s selection of the Meadowlands Venture and rejecting the appellants’ arguments in all respects. On August 28, 2006, Hartz made a motion before the Appellate Division for reconsideration of this decision and for supplementation of the record. That motion was denied, and neither Hartz nor Braha has sought review in the New Jersey Supreme Court. These consolidated appeals are now resolved.
On September 30, 2004, the Borough of Carlstadt filed an action in the Superior Court of New Jersey Law Division, challenging Meadowlands Xanadu, which asserted claims that are substantially the same as claims asserted by Hartz and Braha in the above appeals. By Order dated November 19, 2004, the Law Division transferred that matter to the Superior Court of New Jersey, Appellate Division. This matter was voluntarily dismissed by Carlstadt in accordance with a March 22, 2006, Settlement Agreement and Release between Carlstadt and the Meadowlands Venture.
Several appeals filed by Hartz, the Sierra Club and others, including certain environmental groups, that challenge certain approvals received by the Meadowlands Venture from the NJSEA, the New Jersey Meadowlands Commission (“NJMC”) and the New Jersey Department of Environmental Protection (“NJDEP”) remain pending before the Appellate Division. Some of these appeals challenge NJDEP’s issuance of a stream encroachment permit, waterfront development permit, and coastal zone consistency determination for Meadowlands Xanadu. Other of these appeals are from NJDEP’s and NJMC’s issuance of reports in connection with a consultation process the NJSEA was statutorily required to undertake in connection with any NJSEA-development project.
A Hartz affiliate and a trade association have filed an appeal from an advisory opinion favorable to the Meadowlands Venture issued by the Director of the Division of Alcoholic Beverage Control concerning the availability of special concessionaire permits. That appeal is also pending in the Appellate Division of the Superior Court of New Jersey.
Three separate lawsuits have been filed in the United States District Court for the District of New Jersey, challenging a permit issued by the U.S. Army Corps of Engineers (“USACE”) in connection with the project. The first suit was filed on March 30, 2005, by the Sierra Club, the New Jersey Public Interest Research Group, Citizen Lobby, Inc. and the New Jersey Environmental Federation. Additional suits were filed on May 16 and May 31, 2005, respectively, by Hartz (together with one of its officers as an individually-named plaintiff) and the Borough of Carlstadt. The Sierra Club also filed a motion for a preliminary injunction to stop certain construction activities on the project, which the Court denied on July 6, 2005. On October 26, 2005, the court granted the motions of the Meadowlands Venture and the USACE to dismiss the Hartz complaint for lack of standing. The deadline for appealing that decision has passed, so the Hartz action is ended. On October 31, 2005, the USACE filed a motion to dismiss the complaint filed by the Borough of Carlstadt for lack of standing. On February 7, 2006, the Court granted the motion and dismissed the Borough of Carlstadt’s complaint in its entirety. On March 9, 2006, Carlstadt filed a notice of appeal of this decision to the United States Court of Appeals for the Third Circuit. This appeal has been dismissed pursuant to the Settlement Agreement and Release executed by Carlstadt and the Meadowlands Venture.
On April 5, 2005, the New York Football Giants (“Giants”) filed an emergent application with the Supreme Court of New Jersey, Chancery Division, seeking an injunction stopping all work on the Meadowlands Xanadu project as being in violation of its existing lease with the NJSEA. After hearing oral argument on the application on August 5, 2005, the court denied the Giants’ motion for preliminary injunctive relief. On June 22, 2006, the court entered a Stipulation and Consent Order that dismissed without prejudice the parties’ respective claims.
The New Jersey Builders’ Association (“NJBA”) has commenced an action, which is pending in the Appellate Division, alleging that the NJSEA has failed to meet a purported obligation to provide affordable housing at the Meadowlands Complex and seeking, among other relief, an order enjoining the construction of Meadowlands Xanadu. NJBA filed an application for preliminary injunctive relief seeking to enjoin further construction of Meadowlands Xanadu, which the Appellate Division denied on July 28, 2005. The Meadowlands Venture is not a party to that action.
On January 25, 2006, the Bergen Cliff Hawks Baseball Club, LLC (the “Cliff Hawks”), filed a complaint against the Operating Partnership and Mills, alleging that the Operating Partnership and Mills breached an agreement to provide the Cliff Hawks with a minor league baseball park as part of the Xanadu Project. This matter is pending.
The Operating Partnership believes that the Meadowlands Venture’s proposal and the planned project comply with applicable laws, and the Meadowlands Venture intends to continue its vigorous defense of its rights under the Redevelopment Agreement and Ground Lease. Although there can be no assurance, the Operating Partnership does not believe that the pending lawsuits will have any material affect on its ability to develop the Meadowlands Xanadu project.
There are no other material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which the Operating Partnership is a party or to which any of the Properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
MARKET INFORMATION
The shares of the Corporation’s Common Stock are traded on the New York Stock Exchange (“NYSE”) under the symbol “CLI.”
On June 16, 2006, the Corporation filed with the NYSE its annual CEO Certification and Annual Written Affirmation pursuant to Section 303A.12 of the NYSE Listed Company Manual, each certifying that the Corporation was in compliance with all of the listing standards of the NYSE.
HOLDERS
On February 16, 2007, the Operating Partnership had 139 owners of limited partnership units and one owner of General Partnership units.
RECENT SALES OF UNREGISTERED SECURITIES; USES OF PROCEEDS FROM REGISTERED SECURITIES
During the three months ended December 31, 2006, the Corporation issued 253,542 shares of common stock to holders of common units in the Operating Partnership upon the redemption of such common units in private offerings pursuant to Section 4(2) of the Securities Act. The holders of the common units were limited partners of the Operating Partnership and accredited investors under Rule 501 of the Securities Act. The common units were converted into an equal number of shares of common stock. The Corporation has registered the resale of such shares under the Securities Act.
DIVIDENDS AND DISTRIBUTIONS
During the year ended December 31, 2006, the Corporation and the Operating Partnership declared four quarterly common stock dividends and common unit distributions in the amounts of $0.63, $0.63, $0.64 and $0.64 per share and per unit from the first to the fourth quarter, respectively. Additionally, in 2006, the Operating Partnership declared quarterly preferred unit distributions of $50.00 per preferred unit from the first to the fourth quarter.
During the year ended December 31, 2005, the Corporation and Operating Partnership declared four quarterly common stock dividends and common unit distributions of $0.63 per share and per unit from the first to the fourth quarter. Additionally, in 2005, the Operating Partnership declared quarterly Series C preferred unit distributions of $50.00 per preferred unit from the first to the fourth quarter. The Operating Partnership also declared one quarterly Series B preferred unit distribution of $18.1818 per preferred unit for the first quarter.
The declaration and payment of dividends and distributions will continue to be determined by the Corporation’s Board of Directors in light of conditions then existing, including the Operating Partnership’s earnings, financial condition, capital requirements, applicable REIT and legal restrictions and other factors.
PERFORMANCE GRAPH
The following graph compares total stockholder returns from the last five fiscal years to the Standard & Poor’s 500 Index (“S&P 500”) and to the National Association of Real Estate Investment Trusts, Inc.’s Equity REIT Total Return Index (“NAREIT”). The graph assumes that the value of the investment in the Corporation’s Common Stock and in the S&P 500 and NAREIT indices was $100 at December 31, 2001 and that all dividends were reinvested. The price of the Corporation’s Common Stock on December 31, 2001 (on which the graph is based) was $31.02. The stockholder return shown on the following graph is not necessarily indicative of future performance.
Comparison of Five-Year Cumulative Total Return
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Information regarding securities authorized for issuance under our equity compensation plans of the Corporation is disclosed in Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data on a consolidated basis for the Operating Partnership. The consolidated selected operating, balance sheet and other data of the Operating Partnership as of December 31, 2006, 2005, 2004, 2003 and 2002, and for the years then ended have been derived from the Operating Partnership’s financial statements for the respective periods.
Operating Data (a) | | Year Ended December 31, | |
In thousands, except per unit data | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Total revenues | | $ | 740,309 | | $ | 600,131 | | $ | 537,239 | | $ | 516,536 | | $ | 474,765 | |
| Property expenses (b) | | $ | 238,112 | | $ | 210,473 | | $ | 170,814 | | $ | 158,755 | | $ | 138,332 | |
| Direct construction costs | | $ | 53,602 | | | -- | | | -- | | | -- | | | -- | |
| General and administrative | | $ | 49,077 | | $ | 32,441 | | $ | 31,324 | | $ | 30,843 | | $ | 26,344 | |
| Interest expense | | $ | 136,357 | | $ | 119,337 | | $ | 109,649 | | $ | 115,430 | | $ | 105,385 | |
| Income from continuing operations | | $ | 106,893 | | $ | 95,352 | | $ | 106,556 | | $ | 143,880 | | $ | 130,128 | |
| Net income available to common unitholders | | $ | 177,692 | | $ | 112,210 | | $ | 113,354 | | $ | 160,486 | | $ | 158,991 | |
| Income from continuing operations | | | | | | | | | | | | | | | | |
| per unit - basic | | $ | 1.35 | | $ | 1.21 | | $ | 1.30 | | $ | 1.93 | | $ | 1.80 | |
| Income from continuing operations | | | | | | | | | | | | | | | | |
| per unit - diluted | | $ | 1.35 | | $ | 1.20 | | $ | 1.29 | | $ | 1.92 | | $ | 1.79 | |
| Net income per unit - basic | | $ | 2.29 | | $ | 1.52 | | $ | 1.66 | | $ | 2.45 | | $ | 2.44 | |
| Net income per unit - diluted | | $ | 2.28 | | $ | 1.51 | | $ | 1.65 | | $ | 2.43 | | $ | 2.43 | |
| Distributions declared per common unit | | $ | 2.54 | | $ | 2.52 | | $ | 2.52 | | $ | 2.52 | | $ | 2.50 | |
| Basic weighted average units outstanding | | | 77,523 | | | 73,729 | | | 68,110 | | | 65,526 | | | 65,109 | |
| Diluted weighted average units outstanding | | | 77,901 | | | 74,189 | | | 68,743 | | | 65,980 | | | 65,475 | |
Balance Sheet Data | | December 31, | |
In thousands | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Rental property, before accumulated | | | | | | | | | | | |
| depreciation and amortization | | $ | 4,573,587 | | $ | 4,491,752 | | $ | 4,160,959 | | $ | 3,954,632 | | $ | 3,857,657 | |
| Rental property held for sale, net | | | -- | | | -- | | $ | 19,132 | | | -- | | | -- | |
| Total assets | | $ | 4,422,889 | | $ | 4,247,502 | | $ | 3,850,165 | | $ | 3,749,570 | | $ | 3,796,429 | |
| Total debt (c) | | $ | 2,159,959 | | $ | 2,126,181 | | $ | 1,702,300 | | $ | 1,628,584 | | $ | 1,752,372 | |
| Total liabilities | | $ | 2,412,762 | | $ | 2,335,396 | | $ | 1,877,096 | | $ | 1,779,983 | | $ | 1,912,199 | |
| Partners’ capital | | $ | 2,008,010 | | $ | 1,912,106 | | $ | 1,961,966 | | $ | 1,969,587 | | $ | 1,884,230 | |
________________________
| (a) | Certain reclassifications have been made to prior period amounts in order to conform with current period presentation. |
| (b) | Property expenses is calculated by taking the sum of real estate taxes, utilities and operating services for each of the periods presented. |
| (c) | Total debt is calculated by taking the sum of senior unsecured notes, revolving credit facilities, and mortgages, loans payable and other obligations. |
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion should be read in conjunction with the Consolidated Financial Statements of Mack-Cali Realty, L.P. and the notes thereto (collectively, the “Financial Statements”). Certain defined terms used herein have the meaning ascribed to them in the Financial Statements.
Executive Overview
Mack-Cali Realty Corporation (the “General Partner”) is one of the largest real estate investment trusts (REITs) in the United States, with a total market capitalization of approximately $6.2 billion at December 31, 2006. Mack-Cali Realty, L.P. (the “Operating Partnership”) has been involved in all aspects of commercial real estate development, management and ownership for over 50 years and the Corporation has been a publicly-traded REIT since 1994. The Operating Partnership owns or has interests in 300 properties (collectively, the “Properties”), primarily class A office and office/flex buildings, totaling approximately 34.3 million square feet, leased to over 2,200 tenants. The Properties are located primarily in suburban markets of the Northeast, some with adjacent, Operating Partnership-controlled developable land sites able to accommodate up to 11.5 million square feet of additional commercial space.
The Operating Partnership’s strategy is to be a significant real estate owner and operator in its core, high-barriers-to-entry markets, primarily in the Northeast.
As an owner of real estate, almost all of the Operating Partnership’s earnings and cash flow is derived from rental revenue received pursuant to leased office space at the Properties. Key factors that affect the Operating Partnership’s business and financial results include the following:
| · | the general economic climate; |
| · | the occupancy rates of the Properties; |
| · | rental rates on new or renewed leases; |
| · | tenant improvement and leasing costs incurred to obtain and retain tenants; |
| · | the extent of early lease terminations; |
| · | the extent of acquisitions, development and sales of real estate. |
Any negative effects of the above key factors could potentially cause a deterioration in the Operating Partnership’s revenue and/or earnings. Such negative effects could include: (1) failure to renew or execute new leases as current leases expire; (2) failure to renew or execute new leases with rental terms at or above the terms of in-place leases; and (3) tenant defaults.
A failure to renew or execute new leases as current leases expire or to execute new leases with rental terms at or above the terms of in-place leases may be affected by several factors such as: (1) the local economic climate, which may be adversely impacted by business layoffs or downsizing, industry slowdowns, changing demographics and other factors; and (2) local real estate conditions, such as oversupply of office and office/flex space or competition within the market.
The Operating Partnership’s core markets continue to be weak. The percentage leased in the Operating Partnership’s consolidated portfolio of stabilized operating properties increased to 92.0 percent at December 31, 2006 as compared to 91.0 percent at December 31, 2005 and 91.2 percent at December 31, 2004. Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2006, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases that expire at the period end date. Excluded from percentage leased at December 31, 2004 was a non-strategic, non-core 318,224 square foot property acquired through a deed in lieu of foreclosure, which was 12.7 percent leased at December 31, 2004 and subsequently sold on February 4, 2005. Leases that expired as of December 31, 2006, 2005 and 2004 aggregate 103,477, 311,623 and 439,697 square feet, respectively, or 0.4, 1.1 and 1.5 percentage of the net rentable square footage, respectively. Market rental rates have declined in most markets from peak levels in late 2000 and early 2001. Rental rates on the Operating Partnership’s space that was re-leased (based on first rents payable) during the year ended December 31, 2006 decreased an average of 0.2 percent compared to rates that were in effect under expiring leases, as compared to a 8.2 percent decrease in 2005 and a 8.7 percent decrease in 2004. The Operating Partnership believes that vacancy rates may continue to increase in most of its markets in 2007. As a result, the Operating Partnership’s future earnings and cash flow may continue to be negatively impacted by current market conditions.
The remaining portion of this Management’s Discussion and Analysis of Financial Condition and Results of Operations should help the reader understand:
| · | property transactions during the period; |
| · | critical accounting policies and estimates; |
| · | results of operations for the year ended December 31, 2006, as compared to the year ended December 31, 2005; |
| · | results of operations for the year ended December 31, 2005, as compared to the year ended December 31, 2004; and |
| · | liquidity and capital resources. |
Summary of Transactions
Gale/Green Transactions
On May 9, 2006, the Operating Partnership completed the acquisitions of: (i) The Gale Company and certain of its related businesses, which engage in construction, property management, facilities management, and leasing services (collectively, the “Gale Company”); (ii) three office properties; and (iii) indirect interests in a portfolio of office properties, located primarily in New Jersey, which were owned indirectly by The Gale Company and its affiliates (“Gale”) and affiliates of SL Green Realty Corp. (“SL Green”). The agreements (“Gale/Green Agreements”) to complete the aforementioned acquisitions (collectively, the “Gale/Green Transactions”) required that the Operating Partnership complete all of the acquisitions. Simultaneous with the completion of the Gale/Green Transactions, The Gale Company’s President, Mark Yeager, was named an executive vice president of the Company
Under the Gale/Green Agreements, the Operating Partnership acquired 100 percent of the ownership interests in three office properties located in New Jersey, aggregating 518,257 square feet (the “Wholly-Owned Properties”).
Also, as part of the Gale/Green Agreements, the Operating Partnership entered into a joint venture with an entity controlled by SL Green (in which Stanley C. Gale has an interest), known as Mack-Green-Gale LLC (“Mack-Green”), to hold an approximate 96 percent interest and act as general partner of Gale SLG NJ Operating Partnership, L.P. (the “OP LP”). The OP LP owns 100 percent of entities which own 25 office properties (collectively, the“OP LP Properties”) which aggregate 3.5 million square feet (consisting of 17 office properties aggregating 2.3 million square feet located in New Jersey and eight properties aggregating 1.2 million square feet located in Troy, Michigan), as well as a minor, non-controlling interest in four office properties aggregating 419,000 square feet located in Naperville, Illinois. For a discussion of the ownership interests in Mack-Green, see Note 4: Investments in Unconsolidated Joint Ventures - Mack-Green-Gale LLC - to our financial statements included within this annual report on Form 10-K.
Mr. Gale has agreed to pay Mark Yeager, an executive officer of the Corporation, 49 percent of any payments he receives on account of Mr. Gale’s interest with SL Green in Mack-Green.
The Gale Company, the Wholly-Owned Properties, and the interest in Mack-Green were acquired by the Operating Partnership for a total initial acquisition cost of approximately $245 million consisting of: (i) the issuance by the Operating Partnership of 224,719 common units of the Operating Partnership; (ii) the payment of a total of approximately $194 million in cash, which was primarily funded through borrowing under the Operating Partnership’s revolving credit facility; and (iii) the assumption of $39.9 million in existing mortgage indebtedness on two of the Wholly-Owned Properties. Mr. Gale has agreed to transfer to Mark Yeager 33,700 of his common units of the Operating Partnership on April 30, 2009, provided that Mr. Yeager’s employment with the Corporation has not been terminated involuntarily without cause (“Employment Continuation”) prior to such date. Additionally, the agreement to acquire the Gale Company (“Gale Agreement”) contains earn-out provisions providing for the payment of contingent purchase consideration of up to $18 million in cash based upon the achievement of Gross Income and NOI (as such terms are defined in the Gale Agreement) targets and other events for The Gale Company for the three years following the closing date.
Mr. Gale has agreed to pay to Mr. Yeager 49 percent of all amounts he receives pursuant to the Gale Agreement earn-out provisions, subject to certain conditions including Mr. Yeager’s Employment Continuation.
The Operating Partnership has not yet obtained all the information necessary to finalize its estimates to complete the purchase price allocations related to the Gale/Green Transactions. The purchase price allocations will be finalized once the information identified by the Operating Partnership has been received, which should not be longer than one year from the date of acquisition.
In addition, the Gale Agreement provides for the Operating Partnership to acquire certain other ownership interests in up to 11 real estate projects (the “Non-Portfolio Properties”), subject to obtaining certain third party consents and the satisfaction of various project-related and/or other conditions. Each of the Operating Partnership’s acquired interests in the Non-Portfolio Properties will provide for the initial distributions of net cash flow solely to the Operating Partnership, and thereafter an affiliate of Mr. Gale (“Gale Affiliate”) has participation rights (“Gale Participation Rights”) in 50 percent of the excess net cash flow remaining after the distribution to the Operating Partnership of the aggregate amount equal to the sum of: (a) the Operating Partnership’s capital contributions, plus (b) an internal rate of return (“IRR”) of 10 percent per annum, accruing on the date or dates of the Operating Partnership’s investments.
Mr. Gale has agreed to pay to Mr. Yeager 49 percent of any payments he receives with respect to the Gale Participation Rights, subject to adjustments for payments Mr. Yeager receives from his direct interests in such rights and subject to, in certain cases, Mr. Yeager’s Employment Continuation. Mr. Gale has also agreed to pay to Mr. Yeager 49 percent of the distributions he receives with respect to Mr. Gale’s interest in certain land located in Florham Park, New Jersey, which is one of the Non-Portfolio Properties not yet acquired by the Operating Partnership. Such distribution may include the amounts Mr. Gale receives from the conveyance of his interest in the Florham Park land to the Operating Partnership.
With respect to the arrangements between Mr. Gale and Mr. Yeager regarding the Gale Agreement earn-out provisions and the Florham Park land, they have agreed to consider offering payments to certain persons that have been employed by certain subsidiaries of The Gale Company, which may include current employees of the Corporation.
Through December 31, 2006, the Operating Partnership has completed acquisitions of eight of the interests in the Non-Portfolio Properties, which included the acquisitions of interests in: a 527,015 square foot, mixed-use office/retail complex; a 416,429 square-foot multi-tenanted office property; a 139,750 square-foot fully-leased office property; an office property in development; two vacant land parcels (one of which Mr. Yeager has a 16.49 percent interest in the Participation Rights) and two pre-developed projects. The aggregate cost of the completed acquisitions was approximately $25.6 million.
Pursuant to Mr. Gale’s agreements with Mr. Yeager, as described herein, Mr. Yeager received approximately $5.6 million during the year ended December 31, 2006.
In connection with the Operating Partnership’s acquisition of the Gale Company, Mr. Gale and certain other affiliates of Gale are restricted from competing with the Operating Partnership or hiring the Corporation’s employees for a period of four years expiring on May 9, 2010.
Property Acquisitions
The Operating Partnership acquired the following office properties during the year ended December 31, 2006: (dollars in thousands)
| Acquisition | | | # of | Rentable | Acquisition |
| Date | Property/Address | Location | Bldgs. | Square Feet | Cost |
| 02/28/06 | Capital Office Park (a) | Greenbelt, Maryland | 7 | 842,258 | $166,011 |
| 05/09/06 | 35 Waterview Boulevard (b) (c) | Parsippany, New Jersey | 1 | 172,498 | 33,586 |
| 05/09/06 | 105 Challenger Road (b) (d) | Ridgefield Park, New Jersey | 1 | 150,050 | 34,960 |
| 05/09/06 | 343 Thornall Street (b) (e) | Edison, New Jersey | 1 | 195,709 | 46,193 |
| 07/31/06 | 395 W. Passaic Street (f) | Rochelle Park, New Jersey | 1 | 100,589 | 22,219 |
| | | | | |
| Total Property Acquisitions: | | 11 | 1,461,104 | $302,969 |
| | | | | |
| (a) This transaction was funded primarily through the assumption of $63.2 million of mortgage debt and the issuance of 1.9 million common operating partnership units valued at $87.2 million. |
(b) The property was acquired as part of the Gale/Green Transactions. |
(c) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility and the assumption of $20.4 million of mortgage debt. |
(d) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility and the assumption of $19.5 million of mortgage debt. |
(e) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility. |
(f) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility and the assumption of $13.1 million of mortgage debt. |
Sales
The Operating Partnership sold the following office properties during the year ended December 31, 2006: (dollars in thousands)
| | | | | Rentable | Net | Net | Realized |
| Sale | | | # of | Square | Sales | Book | Gain/ |
| Date | Property/Address | Location | Bldgs. | Feet | Proceeds | Value | (Loss) |
| 06/28/06 | Westage Business Center | Fishkill, New York | 1 | 118,727 | $ 14,765 | $ 10,872 | $ 3,893 |
| 06/30/06 | 1510 Lancer Drive | Moorestown, New Jersey | 1 | 88,000 | 4,146 | 3,134 | 1,012 |
| 11/10/06 | Colorado portfolio | Various cities, Colorado | 19 | 1,431,610 | 193,404 | 165,072 | 28,332 |
| 12/21/06 | California portfolio | San Francisco, California | 2 | 450,891 | 124,182 | 97,814 | 26,368 |
| | | | | | | |
| Total Office Property Sales: | | 23 | 2,089,228 | $336,497 | $276,892 | $59,605 |
On November 6, 2006, the Operating Partnership sold its 50-percent interest in G&G Martco, a joint venture which owned a 305,618 square foot office building located in San Francisco, California for approximately $16.3 million, realizing a gain on the sale of approximately $10.8 million.
On November 7, 2006, the Operating Partnership sold 10.1 acres of developable land adjacent to its Horizon Center properties in Hamilton Township, New Jersey, for net sales proceeds of approximately $1.5 million, realizing a gain of approximately $1.1 million from the sale.
Critical Accounting Policies and Estimates
The Financial Statements have been prepared in conformity with generally accepted accounting principles. The preparation of the Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements, and the reported amounts of revenues and expenses during the reported period. These estimates and assumptions are based on management’s historical experience that are believed to be reasonable at the time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. The Operating Partnership’s critical accounting policies are those which require assumptions to be made about matters that are highly uncertain. Different estimates could have a material effect on the Operating Partnership’s financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances.
Rental Property:
Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Interest capitalized by the Operating Partnership for the years ended December 31, 2006, 2005 and 2004 was $6.1 million, $5.5 million and $3.9 million, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.
The Operating Partnership considers a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup). If portions of a rental project are substantially completed and occupied by tenants, or held available for occupancy, and other portions have not yet reached that stage, the substantially completed portions are accounted for as a separate project. The Operating Partnership allocates costs incurred between the portions under construction and the portions substantially completed and held available for occupancy and capitalizes only those costs associated with the portion under construction.
Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:
| Leasehold interests | Remaining lease term |
| Buildings and improvements | 5 to 40 years |
| Tenant improvements | The shorter of the term of the |
| | related lease or useful life |
| Furniture, fixtures and equipment | 5 to 10 years |
Upon acquisition of rental property, the Operating Partnership estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships. The Operating Partnership allocates the purchase price to the assets acquired and liabilities assumed based on their relative fair values. In estimating the fair value of the tangible and intangible assets acquired, the Operating Partnership considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.
Above-market and below-market lease values for acquired properties are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases.
Other intangible assets acquired include amounts for in-place lease values and tenant relationship values which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Operating Partnership’s overall relationship with the respective tenant. Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses. Characteristics considered by management in valuing tenant relationships include the nature and extent of the Operating Partnership’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals. The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases. The value of tenant relationship intangibles will be amortized to expense over the anticipated life of the relationships.
On a periodic basis, management assesses whether there are any indicators that the value of the Operating Partnership’s rental properties may be impaired. A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. The Operating Partnership’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved. Management does not believe that the value of any of the Operating Partnership’s rental properties is impaired.
Rental Property Held for Sale and Discontinued Operations:
When assets are identified by management as held for sale, the Operating Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. If, in management’s opinion, the net sales price of the assets which have been identified as held for sale is less than the net book value of the assets, a valuation allowance is established. Properties identified as held for sale and/or sold are presented in discontinued operations for all periods presented.
If circumstances arise that previously were considered unlikely and, as a result, the Operating Partnership decides not to sell a property previously classified as held for sale, the property is reclassified as held and used. A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the property been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell.
Revenue Recognition:
Base rental revenue is recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements. Above-market and below-market lease values for acquired properties are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases. Parking and other revenue includes income from parking spaces leased to tenants, income from tenants for additional services provided by the Operating Partnership, income from tenants for early lease terminations and income from managing and/or leasing properties for third parties. Escalations and recoveries are received from tenants for certain costs as provided in the lease agreements. These costs generally include real estate taxes, utilities, insurance, common area maintenance and other recoverable costs.
Construction services revenue includes fees earned and reimbursements received by the Operating Partnership for providing construction management and general contractor services to clients. Construction services revenue is recognized on the percentage of completion method. Using this method, profits are recorded on the basis of estimates of the overall profit and percentage of completion of individual contracts. A portion of the estimated profits is accrued based upon estimates of the percentage of completion of the construction contract. This revenue recognition method involves inherent risks relating to profit and cost estimates. Real estate services revenue includes property management, facilities management, leasing commission fees and other services, and payroll and related costs reimbursed from clients. Other income includes income from parking spaces leased to tenants, income from tenants for additional services arranged for by the Operating Partnership and income from tenants for early lease terminations.
Allowance for Doubtful Accounts:
Management periodically performs a detailed review of amounts due from tenants to determine if accounts receivable balances are impaired based on factors affecting the collectibility of those balances. Management’s estimate of the allowance for doubtful accounts requires management to exercise significant judgment about the timing, frequency and severity of collection losses, which affects the allowance and net income.
Results From Operations
The following comparisons for the year ended December 31, 2006 (“2006”), as compared to the year ended December 31, 2005 (“2005”), and for 2005, as compared to the year ended December 31, 2004 (“2004”), make reference to the following: (i) the effect of the “Same-Store Properties,” which represents all in-service properties owned by the Operating Partnership at December 31, 2004, (for the 2006 versus 2005 comparison) and which represents all in-service properties owned by the Operating Partnership at December 31, 2003, (for the 2005 versus 2004 comparison), excluding properties sold or held for sale through December 31, 2006, and (ii) the effect of the “Acquired Properties,” which represents all properties acquired by the Operating Partnership or commencing initial operations from January 1, 2005 through December 31, 2006 (for the 2006 versus 2005 comparison) and which represent all properties acquired by the Operating Partnership or commencing initial operation from January 1, 2004 through December 31, 2005 (for the 2005 versus 2004 comparison).
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
| | | Year Ended | | | | | |
| | | December 31, | | Dollar | | Percent | |
(dollars in thousands) | | 2006 | | 2005 | | Change | | Change | |
Revenue from rental operations: | | | | | | | | | |
| Base rents | | $ | 544,870 | | $ | 508,227 | | $ | 36,643 | | | 7.2 | % |
| Escalations and recoveries from tenants | | | 91,044 | | | 77,900 | | | 13,144 | | | 16.9 | |
| Other income | | | 17,125 | | | 11,087 | | | 6,038 | | | 54.5 | |
Total revenues from rental operations | | | 653,039 | | | 597,214 | | | 55,825 | | | 9.4 | |
| | | | | | | | | | | | | | |
Property expenses: | | | | | | | | | | | | | |
| Real estate taxes | | | 86,612 | | | 77,252 | | | 9,360 | | | 12.1 | |
| Utilities | | | 60,487 | | | 52,401 | | | 8,086 | | | 15.4 | |
| Operating services | | | 91,013 | | | 80,820 | | | 10,193 | | | 12.6 | |
Total property expenses | | | 238,112 | | | 210,473 | | | 27,639 | | | 13.1 | |
| | | | | | | | | | | | | | |
Non-property revenues: | | | | | | | | | | | | | |
| Construction services | | | 56,225 | | | -- | | | 56,225 | | | -- | |
| Real estate services | | | 31,045 | | | 2,917 | | | 28,128 | | | 964.3 | |
Total non-property revenues | | | 87,270 | | | 2,917 | | | 84,353 | | | 2,891.8 | |
| | | | | | | | | | | | | | |
Non-property expenses: | | | | | | | | | | | | | |
| Direct constructions costs | | | 53,602 | | | -- | | | 53,602 | | | -- | |
| Real estate services and salaries, wages | | | | | | | | | | | | | |
and other costs | | | 18,600 | | | -- | | | 18,600 | | | -- | |
| General and administrative | | | 49,077 | | | 32,441 | | | 16,636 | | | 51.3 | |
| Depreciation and amortization | | | 160,859 | | | 143,593 | | | 17,266 | | | 12.0 | |
Total non-property expenses | | | 282,138 | | | 176,034 | | | 106,104 | | | 60.3 | |
| Operating Income | �� | | 220,059 | | | 213,624 | | | 6,435 | | | 3.0 | |
Other (expense) income: | | | | | | | | | | | | | |
| Interest expense | | | (136,357 | ) | | (119,337 | ) | | (17,020 | ) | | (14.3 | ) |
| Interest and other investment income | | | 3,054 | | | 856 | | | 2,198 | | | 256.8 | |
| Equity in earnings (loss) of unconsolidated | | | | | | | | | | | | | |
joint ventures | | | (5,556 | ) | | 248 | | | (5,804 | ) | | (2,340.3 | ) |
| Minority interest in consolidated joint ventures | | | 218 | | | (74 | ) | | 292 | | | 394.6 | |
| Gain on sale of investment in marketable securities | | | 15,060 | | | -- | | | 15,060 | | | -- | |
| Gain on sale of investment in joint ventures | | | 10,831 | | | 35 | | | 10,796 | | | 30,845.7 | |
| Gain/(loss) on sale of land and other assets | | | (416 | ) | | -- | | | (416 | ) | | -- | |
Total other (expense) income | | | (113,166 | ) | | (118,272 | ) | | 5,106 | | | 4.3 | |
| Income from continuing operations | | | 106,893 | | | 95,352 | | | 11,541 | | | 12.1 | |
| Discontinued operations: | | | | | | | | | | | | | |
Income (loss) from discontinued operations | | | 13,194 | | | 17,245 | | | (4,051 | ) | | (23.5 | ) |
Realized gains (losses) and unrealized losses | | | | | | | | | | | | | |
on disposition of rental property, net | | | 59,605 | | | 5,522 | | | 54,083 | | | 979.4 | |
| Total discontinued operations, net | | | 72,799 | | | 22,767 | | | 50,032 | | | 219.8 | |
| Net income | | | 179,692 | | | 118,119 | | | 61,573 | | | 52.1 | |
| Preferred unit distributions | | | (2,000 | ) | | (5,909 | ) | | 3,909 | | | 66.2 | |
| | | | | | | | | | | | | | |
| Net income available to common unitholders | | $ | 177,692 | | $ | 112,210 | | $ | 65,482 | | | 58.4 | % |
The following is a summary of the changes in revenue from rental operations and property expenses in 2006 as compared to 2005 divided into Same-Store Properties and Acquired Properties (dollars in thousands):
| | | Total Operating Partnership | | Same-Store Properties | | Acquired Properties | |
| | | Dollar | | Percent | | Dollar | | Percent | | Dollar | | Percent | |
| | | Change | | Change | | Change | | Change | | Change | | Change | |
Revenue from rental operations: | | | | | | | | | | | | | |
| Base rents | | $ | 36,643 | | | 7.2 | % | $ | 7,277 | | | 1.4 | % | $ | 29,366 | | | 5.8 | % |
| Escalations and recoveries | | | | | | | | | | | | | | | | | | | |
| from tenants | | | 13,144 | | | 16.9 | | | 6,596 | | | 8.5 | | | 6,548 | | | 8.4 | |
| Other income | | | 6,038 | | | 54.5 | | | 5,177 | | | 46.7 | | | 861 | | | 7.8 | |
| Total | | $ | 55,825 | | | 9.4 | % | $ | 19,050 | | | 3.2 | % | $ | 36,775 | | | 6.2 | % |
| | | | | | | | | | | | | | | | | | | | |
Property expenses: | | | | | | | | | | | | | | | | | | | |
| Real estate taxes | | $ | 9,360 | | | 12.1 | % | $ | 5,229 | | | 6.8 | % | $ | 4,131 | | | 5.3 | % |
| Utilities | | | 8,086 | | | 15.4 | | | 3,821 | | | 7.3 | | | 4,265 | | | 8.1 | |
| Operating services | | | 10,193 | | | 12.6 | | | 1,875 | | | 2.3 | | | 8,318 | | | 10.3 | |
| Total | | $ | 27,639 | | | 13.1 | % | $ | 10,925 | | | 5.2 | % | $ | 16,714 | | | 7.9 | % |
| | | | | | | | | | | | | | | | | | | | |
OTHER DATA: | | | | | | | | | | | | | | | | | | | |
| Number of Consolidated Properties | | | 255 | | | | | | 238 | | | | | | 17 | | | | |
| Square feet (in thousands) | | | 28,866 | | | | | | 25,573 | | | | | | 3,293 | | | | |
Base rents for the Same-Store Properties increased $7.3 million, or 1.4 percent, for 2006 as compared to 2005, due primarily to an increase in the percentage of space leased at the properties in 2006 from 2005. Escalations and recoveries from tenants for the Same-Store Properties increased $6.6 million, or 8.5 percent, for 2006 over 2005, due primarily to an increased amount of total property expenses in 2006. Other income for the Same-Store Properties increased $5.2 million, or 46.7 percent, due primarily to an increase in lease breakage fees of $3.1 million in 2006 and $1.4 million recognized in 2006 for additional purchase consideration earned from a past sale of a joint venture.
Real estate taxes on the Same-Store Properties increased $5.2 million, or 6.8 percent, for 2006 as compared to 2005, due primarily to property tax rate increases in certain municipalities in 2006. Utilities for the Same-Store Properties increased $3.8 million, or 7.3 percent, for 2006 as compared to 2005, due primarily to increased electric rates in 2006 as compared to 2005. Operating services for the Same-Store Properties increased $1.9 million, or 2.3 percent, due primarily to increased maintenance and related labor costs of $5.1 million for 2006 as compared to 2005, partially offset by a decrease in snow removal costs in 2006 of $3.1 million.
Construction services amounted to $56.2 million in 2006, due to the effect of the Gale/Green Transactions. Real estate services increased by $28.1 million, or 964.3 percent, for 2006 as compared to 2005, also due primarily to the effect of the Gale/Green Transactions.
Direct construction costs totaled $53.6 million in 2006, due primarily to the effect of the Gale/Green Transactions. Real estate services salaries, wages and other costs equaled $18.6 million in 2006, also due primarily to the effect of the Gale/Green Transactions. General and administrative increased by $16.6 million, or 51.3 percent, for 2006 as compared to 2005 due primarily to the effect of the Gale/Green Transactions.
Depreciation and amortization increased by $17.3 million, or 12.0 percent, for 2006 over 2005. Of this increase, $2.9 million, or 2.0 percent, was attributable to the Same-Store Properties and $14.4 million, or 10.0 percent, was due to the Acquired Properties.
Interest expense increased $17.0 million, or 14.3 percent, for 2006 as compared to 2005. This increase was primarily as a result of higher average debt balances in 2006 as compared to 2005.
Interest and other investment income increased $2.2 million, or 256.8 percent, for 2006 as compared to 2005. This increase was due primarily to the receipt of approximately $0.9 million in dividends on the Operating Partnership’s investment in marketable securities, as well as higher cash balances invested in 2006 due primarily to property sales proceeds as compared to 2005.
Equity in earnings of unconsolidated joint ventures decreased $5.8 million, or 2,340.3 percent, for 2006 as compared to 2005. The decrease was due primarily to a loss of $4.9 million in 2006 in the Mack-Green joint venture and a loss of $1.9 million in 2006 in the Meadowlands Xanadu joint venture, partially offset by an increase of $1.1 million in the Harborside South Pier joint venture.
The Operating Partnership recognized a gain on sale of investment in marketable securities of $15.1 million in 2006.
Gain on sale of investment in unconsolidated joint ventures amounted to $10.8 million in 2006 from the sale of the Operating Partnership’s interest in the G&G Martco joint venture. Gain on sale of investment in unconsolidated joint ventures amounted to $35,000 in 2005 from the sale of the Operating Partnership’s interest in the Ashford Loop joint venture.
Gain (loss) on sale of land and other assets amounted to a loss of $0.4 million in 2006 due to a loss on the sale of Gale Global Facilities and related companies in 2006 of $1.5 million, partially offset by a gain of $1.1 million from the sale of a parcel of land in Hamilton, New Jersey.
Income from continuing operations increased to $106.9 million in 2006 from $95.4 million in 2005. The increase of approximately $11.5 million was due to the factors discussed above.
Net income available to common unitholders increased by $65.5 million, or 58.4 percent, from $112.2 million in 2005 to $177.7 million in 2006. This increase was primarily the result of realized gains on disposition of rental property of $59.6 million in 2006, an increase in income from continuing operations of $11.5 million and a decrease in preferred unit distributions of $3.9 million. These were partially offset by realized gains on disposition of rental property of $5.5 million in 2005, and a decrease in income from discontinued operations of approximately $4.0 million in 2006 as compared to 2005.
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
| | | Year Ended | | | | | |
| | | December 31, | | Dollar | | Percent | |
(dollars in thousands) | | 2005 | | 2004 | | Change | | Change | |
Revenue from rental operations: | | | | | | | | | |
| Base rents | | $ | 508,227 | | $ | 464,303 | | $ | 43,924 | | | 9.5 | % |
| Escalations and recoveries from tenants | | | 77,900 | | | 60,492 | | | 17,408 | | | 28.8 | |
| Other income | | | 11,087 | | | 7,950 | | | 3,137 | | | 39.5 | |
Total revenues from rental operations | | | 597,214 | | | 532,745 | | | 64,469 | | | 12.1 | |
| | | | | | | | | | | | | | |
Property expenses: | | | | | | | | | | | | | |
| Real estate taxes | | | 77,252 | | | 64,036 | | | 13,216 | | | 20.6 | |
| Utilities | | | 52,401 | | | 38,456 | | | 13,945 | | | 36.3 | |
| Operating services | | | 80,820 | | | 68,322 | | | 12,498 | | | 18.3 | |
Total property expenses | | | 210,473 | | | 170,814 | | | 39,659 | | | 23.2 | |
| | | | | | | | | | | | | | |
Non-property revenues: | | | | | | | | | | | | | |
| Construction services | | | -- | | | -- | | | -- | | | -- | |
| Real estate services | | | 2,917 | | | 4,494 | | | (1,577 | ) | | (35.1 | ) |
Total non-property revenues | | | 2,917 | | | 4,494 | | | (1,577 | ) | | (35.1 | ) |
| | | | | | | | | | | | | | |
Non-property expenses: | | | | | | | | | | | | | |
| Direct constructions costs | | | -- | | | -- | | | -- | | | -- | |
| Real estate services and salaries, wages | | | | | | | | | | | | | |
and other costs | | | -- | | | -- | | | -- | | | -- | |
| General and administrative | | | 32,441 | | | 31,324 | | | 1,117 | | | 3.6 | |
| Depreciation and amortization | | | 143,593 | | | 117,097 | | | 26,496 | | | 22.6 | |
Total non-property expenses | | | 176,034 | | | 148,421 | | | 27,613 | | | 18.6 | |
| Operating Income | | | 213,624 | | | 218,004 | | | (4,380 | ) | | (2.0 | ) |
Other (expense) income: | | | | | | | | | | | | | |
| Interest expense | | | (119,337 | ) | | (109,649 | ) | | (9,688 | ) | | 8.8 | |
| Interest and other investment income | | | 856 | | | 1,367 | | | (511 | ) | | (37.4 | ) |
| Equity in earnings (loss) of unconsolidated | | | | | | | | | | | | | |
joint ventures | | | 248 | | | (3,886 | ) | | 4,134 | | | 106.4 | |
| Minority interest in consolidated joint ventures | | | (74 | ) | | -- | | | (74 | ) | | -- | |
| Gain on sale of investment in marketable | | | | | | | | | | | | | |
securities | | | -- | | | -- | | | -- | | | -- | |
| Gain on sale of investment in joint ventures | | | 35 | | | 720 | | | (685 | ) | | (95.1 | ) |
Total other (expense) income | | | (118,272 | ) | | (111,448 | ) | | (6,824 | ) | | (6.1 | ) |
| Income from continuing operations | | | 95,352 | | | 106,556 | | | (11,204 | ) | | (10.5 | ) |
| Discontinued operations: | | | | | | | | | | | | | |
Income (loss) from discontinued operations | | | 17,245 | | | 25,160 | | | (7,915 | ) | | (31.5 | ) |
Realized gains (losses) and unrealized losses | | | | | | | | | | | | | |
on disposition of rental property, net | | | 5,522 | | | (726 | ) | | 6,248 | | | 860.6 | |
| Total discontinued operations, net | | | 22,767 | | | 24,434 | | | (1,667 | ) | | (6.8 | ) |
| Net income | | | 118,119 | | | 130,990 | | | (12,871 | ) | | (9.8 | ) |
| Preferred unit distributions | | | (5,909 | ) | | (17,636 | ) | | 11,727 | | | 66.5 | |
| | | | | | | | | | | | | | |
| Net income available to common unitholders | | $ | 112,210 | | $ | 113,354 | | $ | (1,144 | ) | | (1.0 | )% |
The following is a summary of the changes in revenue from rental operations and property expenses in 2005 as compared to 2004 divided into Same-Store Properties and Acquired Properties (dollars in thousands):
| | | Total Operating Partnership | | Same-Store Properties | | Acquired Properties | |
| | | Dollar | | Percent | | Dollar | | Percent | | Dollar | | Percent | |
| | | Change | | Change | | Change | | Change | | Change | | Change | |
Revenue from rental operations: | | | | | | | | | | | | | |
| Base rents | | $ | 43,924 | | | 9.5 | % | $ | (191 | ) | | -- | | $ | 44,115 | | | 9.5 | % |
| Escalations and recoveries | | | | | | | | | | | | | | | | | | | |
| from tenants | | | 17,408 | | | 28.8 | | | 6,816 | | | 11.3 | % | | 10,592 | | | 17.5 | |
| Other income | | | 3,137 | | | 39.5 | | | 1,294 | | | 16.3 | | | 1,843 | | | 23.2 | |
| Total | | $ | 64,469 | | | 12.1 | % | $ | 7,919 | | | 1.5 | % | $ | 56,550 | | | 10.6 | % |
| | | | | | | | | | | | | | | | | | | | |
Property expenses: | | | | | | | | | | | | | | | | | | | |
| Real estate taxes | | $ | 13,216 | | | 20.6 | % | $ | 4,074 | | | 6.4 | % | $ | 9,142 | | | 14.2 | % |
| Utilities | | | 13,945 | | | 36.3 | | | 8,755 | | | 22.8 | | | 5,190 | | | 13.5 | |
| Operating services | | | 12,498 | | | 18.3 | | | 2,485 | | | 3.6 | | | 10,013 | | | 14.7 | |
| Total | | $ | 39,659 | | | 23.2 | % | $ | 15,314 | | | 9.0 | % | $ | 24,345 | | | 14.2 | % |
| | | | | | | | | | | | | | | | | | | | |
OTHER DATA: | | | | | | | | | | | | | | | | | | | |
| Number of Consolidated Properties | | | 244 | | | | | | 224 | | | | | | 20 | | | | |
| Square feet (in thousands) | | | 27,405 | | | | | | 23,163 | | | | | | 4,242 | | | | |
Base rents for the Same-Store Properties decreased $0.2 million, for 2005 as compared to 2004, due primarily to decreased rental rates for new leases in 2005 as compared to 2004. Escalations and recoveries from tenants for the Same-Store Properties increased $6.8 million, or 11.3 percent, for 2005 over 2004, due primarily to an increased amount of total property expenses in 2005. Other income for the Same-Store Properties increased $1.3 million, or 16.3 percent, due primarily to an increase in lease termination fees in 2005 as compared to 2004.
Real estate taxes on the Same-Store Properties increased $4.1 million, or 6.4 percent, for 2005 as compared to 2004, due primarily to property tax rate increases in certain municipalities in 2005, partially offset by lower assessments on certain properties in 2005. Utilities for the Same-Store Properties increased $8.8 million, or 22.8 percent, for 2005 as compared to 2004, due primarily to increased electric rates and increased usage in 2005. Operating services for the Same-Store Properties increased $2.5 million, or 3.6 percent, due primarily to increases in 2005 as compared to 2004 in snow removal costs of $2.0 million, and property management compensation and related expenses of $0.8 million.
General and administrative increased by $1.1 million, or 3.6 percent, for 2005 as compared to 2004. This was due primarily to increases in 2005 as compared to 2004 in compensation costs and related expenses of $0.9 million and state income tax expense of $0.5 million, as well as compensation costs and related expenses in 2005 of $0.6 million in connection with the resignation of a non-executive officer, and a write-down in 2005 of a technology investment of $0.5 million. These increases were partially offset by compensation costs and related expenses incurred in 2004 in connection with the resignation of the Corporation’s former president of $1.3 million.
Depreciation and amortization increased by $26.5 million, or 22.6 percent, for 2005 over 2004. Of this increase, $5.4 million, or 4.6 percent, was attributable to the Same-Store Properties primarily on account of the amortization of additional tenant installation costs in 2005 and $21.1 million, or 18.0 percent, was due to the Acquired Properties.
Interest expense increased $9.7 million, or 8.8 percent, for 2005 as compared to 2004. This increase was primarily as a result of higher average debt balances in 2005, as well as an overall increase in interest rates on the Operating Partnership’s debt.
Interest and other investment income decreased $0.5 million, or 37.4 percent, for 2005 as compared to 2004. This decrease was due primarily to lower interest income from mortgage notes receivable in 2005 and lower average cash balances in 2005.
Equity in earnings of unconsolidated joint ventures increased $4.1 million, or 106.4 percent, for 2005 as compared to 2004. This increase was due primarily to the following: an increase of $5.2 million in 2005 on account of the Ashford Loop joint venture having a loss in 2004, with no activity in 2005 due to the Operating Partnership’s sale of its interest in the venture in early 2005; an increase of $0.8 million from increased earnings in 2005 at the Harborside South Pier Hyatt Hotel Venture; and an increase of $0.6 million in 2005 on account of equity in loss in 2004 at the Ramland Realty joint venture, with no equity in earnings in 2005. These increases were partially offset by a decrease in equity in earnings of $1.9 million at the G&G Martco joint venture on account of equity in loss in 2005; and a decrease of $0.7 million in 2005 on account of equity in earnings in the HPMC joint venture in 2004, with no activity in 2005 due to the joint venture’s sale of the Pacific Plaza I & II complex in 2004.
Gain on sale of investment in unconsolidated joint ventures amounted to $35,000 in 2005 from the sale of the Operating Partnership’s interest in the Ashford Loop joint venture. Gain on sale of investment in unconsolidated joint venture amounted to $0.7 million in 2004 on account of the receipt of additional contingent purchase consideration from the Harborside North Pier sale.
Income from continuing operations decreased to $95.4 million in 2005 from $106.6 million in 2004. The decrease of approximately $11.2 million was due to the factors discussed above.
Net income available to common shareholders decreased by approximately $1.2 million, or 1.0 percent, from $113.4 million in 2004 to $112.2 million in 2005. This decrease was primarily the result of a decrease in 2005 from 2004 in income from continuing operations of $11.2 million, and a decrease in income from discontinued operations of approximately $7.9 million. These were partially offset by a decrease in preferred unit distributions of $11.7 million, realized gains on disposition of rental property of $5.5 million in 2005, and realized gains and unrealized losses on disposition of rental property of $0.7 million in 2004.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Overview:
Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service, capital expenditures and dividends, excluding non-recurring capital expenditures. To the extent that the Operating Partnership’s cash flow from operating activities is insufficient to finance its non-recurring capital expenditures such as property acquisitions, development and construction costs and other capital expenditures, the Operating Partnership has and expects to continue to finance such activities through borrowings under its revolving credit facility and other debt and equity financings.
The Operating Partnership believes that with the general downturn in the Operating Partnership’s markets in recent years, it is reasonably likely that vacancy rates may continue to increase, effective rental rates on new and renewed leases may continue to decrease and tenant installation costs, including concessions, may continue to increase in most or all of its markets in 2007. As a result of the potential negative effects on the Operating Partnership’s revenue from the overall reduced demand for office space, the Operating Partnership’s cash flow could be insufficient to cover increased tenant installation costs over the short-term. If this situation were to occur, the Operating Partnership expects that it would finance any shortfalls through borrowings under its revolving credit facility and other debt and equity financings.
The Operating Partnership expects to meet its short-term liquidity requirements generally through its working capital, net cash provided by operating activities and from its revolving credit facility. The Operating Partnership frequently examines potential property acquisitions and development projects and, at any given time, one or more of such acquisitions or development projects may be under consideration. Accordingly, the ability to fund property acquisitions and development projects is a major part of the Operating Partnership’s financing requirements. The Operating Partnership expects to meet its financing requirements through funds generated from operating activities, proceeds from property sales, long-term and short-term borrowings (including draws on the Operating Partnership’s revolving credit facility) and the issuance of additional debt and/or equity securities.
Gale Company Earn-Out:
The agreement under which the Operating Partnership acquired the Gale Company on May 9, 2006 (“Gale Agreement”), contains earn-out provisions providing for the payment of contingent purchase consideration of up to $18 million in cash based upon the achievement of Gross Income and NOI (as such terms are defined in the Gale Agreement) targets and other events for the three years following the closing date.
Construction Projects:
The Operating Partnership entered into a 15-year lease with AAA Mid-Atlantic (“AAA”) for a 120,000 square foot office building being constructed by the Operating Partnership in its Horizon Center Business Park located in Hamilton Township, New Jersey. The building is expected to be completed during the early part of 2007 at an estimated cost of approximately $19.2 million (of which the Operating Partnership has incurred $15.7 million through December 31, 2006), which is expected to be funded through borrowings on the Operating Partnership’s unsecured credit facility. Concurrent with the signing of the lease, the Operating Partnership executed a purchase and sale agreement with AAA pursuant to which the Operating Partnership, upon the commencement of the 120,000 square foot lease, will acquire AAA’s three office and office/flex buildings, totaling approximately 84,000, square feet and certain vacant, developable land, all located in Hamilton Township, New Jersey, for a total purchase price of approximately $10 million, subject to certain conditions.
Additionally, the Operating Partnership, through a joint venture with the PRC Group, is constructing a 92,878 square-foot office property, to be known as Red Bank Corporate Plaza, located in Red Bank, New Jersey, on land contributed by its joint venture partner. The project is fully leased to Hovnanian Enterprise, Inc. for a 10-year term. The total cost of the project, which is expected to be completed in the third quarter 2007, is estimated to be approximately $27 million, of which the Operating Partnership currently expects to fund approximately $3 million. On October 20, 2006, the venture entered into a $22.0 million construction loan with a commercial bank. The loan carries an interest rate of LIBOR plus 130 basis points and matures in April 2008. The loan currently has three one-year extension options subject to certain conditions, each of which require payment of a fee.
The Operating Partnership owns a 15 percent indirect interest in a joint venture which plans to develop a 1.2 million square foot mixed-use project in downtown Boston consisting of office and retail space, condominium apartments, a hotel and garage. The development project, which is subject to government approval, is currently projected to cost approximately $630 million, of which the Operating Partnership is currently projected to invest a total of approximately $20.3 million (of which the Operating Partnership has invested $14.8 million through February 16, 2007).
REIT Restrictions:
To maintain its qualification as a REIT, the Corporation must make annual distributions to its stockholders of at least 90 percent of its REIT taxable income, determined without regard to the dividends paid deduction and by excluding net capital gains. Moreover, the Operating Partnership intends to continue to make regular quarterly distributions to its common unitholders which, based upon current policy, in the aggregate would equal approximately $173.5 million on an annualized basis. However, any such distribution, whether for federal income tax purposes or otherwise, would only be paid out of available cash, including borrowings and other sources, after meeting operating requirements, preferred stock and unit dividends and distributions, and scheduled debt service on the Operating Partnership’s debt.
Property Lock-Ups:
The Operating Partnership may not dispose of or distribute certain of its properties, currently comprising 50 properties with an aggregate net book value of approximately $1.3 billion, which were originally contributed by members of either the Mack Group (which includes William L. Mack, Chairman of the Corporation’s Board of Directors; David S. Mack, a director of the Corporation; Earle I. Mack, a former director of the Corporation; and Mitchell E. Hersh, president, chief executive officer and a director of the Corporation), the Robert Martin Group (which includes Robert F. Weinberg, a director of the Corporation; Martin S. Berger, a former director of the Corporation; and Timothy M. Jones, former president of the Corporation), the Cali Group (which includes John R. Cali, a director of the Corporation, and John J. Cali, a former director of the Corporation) or certain other common unitholders, without the express written consent of a representative of the Mack Group, the Robert Martin Group, the Cali Group or the specific certain other common unitholders, as applicable, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate Mack Group, Robert Martin Group, Cali Group members or the specific certain other common unitholders for the tax consequences of the recognition of such built-in-gains (collectively, the “Property Lock-Ups”). The aforementioned restrictions do not apply in the event that the Operating Partnership sells all of its properties or in connection with a sale transaction which the Corporation’s Board of Directors determines is reasonably necessary to satisfy a material monetary default on any unsecured debt, judgment or liability of the Operating Partnership or Corporation or to cure any material monetary default on any mortgage secured by a property. The Property Lock-Ups expire periodically through 2016. Upon the expiration of the Property Lock-Ups, the Operating Partnership generally is required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the appropriate Mack Group, Robert Martin Group, Cali Group members or the specific certain other common unitholders. 88 of our properties, with an aggregate net book value of approximately $809.0 million, have lapsed restrictions and are subject to these conditions.
Unencumbered Properties:
As of December 31, 2006, the Operating Partnership had 236 unencumbered properties, totaling 24.8 million square feet, representing 85.8 percent of the Operating Partnership’s total portfolio on a square footage basis.
Credit Ratings:
The Operating Partnership has three investment grade credit ratings. Standard & Poor’s Rating Services (“S&P”) and Fitch, Inc. (“Fitch”) have each assigned their BBB rating to existing and prospective senior unsecured debt of the Operating Partnership. S&P and Fitch have also assigned their BBB- rating to existing and prospective preferred stock offerings of the Corporation. Moody’s Investors Service (“Moody’s”) has assigned its Baa2 rating to existing and prospective senior unsecured debt of the Operating Partnership and its Baa3 rating to its existing and prospective preferred stock offerings of the Corporation.
Cash Flows
Cash and cash equivalents increased by $40.8 million to $101.2 million at December 31, 2006, compared to $60.4 million at December 31, 2005. This increase is comprised of the following net cash flow items:
| 1) | $235.9 million provided by operating activities. |
| 2) | $74.2 million provided by investing activities, consisting primarily of the following: |
| (a) | $217.8 million used for additions to rental property; minus |
| (b) | $163.4 million used for investments in unconsolidated joint ventures; minus |
| (c) | $11.9 million used for the purchase of marketable securities; plus |
| (d) | $338.5 million received from proceeds from sale of rental properties; plus |
| (e) | $78.6 million received from proceeds from the sale of marketable securities; plus |
| (f) | $16.3 million received from proceeds from the sale of investment in unconsolidated joint ventures; plus |
| (g) | $40 million received from distributions from investments in unconsolidated joint ventures. |
| | 3) | $269.3 million used in financing activities, consisting primarily of the following: |
| (a) | $983 million from borrowings under the revolving credit facility; minus |
| (b) | $200 million from proceeds from the sale of senior unsecured notes; minus |
| (c) | $10.4 million from proceeds received from stock options and warrants exercised; plus |
| (d) | $1.1 billion used for repayments of borrowings under the Operating Partnership’s unsecured credit facility; plus |
| (e) | $197 million used for payments of distributions; plus |
| (f) | $160.6 million used for repayments of mortgages, loans payable and other obligations. |
Debt Financing
Summary of Debt:
The following is a breakdown of the Operating Partnership’s debt between fixed and variable-rate financing as of December 31, 2006:
| | Balance | | Weighted Average | Weighted Average Maturity |
| | ($000’s) | % of Total | Interest Rate (a) | in Years |
| Fixed Rate Unsecured Debt | $1,670,225 | 77.33% | 6.28% | 5.29 |
| Fixed Rate Secured Debt and | | | | |
| Other Obligations | 344,734 | 15.96% | 5.43% | 5.11 |
| Variable Rate Unsecured Debt | 145,000 | 6.71% | 5.76% | 2.90 |
| | | | | |
Totals/Weighted Average: | $2,159,959 | 100.00% | 6.11% | 5.10 |
Debt Maturities:
Scheduled principal payments and related weighted average annual interest rates for the Operating Partnership’s debt as of December 31, 2006 are as follows:
| | | Scheduled | | Principal | | | | Weighted Avg. | |
| | | Amortization | | Maturities | | Total | | Interest Rate of | |
Period | | ($000’s) | | ($000’s) | | ($000’s) | | Future Repayments (a) | |
| 2007 | | $ | 19,126 | | $ | 15,152 | | $ | 34,278 | | | 5.67 | % |
| 2008 | | | 17,971 | | | 12,563 | | | 30,534 | | | 5.25 | % |
| 2009 | | | 10,100 | | | 445,000 | | | 455,100 | | | 6.89 | % |
| 2010 | | | 2,795 | | | 334,500 | | | 337,295 | | | 5.26 | % |
| 2011 | | | 3,580 | | | 300,000 | | | 303,580 | | | 7.91 | % |
| Thereafter | | | 11,685 | | | 993,091 | | | 1,004,776 | | | 5.57 | % |
| Sub-total | | | 65,257 | | | 2,100,306 | | | 2,165,563 | | | 6.11 | % |
| Adjustment for unamortized debt | | | | | | | | | | | | | |
| discount/premium, net, as of | | | | | | | | | | | | | |
| December 31, 2006 | | | (5,604 | ) | | -- | | | (5,604 | ) | | -- | |
| | | | | | | | | | | | | | |
| Totals/Weighted Average | | $ | 59,653 | | $ | 2,100,306 | | $ | 2,159,959 | | | 6.11 | % |
| | | | | | | | | | | | | | |
(a) Actual weighted average LIBOR contract rates relating to the Operating Partnership’s outstanding debt as of December 31, 2006 of 5.35 percent was used in calculating revolving credit facility. |
Senior Unsecured Notes:
On January 24, 2006, the Operating Partnership issued $100 million face amount of 5.80 percent senior unsecured notes due January 15, 2016 with interest payable semi-annually in arrears, and $100 million face amount of 5.25 percent senior unsecured notes due January 15, 2012 with interest payable semi-annually in arrears. The Operating Partnership’s total proceeds from the issuances, including accrued interest on the 5.80 percent notes of approximately $200.8 million, were used to reduce outstanding borrowings under the total unsecured facility.
The terms of the Operating Partnership’s senior unsecured notes (which totaled approximately $1.6 billion as of December 31, 2006) include certain restrictions and covenants which require compliance with financial ratios relating to the maximum amount of debt leverage, the maximum amount of secured indebtedness, the minimum amount of debt service coverage and the maximum amount of unsecured debt as a percent of unsecured assets.
Unsecured Revolving Credit Facility:
The Operating Partnership has an unsecured revolving credit facility with a borrowing capacity of $600 million (expandable to $800 million). The interest rate on outstanding borrowings (not electing the Operating Partnership’s competitive bid feature) under the unsecured facility is currently LIBOR plus 65 basis points. The facility has a competitive bid feature, which allows the Operating Partnership to solicit bids from lenders under the facility to borrow up to $300 million at interest
rates less than the current LIBOR plus 65 basis point spread. As of December 31, 2006, the Operating Partnership’s outstanding borrowings carried a weighted average interest rate of LIBOR plus 41 basis points. The Operating Partnership may also elect an interest rate representing the higher of the lender’s prime rate or the Federal Funds rate plus 50 basis points. The unsecured facility, which also requires a 15 basis point facility fee on the current borrowing capacity payable quarterly in arrears, is scheduled to mature in November 2009 and has an extension option of one year, which would require a payment of 25 basis points of the then borrowing capacity of the facility upon exercise.
The interest rate and the facility fee are subject to adjustment, on a sliding scale, based upon the operating partnership’s unsecured debt ratings. In the event of a change in the Operating Partnership’s unsecured debt rating, the interest and facility fee rates will be adjusted in accordance with the following table:
Operating Partnership’s | Interest Rate - | |
Unsecured Debt Ratings: | Applicable Basis Points | Facility Fee |
S&P Moody’s/Fitch (a) | Above LIBOR | Basis Points |
| No ratings or less than BBB-/Baa3/BBB- | 112.5 | 25.0 |
| BBB-/Baa3/BBB- | 80.0 | 20.0 |
| BBB/Baa2/BBB (current) | 65.0 | 15.0 |
| BBB+/Baa1/BBB+ | 55.0 | 15.0 |
| A-/A3/A- or higher | 50.0 | 15.0 |
| | | |
(a) If the Operating Partnership has debt ratings from two rating agencies, one of which is Standard & Poor’s Rating Services (“S&P”) or Moody’s Investors Service (“Moody’s”), the rates per the above table shall be based on the lower of such ratings. If the Operating Partnership has debt ratings from three rating agencies, one of which is S&P or Moody’s, the rates per the above table shall be based on the lower of the two highest ratings. If the Operating Partnership has debt ratings from only one agency, it will be considered to have no rating or less than BBB-/Baa3/BBB- per the above table. |
The terms of the unsecured facility include certain restrictions and covenants which limit, among other things, the payment of dividends (as discussed below), the incurrence of additional indebtedness, the incurrence of liens and the disposition of real estate properties (to the extent that: (i) such property dispositions cause the Operating Partnership to default on any of the financial ratios of the facility described below, or (ii) the property dispositions are completed while the Operating Partnership is under an event of default under the facility, unless, under certain circumstances, such disposition is being carried out to cure such default), and which require compliance with financial ratios relating to the maximum leverage ratio, the maximum amount of secured indebtedness, the minimum amount of tangible net worth, the minimum amount of fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property interest coverage and certain investment limitations. The dividend restriction referred to above provides that, except to enable the Corporation to continue to qualify as a REIT under the Code, the Corporation will not during any four consecutive fiscal quarters make distributions with respect to common stock or other common equity interests in an aggregate amount in excess of 90 percent of funds from operations (as defined in the facility agreement) for such period, subject to certain other adjustments.
The lending group for the unsecured facility consists of: JPMorgan Chase Bank, N.A., as administrative agent; Bank of America, N. A., as syndication agent; The Bank of Nova Scotia, New York Agency; Wachovia Bank, National Association; and Wells Fargo Bank, National Association, as documentation agents; SunTrust Bank, as senior managing agent; US Bank National Association; Citicorp North America, Inc.; and PNC Bank National Association, as managing agents; and Bank of China, New York Branch; The Bank of New York; Chevy Chase Bank, F.S.B.; The Royal Bank of Scotland, plc; Mizuho Corporate Bank, Ltd.; UFJ Bank Limited, New York Branch; The Governor and Company of the Bank of Ireland; Bank Hapoalim B.M.; Comerica Bank; Chang Hwa Commercial Bank, Ltd., New York Branch; First Commercial Bank, New York Agency; Chiao Tung Bank Co., Ltd., New York Agency; Deutsche Bank Trust Company Americas; and Hua Nan Commercial Bank, New York Agency.
Mortgages, Loans Payable and Other Obligations:
The Operating Partnership has mortgages, loans payable and other obligations which consist principally of various loans collateralized by certain of the Operating Partnership’s rental properties. Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only.
Debt Strategy:
The Operating Partnership does not intend to reserve funds to retire the Operating Partnership’s senior unsecured notes or its mortgages, loans payable and other obligations upon maturity. Instead, the Operating Partnership will seek to refinance such debt at maturity or retire such debt through the issuance of additional equity or debt securities on or before the applicable maturity dates. If it cannot raise sufficient proceeds to retire the maturing debt, the Operating Partnership may draw on its revolving credit facility to retire the maturing indebtedness, which would reduce the future availability of funds under such facility. As of February 16, 2007, the Operating Partnership had $75.0 million of outstanding borrowings under its $600 million unsecured revolving credit facility. The Operating Partnership is reviewing various refinancing options, including the purchase of its senior unsecured notes in privately-negotiated transactions, the issuance of additional, or exchange of current, unsecured debt, preferred stock, and/or obtaining additional mortgage debt, some or all of which may be completed during 2007. The Operating Partnership anticipates that its available cash and cash equivalents and cash flows from operating activities, together with cash available from borrowings and other sources, will be adequate to meet the Operating Partnership’s capital and liquidity needs both in the short and long-term. However, if these sources of funds are insufficient or unavailable, the Operating Partnership’s ability to make the expected distributions discussed below may be adversely affected.
Equity Financing and Registration Statements
Equity Activity:
The following table presents the changes in the Corporation’s issued and outstanding shares of Common Stock and the Operating Partnership’s common units since December 31, 2005:
| | Common | Common | |
| | Stock | Units | Total |
| Outstanding at December 31, 2005 | 62,019,646 | 13,650,439 | 75,670,085 |
| Stock options exercised | 352,699 | -- | 352,699 |
| Common units redeemed for Common Stock | 475,208 | (475,208) | -- |
| Common units redeemed for cash | -- | (1) | (1) |
| Common units issued | -- | 2,167,053 | 2,167,053 |
| Shares issued under Dividend Reinvestment | | | |
| and Stock Purchase Plan | 5,154 | -- | 5,154 |
| Restricted shares issued, net of cancellations | 72,484 | -- | 72,484 |
| | | | |
| Outstanding at December 31, 2006 | 62,925,191 | 15,342,283 | 78,267,474 |
| | | | |
On February 7, 2007, the Corporation completed an underwritten offer and sale of 4,650,000 shares of its common stock and used the net proceeds, which totaled approximately $252 million (after offering costs), primarily to pay down the outstanding borrowings under the Operating Partnership’s revolving credit facility and for general corporate purposes. Concurrent with this transaction, the Corporation purchased from the Operating Partnership 4,650,000 of its outstanding common units for approximately $252 million.
Share Repurchase Program:
The Corporation has authorization to repurchase up to $45.5 million of its outstanding common stock, which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions.
Shelf Registration Statements:
The Corporation has an effective shelf registration statement on Form S-3 filed with the Securities and Exchange Commission (“SEC”) for an aggregate amount of $2.0 billion in common stock, preferred stock, depositary shares, and/or warrants of the Corporation, under which $260.1 million of securities have been sold through February 16, 2007 and $1.7 billion remains available for future issuances.
The Corporation and the Operating Partnership also have an effective shelf registration statement on Form S-3 filed with the SEC for an aggregate amount of $2.5 billion in common stock, preferred stock, depositary shares and guarantees of the Corporation and debt securities of the Operating Partnership, under which $600 million of securities have been sold through February 16, 2007 and $1.9 billion remains available for future issuances.
Off-Balance Sheet Arrangements
Unconsolidated Joint Venture Debt:
The debt of the Operating Partnership’s unconsolidated joint ventures aggregating $571.7 million, at December 31, 2006, is non-recourse to the Operating Partnership except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions and material misrepresentations. The Operating Partnership has posted a $7.3 million letter of credit in support of the Harborside South Pier joint venture, $3.6 million of which is indemnified by Hyatt.
The Operating Partnership’s off-balance sheet arrangements are further discussed in Note 4 to our financial statements filed with this annual report on Form 10-K: Investments in Unconsolidated Joint Ventures to the Financial Statements.
Contractual Obligations
The following table outlines the timing of payment requirements related to the Operating Partnership’s debt (principal and interest), PILOT agreements, and ground lease agreements as of December 31, 2006 (dollars in thousands):
| | Payments Due by Period |
| | | Less than 1 | 1 - 3 | 4 - 5 | 6 - 10 | After 10 |
| | Total | year | years | years | years | years |
| Senior unsecured notes | $2,197,175 | $100,494 | $490,114 | $598,326 | $1,008,241 | -- |
| Revolving credit facility (1) | 169,369 | 8,355 | 161,014 | -- | -- | -- |
| Mortgages, loans payable | | | | | | |
| and other obligations | 472,847 | 52,057 | 72,262 | 190,734 | 127,280 | $30,514 |
| Payments in lieu of taxes (PILOT) | 70,102 | 4,193 | 12,680 | 8,587 | 23,229 | 21,413 |
| Operating lease payments | 499 | 412 | 87 | -- | -- | -- |
| Ground lease payments | 37,950 | 508 | 1,488 | 1,002 | 2,525 | 32,427 |
| Total | $2,947,942 | $166,019 | $737,645 | $798,649 | $1,161,275 | $84,354 |
| | | | | | | |
(1) Interest payments assume current revolving credit facility borrowings and interest rates remain at the December 31, 2006 level until maturity. |
Other Commitments and Contingencies
Legal Proceedings:
On February 12, 2003, the NJSEA selected The Mills Corporation and the Operating Partnership to redevelop the Continental Airlines Arena site (“Arena Site”) for mixed uses, including retail. In March 2003, Hartz Mountain Industries, Inc., (“Hartz”), filed a lawsuit in the Superior Court of New Jersey, Law Division, for Bergen County, seeking to enjoin NJSEA from entering into a contract with the Meadowlands Venture for the redevelopment of the Continental Airlines Arena site. In May 2003, the court denied Hartz’s request for an injunction and dismissed its suit for failure to exhaust administrative remedies. In June 2003, the NJSEA held hearings on Hartz’s protest, and on a parallel protest filed by another rejected developer, Westfield, Inc. (“Westfield”). On September 10, 2003, the NJSEA ruled against Hartz’s and Westfield’s protests. Hartz and Westfield, as well as Elliot Braha and three other taxpayers (collectively “Braha”), thereafter filed appeals from the NJSEA’s final decision. By decision dated May 14, 2004, the Appellate Division of the Superior Court of New Jersey rejected the appellants’ contention that the NJSEA lacks statutory authority to allow retail development of its property. The Appellate Division also remanded Hart’s claim under the Open Public Records Acts, seeking disclosure of additional documents from NJSEA, to the Law Division for further proceedings. The Supreme Court of New Jersey
declined to review the Appellate Division’s decision. On August 19, 2004, the Law Division issued a decision resolving Hartz’s Open Public Records Act claim and ordered NJSEA to disclose some, but not all, of the documents Hartz was seeking. The Appellate Division, in a decision rendered on November 24, 2004, upheld the findings of the Law Division in the remand proceeding. The Supreme Court of New Jersey declined to review the Appellate Division’s decision. At Hartz’s request, the NJSEA thereafter held further hearings on December 15 and 16, 2004, to review certain additional facts in support of Hartz’s and Westfield’s bid protest. Braha, as a taxpayer, did not have standing to participate in the supplemental protest hearing. On March 4, 2005, the Hearing Officer rendered his Supplemental Report and Recommendation to the NJSEA, finding no merit in the protests presented by Hartz and Westfield. The NJSEA accepted the Hearing Officer’s Supplemental Report and Recommendation on March 30, 2005 and Hartz and Braha have appealed that decision to the Appellate Division.
In January 2004, Hartz and Westfield also appealed to the Appellate Division of the Superior Court of New Jersey from the NJSEA’s December 2003 approval and execution of the Redevelopment Agreement with the Meadowlands Venture.
In November 2004, Hartz and Westfield filed additional appeals in the Appellate Division challenging NJSEA’s resolution authorizing the execution of the First Amendment to the Redevelopment Agreement with Meadowlands Venture and the ground lease with the Meadowlands Venture.
All of the above appeals were consolidated by the Appellate Division. On August 17, 2006, the Appellate Division issued an opinion affirming NJSEA’s selection of the Meadowlands Venture and rejecting the appellants’ arguments in all respects. On August 28, 2006, Hartz made a motion before the Appellate Division for reconsideration of this decision and for supplementation of the record. That motion was denied, and neither Hartz nor Braha has sought review in the New Jersey Supreme Court. These consolidated appeals are now resolved.
On September 30, 2004, the Borough of Carlstadt filed an action in the Superior Court of New Jersey Law Division, challenging Meadowlands Xanadu, which asserted claims that are substantially the same as claims asserted by Hartz and Braha in the above appeals. By Order dated November 19, 2004, the Law Division transferred that matter to the Superior Court of New Jersey, Appellate Division. This matter was voluntarily dismissed by Carlstadt in accordance with a March 22, 2006, Settlement Agreement and Release between Carlstadt and the Meadowlands Venture.
Several appeals filed by Hartz, the Sierra Club and others, including certain environmental groups, that challenge certain approvals received by the Meadowlands Venture from the NJSEA, the New Jersey Meadowlands Commission (“NJMC”) and the New Jersey Department of Environmental Protection (“NJDEP”) remain pending before the Appellate Division. Some of these appeals challenge NJDEP’s issuance of a stream encroachment permit, waterfront development permit, and coastal zone consistency determination for Meadowlands Xanadu. Other of these appeals are from NJDEP’s and NJMC’s issuance of reports in connection with a consultation process the NJSEA was statutorily required to undertake in connection with any NJSEA-development project.
A Hartz affiliate and a trade association have filed an appeal from an advisory opinion favorable to the Meadowlands Venture issued by the Director of the Division of Alcoholic Beverage Control concerning the availability of special concessionaire permits. That appeal is also pending in the Appellate Division of the Superior Court of New Jersey.
Three separate lawsuits have been filed in the United States District Court for the District of New Jersey, challenging a permit issued by the U.S. Army Corps of Engineers (“USACE”) in connection with the project. The first suit was filed on March 30, 2005, by the Sierra Club, the New Jersey Public Interest Research Group, Citizen Lobby, Inc. and the New Jersey Environmental Federation. Additional suits were filed on May 16 and May 31, 2005, respectively, by Hartz (together with one of its officers as an individually-named plaintiff) and the Borough of Carlstadt. The Sierra Club also filed a motion for a preliminary injunction to stop certain construction activities on the project, which the Court denied on July 6, 2005. On October 26, 2005, the court granted the motions of the Meadowlands Venture and the USACE to dismiss the Hartz complaint for lack of standing. The deadline for appealing that decision has passed, so the Hartz action is ended. On October 31, 2005, the USACE filed a motion to dismiss the complaint filed by the Borough of Carlstadt for lack of standing. On February 7, 2006, the Court granted the motion and dismissed the Borough of Carlstadt’s complaint in its entirety. On March 9, 2006, Carlstadt filed a notice of appeal of this decision to the United States Court of Appeals for the Third Circuit. This appeal has been dismissed pursuant to the Settlement Agreement and Release executed by Carlstadt and the Meadowlands Venture.
On April 5, 2005, the New York Football Giants (“Giants”) filed an emergent application with the Supreme Court of New Jersey, Chancery Division, seeking an injunction stopping all work on the Meadowlands Xanadu project as being in violation of its existing lease with the NJSEA. After hearing oral argument on the application on August 5, 2005, the court denied the Giants’ motion for preliminary injunctive relief. On June 22, 2006, the court entered a Stipulation and Consent Order that dismissed without prejudice the parties’ respective claims.
The New Jersey Builders’ Association (“NJBA”) has commenced an action, which is pending in the Appellate Division, alleging that the NJSEA has failed to meet a purported obligation to provide affordable housing at the Meadowlands Complex and seeking, among other relief, an order enjoining the construction of Meadowlands Xanadu. NJBA filed an application for preliminary injunctive relief seeking to enjoin further construction of Meadowlands Xanadu, which the Appellate Division denied on July 28, 2005. The Meadowlands Venture is not a party to that action.
On January 25, 2006, the Bergen Cliff Hawks Baseball Club, LLC (the “Cliff Hawks”), filed a complaint against the Operating Partnership and Mills, alleging that the Operating Partnership and Mills breached an agreement to provide the Cliff Hawks with a minor league baseball park as part of the Xanadu Project. This matter is pending.
The Operating Partnership believes that the Meadowlands Venture’s proposal and the planned project comply with applicable laws, and the Meadowlands Venture intends to continue its vigorous defense of its rights under the Redevelopment Agreement and Ground Lease. Although there can be no assurance, the Operating Partnership does not believe that the pending lawsuits will have any material affect on its ability to develop the Meadowlands Xanadu project.
There are no other material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which the Operating Partnership is a party or to which any of the Properties is subject.
Inflation
The Operating Partnership’s leases with the majority of its tenants provide for recoveries and escalation charges based upon the tenant’s proportionate share of, and/or increases in, real estate taxes and certain operating costs, which reduce the Operating Partnership’s exposure to increases in operating costs resulting from inflation.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
We consider portions of this information, including the documents incorporated by reference, to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of such act. Such forward-looking statements relate to, without limitation, our future economic performance, plans and objectives for future operations and projections of revenue and other financial items. Forward-looking statements can be identified by the use of words such as “may,” “will,” “plan,” “should,” “expect,” “anticipate,” “estimate,” “continue” or comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.
Among the factors about which we have made assumptions are:
| · | changes in the general economic climate and conditions, including those affecting industries in which our principal tenants operate; |
| · | the extent of any tenant bankruptcies or of any early lease terminations; |
| · | our ability to lease or re-lease space at current or anticipated rents; |
| · | changes in the supply of and demand for office, office/flex and industrial/warehouse properties; |
| · | changes in interest rate levels; |
| · | changes in operating costs; |
| · | our ability to obtain adequate insurance, including coverage for terrorist acts; |
| · | the availability of financing; |
| · | changes in governmental regulation, tax rates and similar matters; and |
| · | other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated. |
For further information on factors which could impact us and the statements contained herein, see Item 1A: Risk Factors. We assume no obligation to update and supplement forward-looking statements that become untrue because of subsequent events.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. In pursuing its business plan, the primary market risk to which the Operating Partnership is exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Operating Partnership’s yield on invested assets and cost of funds and, in turn, its ability to make distributions or payments to its investors.
Approximately $2.0 billion of the Operating Partnership’s long-term debt bears interest at fixed rates and therefore the fair value of these instruments is affected by changes in market interest rates. The following table presents principal cash flows (in thousands) based upon maturity dates of the debt obligations and the related weighted-average interest rates by expected maturity dates for the fixed rate debt. The average interest rate on the variable rate debt as of December 31, 2006 was LIBOR plus 41 basis points.
December 31, 2006 | | | | | | | | |
Debt, | | | | | | | | |
including current portion ($’s in thousands) | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total | Fair Value |
| | | | | | | | | |
| Fixed Rate | $ 32,967 | $29,377 | $309,246 | $336,398 | $302,766 | $1,004,205 | $2,014,959 | $2,033,913 |
| Average Interest Rate | 5.67% | 5.25% | 7.41% | 5.26% | 7.91% | 5.57% | 6.14% | |
| | | | | | | | | |
| Variable Rate | | | $145,000 | | | | $ 145,000 | $ 145,000 |
While the Operating Partnership has not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in losses to the Operating Partnership which could adversely affect its operating results and liquidity.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is contained in the Consolidated Financial Statements, together with the notes to the Consolidated Financial Statements and the report of independent registered public accounting firm.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures. The Operating Partnership’s management, with the participation of the Corporation’s chief executive officer and chief financial officer, has evaluated the effectiveness of the Operating Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Corporation's chief executive officer and chief financial officer have concluded that, as of the end of such period, the Operating Partnership's disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Operating Partnership in the reports that it files or submits under the Exchange Act.
Management’s Report on Internal Control Over Financial Reporting. Internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is a process designed by, or under the supervision of, the Corporation’s chief executive officer and chief financial officer, or persons performing similar functions, and effected by the Corporation’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Operating Partnership’s management, with the participation of the Corporation’s chief executive officer and chief financial officer, has established and maintained policies and procedures designed to maintain the adequacy of the Operating Partnership’s internal control over financial reporting, and includes those policies and procedures that:
| | (1) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Operating Partnership; |
| | (2) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Operating Partnership are being made only in accordance with authorizations of management and directors of the Operating Partnership; and |
| | (3) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Operating Partnership’s assets that could have a material effect on the financial statements. |
The Operating Partnership’s management has evaluated the effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2006 based on the criteria established in a report entitled Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria, the Operating Partnership’s management has concluded that the Operating Partnership’s internal control over financial reporting was effective as of December 31, 2006.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
Management’s assessment of the effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes In Internal Control Over Financial Reporting. There have not been any changes in the Operating Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Operating Partnership's internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not Applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 will be set forth in the Corporation’s definitive proxy statement for its annual meeting of shareholders expected to be held on May 23, 2007, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 will be set forth in the Corporation’s definitive proxy statement for its annual meeting of shareholders expected to be held on May 23, 2007, and is incorporated herein by reference.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The information required by Item 12 will be set forth in the Corporation’s definitive proxy statement for its annual meeting of shareholders expected to be held on May 23, 2007, and is incorporated herein by reference.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The information required by Item 13 will be set forth in the Corporation’s definitive proxy statement for its annual meeting of shareholders expected to be held on May 23, 2007, and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 will be set forth in the Corporation’s definitive proxy statement for its annual meeting of shareholders expected to be held on May 23, 2007, and is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. | Financial Statements and Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm |
Consolidated Balance Sheets as of December 31, 2006 and 2005
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004
Consolidated Statements of Changes in Partners’ Capital for the Years Ended December 31, 2006, 2005 and 2004
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
Schedule III - Real Estate Investments and Accumulated Depreciation as of December 31, 2006
All other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto.
(a) 3. Exhibits
The exhibits required by this item are set forth on the Exhibit Index attached hereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of Mack-Cali Realty, L.P.:
We have completed integrated audits of Mack-Cali Realty, L.P.’s consolidated financial statements and of its internal control over financial reporting as of December 31, 2006, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement schedule
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Mack-Cali Realty, L.P. and its subsidiaries (collectively, the “Operating Partnership”) at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Operating Partnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Operating Partnership maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Operating Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Operating Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Operating Partnership’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 21, 2007
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands, except per unit amounts)
| | | December 31, | |
ASSETS | | 2006 | | 2005 | |
| Rental property | | | | | |
| Land and leasehold interests | | $ | 659,169 | | $ | 637,653 | |
| Buildings and improvements | | | 3,549,699 | | | 3,539,003 | |
| Tenant improvements | | | 356,495 | | | 307,664 | |
| Furniture, fixtures and equipment | | | 8,224 | | | 7,432 | |
| | | | 4,573,587 | | | 4,491,752 | |
| Less - accumulated depreciation and amortization | | | (796,793 | ) | | (722,980 | ) |
Net investment in rental property | | | 3,776,794 | | | 3,768,772 | |
| Cash and cash equivalents | | | 101,223 | | | 60,397 | |
| Marketable securities available for sale at fair value | | | -- | | | 50,847 | |
| Investments in unconsolidated joint ventures | | | 160,301 | | | 62,138 | |
| Unbilled rents receivable, net | | | 100,847 | | | 92,692 | |
| Deferred charges and other assets, net | | | 240,637 | | | 197,634 | |
| Restricted cash | | | 15,448 | | | 9,221 | |
| Accounts receivable, net of allowance for doubtful accounts | | | | | | | |
| of $1,260 and $1,088 | | | 27,639 | | | 5,801 | |
| | | | | | | | |
| Total assets | | $ | 4,422,889 | | $ | 4,247,502 | |
| | | | | | | | |
LIABILITIES AND PARTNERS’ CAPITAL | | | | | | | |
| Senior unsecured notes | | $ | 1,631,482 | | $ | 1,430,509 | |
| Revolving credit facilities | | | 145,000 | | | 227,000 | |
| Mortgages, loans payable and other obligations | | | 383,477 | | | 468,672 | |
| Distributions payable | | | 50,591 | | | 48,178 | |
| Accounts payable, accrued expenses and other liabilities | | | 122,134 | | | 85,481 | |
| Rents received in advance and security deposits | | | 45,972 | | | 47,685 | |
| Accrued interest payable | | | 34,106 | | | 27,871 | |
| Total liabilities | | | 2,412,762 | | | 2,335,396 | |
| | | | | | | | |
| Minority interest in consolidated joint ventures | | | 2,117 | | | -- | |
| | | | | | | | |
| Commitments and contingencies | | | | | | | |
| | | | | | | | |
Partners’ capital: | | | | | | | |
| General Partner, 10,000 and 10,000 preferred units outstanding | | | 24,836 | | | 24,836 | |
| General Partner, 62,925,191 and 62,019,646 common units outstanding | | | 1,503,071 | | | 1,487,241 | |
| Limited partners, 15,342,283 and 13,650,439 common units outstanding | | | 480,103 | | | 400,819 | |
| Accumulated other comprehensive loss | | | -- | | | (790 | ) |
| Total partners’ capital | | | 2,008,010 | | | 1,912,106 | |
| | | | | | | | |
| Total liabilities and partners’ capital | | $ | 4,422,889 | | $ | 4,247,502 | |
| | | | | | | | |
| | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. |
MACK-CALI REALTY, L.P. SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit amounts)
| | | Year Ended December 31, | |
REVENUES | | 2006 | | 2005 | | 2004 | |
| Base rents | | $ | 544,870 | | $ | 508,227 | | $ | 464,303 | |
| Escalations and recoveries from tenants | | | 91,044 | | | 77,900 | | | 60,492 | |
| Construction services | | | 56,225 | | | -- | | | -- | |
| Real estate services | | | 31,045 | | | 2,917 | | | 4,494 | |
| Other income | | | 17,125 | | | 11,087 | | | 7,950 | |
| Total revenues | | | 740,309 | | | 600,131 | | | 537,239 | |
| | | | | | | | | | | |
EXPENSES | | | | | | | | | | |
| Real estate taxes | | | 86,612 | | | 77,252 | | | 64,036 | |
| Utilities | | | 60,487 | | | 52,401 | | | 38,456 | |
| Operating services | | | 91,013 | | | 80,820 | | | 68,322 | |
| Direct construction costs | | | 53,602 | | | -- | | | -- | |
| Real estate services salaries, wages and other costs | | | 18,600 | | | -- | | | -- | |
| General and administrative | | | 49,077 | | | 32,441 | | | 31,324 | |
| Depreciation and amortization | | | 160,859 | | | 143,593 | | | 117,097 | |
| Total expenses | | | 520,250 | | | 386,507 | | | 319,235 | |
| Operating Income | | | 220,059 | | | 213,624 | | | 218,004 | |
| | | | | | | | | | | |
OTHER (EXPENSE) INCOME | | | | | | | | | | |
| Interest expense | | | (136,357 | ) | | (119,337 | ) | | (109,649 | ) |
| Interest and other investment income | | | 3,054 | | | 856 | | | 1,367 | |
| Equity in earnings (loss) of unconsolidated joint ventures | | | (5,556 | ) | | 248 | | | (3,886 | ) |
| Minority interest in consolidated joint ventures | | | 218 | | | (74 | ) | | -- | |
| Gain on sale of investment in marketable securities | | | 15,060 | | | -- | | | | |
| Gain on sale of investment in unconsolidated joint ventures | | | 10,831 | | | 35 | | | 720 | |
| Gain/(loss) on sale of land and other assets | | | (416 | ) | | -- | | | -- | |
| Total other (expense) income | | | (113,166 | ) | | (118,272 | ) | | (111,448 | ) |
| Income from continuing operations | | | 106,893 | | | 95,352 | | | 106,556 | |
| Discontinued operations: | | | | | | | | | | |
| Income from discontinued operations | | | 13,194 | | | 17,245 | | | 25,160 | |
| Realized gains (losses) and unrealized losses | | | | | | | | | | |
| on disposition of rental property, net | | | 59,605 | | | 5,522 | | | (726 | ) |
| Total discontinued operations, net | | | 72,799 | | | 22,767 | | | 24,434 | |
| Net income | | | 179,692 | | | 118,119 | | | 130,990 | |
| Preferred unit distributions | | | (2,000 | ) | | (5,909 | ) | | (17,636 | ) |
| Net income available to common unitholders | | $ | 177,692 | | $ | 112,210 | | $ | 113,354 | |
| | | | | | | | | | | |
Basic earnings per common unit: | | | | | | | | | | |
| Income from continuing operations | | $ | 1.35 | | $ | 1.21 | | $ | 1.30 | |
| Discontinued operations | | | 0.94 | | | 0.31 | | | 0.36 | |
| Net income available to common unitholders | | $ | 2.29 | | $ | 1.52 | | $ | 1.66 | |
| | | | | | | | | | | |
Diluted earnings per common unit: | | | | | | | | | | |
| Income from continuing operations | | $ | 1.35 | | $ | 1.20 | | $ | 1.29 | |
| Discontinued operations | | | 0.93 | | | 0.31 | | | 0.36 | |
| Net income available to common unitholders | | $ | 2.28 | | $ | 1.51 | | $ | 1.65 | |
| | | | | | | | | | | |
| Distributions declared per common unit | | $ | 2.54 | | $ | 2.52 | | $ | 2.52 | |
| | | | | | | | | | | |
| Basic weighted average units outstanding | | | 77,523 | | | 73,729 | | | 68,110 | |
| | | | | | | | | | | |
| Diluted weighted average units outstanding | | | 77,901 | | | 74,189 | | | 68,743 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. |
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (in thousands)
| | General | Limited | General | Limited | General | Limited | General | Limited | Accumulated | | | |
| | Partner | Partners | Partner | Partners | Partner | Partners | Partner | Partners | Others | Total | | |
| | Preferred | Preferred | Common | Common | Preferred | Preferred | Common | Common | Comprehensive | Partners’ | | Comprehensive |
| | Units | Units | Units | Units | Unitholders | Unitholders | Unitholders | Unitholders | Income/(Loss) | Capital | | Income |
| Balance at January 1, 2004 | 10 | 215 | 59,420 | 7,795 | $24,836 | $220,547 | $1,516,652 | $207,552 | -- | $1,969,587 | | $177,826 |
Net income | -- | -- | -- | -- | 2,000 | 15,636 | 100,453 | 12,901 | -- | 130,990 | | 130,990 |
Distributions | -- | -- | -- | -- | (2,000) | (15,636) | (153,097) | (19,501) | -- | (190,234) | | -- |
Redemption of limited | | | | | | | | | | | | |
partners common units | | | | | | | | | | | | |
for shares of | | | | | | | | | | | | |
common stock | -- | -- | 179 | (179) | -- | -- | 4,644 | (4,644) | -- | -- | | -- |
Units issued under Dividend | | | | | | | | | | | | |
Reinvestment and Stock | | | | | | | | | | | | |
Purchase Plan | -- | -- | 12 | -- | -- | -- | 481 | -- | | 481 | | -- |
Contributions - proceeds | | | | | | | | | | | | |
from stock options | | | | | | | | | -- | | | |
exercised | -- | -- | 1,251 | -- | -- | -- | 40,520 | -- | -- | 40,520 | | -- |
Contributions - proceeds | | | | | | | | | | | | |
from Stock Warrants | | | | | | | | | | | | |
exercised | -- | -- | 149 | -- | -- | -- | 4,925 | -- | -- | 4,925 | | -- |
Stock options expense | -- | -- | -- | -- | -- | -- | 415 | -- | -- | 415 | | -- |
Directors Deferred comp. | | | | | | | | | | | | |
plan | -- | -- | -- | -- | -- | -- | 265 | -- | -- | 265 | | -- |
Issuance of Restricted Stock | | | | | | | | | | | | |
Awards | -- | -- | 47 | -- | -- | -- | 1,528 | -- | -- | 1,528 | | -- |
Amortization of stock comp. | -- | -- | -- | -- | -- | -- | 3,489 | -- | -- | 3,489 | | -- |
Cancellation of restricted stock | -- | -- | (19) | -- | -- | -- | -- | -- | -- | -- | | -- |
| Balance at December 31, 2004 | 10 | 215 | 61,039 | 7,616 | $24,836 | $220,547 | $1,520,275 | $196,308 | -- | $1,961,966 | | $130,990 |
Net income | -- | -- | -- | -- | 2,000 | 3,909 | 93,488 | 18,722 | -- | 118,119 | | 118,119 |
Distributions | -- | -- | -- | -- | (2,000) | (3,909) | (155,702) | (30,754) | -- | (192,365) | | -- |
Conversion of limited | | | | | | | | | | | | |
partners preferred units | | | | | | | | | | | | |
into limited partners | | | | | | | | | | | | |
common units | -- | (215) | -- | 6,206 | -- | (220,547) | -- | 220,547 | -- | -- | | -- |
Redemption of limited | | | | | | | | | | | | |
partners common units | | | | | | | | | | | | |
for shares of | | | | | | | | | | | | |
common stock | -- | -- | 235 | (235) | -- | -- | 6,790 | (6,790) | -- | -- | | -- |
Issuance of limited partner | | | | | | | | | | | | |
common units | -- | -- | -- | 63 | -- | -- | -- | 2,786 | -- | 2,786 | | --- |
Units issued under Dividend | | | | | | | | | | | | |
Reinvestment and Stock | | | | | | | | | | | | |
Purchase Plan | -- | -- | 9 | -- | -- | -- | 390 | -- | -- | 390 | | -- |
Contributions - proceeds | | | | | | | | | | | | |
from stock options | | | | | | | | | | | | |
exercised | -- | -- | 574 | -- | -- | -- | 16,603 | -- | -- | 16,603 | | - |
Stock options expense | -- | -- | -- | -- | -- | -- | 448 | -- | -- | 448 | | -- |
Comprehensive Loss: | | | | | | | | | | | | |
Unrealized holding loss on | | | | | | | | | | | | |
marketable securities | | | | | | | | | | | | |
available for sale | -- | -- | -- | -- | -- | -- | -- | -- | $(790) | (790) | | (790) |
Directors Deferred comp. | | | | | | | | | | | | |
plan | -- | -- | 5 | -- | -- | -- | 288 | -- | -- | 288 | | -- |
Issuance of Restricted Stock | | | | | | | | | | | | |
Awards | -- | -- | 166 | -- | -- | -- | | -- | | | | |
Amortization of stock comp. | -- | -- | -- | -- | -- | -- | 4,661 | -- | -- | 4,661 | | -- |
Cancellation of restricted stock | -- | -- | (8) | -- | -- | -- | -- | -- | -- | -- | | -- |
| Balance at December 31, 2005 | 10 | -- | 62,020 | 13,650 | $24,836 | -- | $1,487,241 | $400,819 | $ (790) | $1,912,106 | | $130,990 |
Net income | -- | -- | -- | -- | 2,000 | -- | 142,666 | 35,026 | -- | 179,692 | | 179,692 |
Distributions | -- | -- | -- | -- | (2,000) | -- | (158,862) | (38,585) | -- | (199,447) | | -- |
partners common units | | | | | | | | | | | | |
for shares of | | | | | | | | | | | | |
common stock | -- | -- | 475 | (475) | -- | -- | 14,674 | (14,674) | -- | -- | | -- |
Issuance of limited partner | | | | | | | | | | | | |
common units | -- | -- | -- | 2,167 | -- | -- | -- | 97,517 | -- | 97,517 | | -- |
Units issued under Dividend | | | | | | | | | | | | |
Reinvestment and Stock | | | | | | | | | | | | |
Purchase Plan | -- | -- | 5 | -- | -- | -- | 244 | -- | -- | 244 | | -- |
Contributions - proceeds | | | | | | | | | | | | |
from stock options | | | | | | | | | | | | |
Exercised | -- | -- | 353 | -- | -- | -- | 10,445 | -- | -- | 10,445 | | - |
Stock options expense | -- | -- | -- | -- | -- | -- | 465 | -- | -- | 465 | | -- |
Comprehensive Gain: | | | | | | | | | | | | |
Unrealized holding gain on | | | | | | | | | | | | |
marketable securities | | | | | | | | | | | | |
available for sale | -- | -- | -- | -- | -- | -- | -- | -- | 15,850 | 15,850 | | 15,850 |
Directors Deferred comp. | | | | | | | | | | | | |
Plan | -- | -- | -- | -- | -- | -- | 302 | -- | -- | 302 | | -- |
Issuance of Restricted Stock | | | | | | | | | | | | |
Awards | -- | -- | 81 | -- | -- | -- | 1 | -- | -- | 1 | | |
Amortization of stock comp. | -- | -- | -- | -- | -- | -- | 5,895 | -- | -- | 5,895 | | -- |
Cancellation of restricted stock | -- | -- | (9) | -- | -- | -- | -- | -- | -- | -- | | -- |
Reclassification adjustment for | | | | | | | | | | | | |
realized gain included in | | | | | | | | | | | | |
net income | -- | -- | -- | -- | -- | -- | -- | -- | (15,060) | (15,060) | | (15,060) |
| | | | | | | | | | | | | |
| Balance at December 31, 2005 | 10 | -- | 62,925 | 15,342 | $24,836 | -- | $1,503,071 | $480,103 | -- | $2,008,010 | | $180,482 |
The accompanying notes are an integral part of these consolidated financial statements
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
| | | Year Ended December 31, | |
CASH FLOWS FROM OPERATING ACTIVITIES | | 2006 | | 2005 | | 2004 | |
| Net income | | $ | 179,692 | | $ | 118,119 | | $ | 130,990 | |
| Adjustments to reconcile net income to net cash provided by | | | | | | | | | | |
| Operating activities: | | | | | | | | | | |
| Depreciation and amortization | | | 160,859 | | | 143,593 | | | 117,097 | |
| Depreciation and amortization on discontinued operations | | | 7,090 | | | 12,506 | | | 15,477 | |
| Stock options expense | | | 465 | | | 448 | | | 415 | |
| Amortization of stock compensation | | | 5,895 | | | 4,661 | | | 3,489 | |
| Amortization of deferred financing costs and debt discount | | | 3,157 | | | 3,271 | | | 4,163 | |
| Equity in earnings of unconsolidated joint venture, net | | | 5,556 | | | (248 | ) | | 3,886 | |
| Gain on sale of investment in unconsolidated joint ventures | | | (10,831 | ) | | (35 | ) | | (720 | ) |
| Gain on sale of marketable securities available for sale | | | (15,060 | ) | | -- | | | -- | |
| Loss on sale of land and other assets | | | 416 | | | -- | | | -- | |
| (Realized gains) unrealized losses on disposition of rental property | | | (59,605 | ) | | (5,522 | ) | | 726 | |
| Distributions of cumulative earnings from unconsolidated joint ventures | | | 2,302 | | | -- | | | -- | |
| Minority interest in consolidated joint ventures | | | (218 | ) | | 74 | | | -- | |
| Changes in operating assets and liabilities: | | | | | | | | | | |
| Increase in unbilled rents receivable, net | | | (15,989 | ) | | (13,283 | ) | | (11,230 | ) |
| Increase in deferred charges and other assets, net | | | (40,084 | ) | | (40,566 | ) | | (48,305 | ) |
| Decrease (increase) in accounts receivable, net | | | 3,162 | | | (1,237 | ) | | (106 | ) |
| Increase in accounts payable, accrued expenses and | | | 4,598 | | | 15,674 | | | 15,579 | |
| other liabilities | | | | | | | | | | |
| (Decrease) increase in rents received in advance and security deposits | | | (1,713 | ) | | (253 | ) | | 7,839 | |
| Increase (decrease) in accrued interest payable | | | 6,235 | | | 5,727 | | | (860 | ) |
| | | | | | | | | | | |
| Net cash provided by operating activities | | $ | 235,927 | | $ | 242,929 | | $ | 238,440 | |
| | | | | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | |
| Additions to rental property, related intangibles and service companies | | $ | (217,804 | ) | $ | (451,335 | ) | $ | (200,033 | ) |
| Repayment of mortgage note receivable | | | 150 | | | 81 | | | 850 | |
| Investment in unconsolidated joint ventures | | | (163,428 | ) | | (17,788 | ) | | (27,945 | ) |
| Distributions from unconsolidated joint ventures | | | 39,982 | | | -- | | | 25,942 | |
| Proceeds from sale of investment in unconsolidated joint venture | | | 16,324 | | | 2,676 | | | 720 | |
| Acquisition of minority interest in consolidated joint venture | | | -- | | | (7,713 | ) | | -- | |
| Proceeds from sales of rental property and service company | | | 338,546 | | | 102,980 | | | 110,141 | |
| Purchase of marketable securities available for sale | | | (11,912 | ) | | (51,637 | ) | | -- | |
| Proceeds from sale of marketable securities available for sale | | | 78,609 | | | -- | | | -- | |
| Funding of note receivable | | | -- | | | -- | | | (13,042 | ) |
| (Increase) decrease in restricted cash | | | (6,227 | ) | | 1,256 | | | (2,388 | ) |
| | | | | | | | | | | |
| Net cash provided by (used in) investing activities | | $ | 74,240 | | $ | (421,480 | ) | $ | (105,755 | ) |
| | | | | | | | | | | |
CASH FLOW FROM FINANCING ACTIVITIES | | | | | | | | | | |
| Proceeds from senior unsecured notes | | $ | 199,914 | | $ | 398,480 | | $ | 202,363 | |
| Borrowings from revolving credit facility | | | 983,250 | | | 1,041,560 | | | 612,475 | |
| Proceeds from mortgages | | | -- | | | 58,500 | | | -- | |
| Repayment of senior unsecured notes | | | -- | | | -- | | | (300,000 | ) |
| Repayment of revolving credit facility | | | (1,104,643 | ) | | (921,560 | ) | | (505,475 | ) |
| Repayment of mortgages, loans payable and other obligations | | | (160,626 | ) | | (169,935 | ) | | (58,553 | ) |
| Payment of financing costs | | | (646 | ) | | (5,071 | ) | | (5,648 | ) |
| Proceeds from stock options exercised | | | 10,445 | | | 16,603 | | | 40,520 | |
| Proceeds from stock warrants exercised | | | -- | | | -- | | | 4,925 | |
| Payment of distributions | | | (197,035 | ) | | (191,899 | ) | | (189,397 | ) |
| | | | | | | | | | | |
| Net cash (used in) provided by financing activities | | $ | (269,341 | ) | $ | 226,678 | | $ | (198,790 | ) |
| | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | $ | 40,826 | | $ | 48,127 | | $ | (66,105 | ) |
| Cash and cash equivalents, beginning of period | | | 60,397 | | | 12,270 | | | 78,375 | |
| | | | | | | | | | | |
| Cash and cash equivalents, end of period | | $ | 101,223 | | $ | 60,397 | | $ | 12,270 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. |
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | ORGANIZATION AND BASIS OF PRESENTATION |
ORGANIZATION
Mack-Cali Realty, L.P., a Delaware limited partnership, together with its subsidiaries (the “Operating Partnership”), was formed on May 31, 1994 to conduct the business of leasing, management, acquisition, development, construction and tenant-related services for its sole general partner, Mack-Cali Realty Corporation and its subsidiaries (the “Corporation” or “General Partner”). The Operating Partnership, through its operating divisions and subsidiaries, including the Mack-Cali property-owning partnerships and limited liability companies (collectively, the “Property Partnerships”) is the entity through which all of the General Partner’s operations are conducted.
The General Partner is a fully integrated, self-administered, self-managed real estate investment trust (“REIT”). The General Partner controls the Operating Partnership as its sole general partner, and owned an 80.4 percent and 82.0 percent common unit interest in the Operating Partnership as of December 31, 2006 and December 31, 2005, respectively.
The General Partner’s business is the ownership of interests in and operation of the Operating Partnership, and all of the General Partner’s expenses are incurred for the benefit of the Operating Partnership. The General Partner is reimbursed by the Operating Partnership for all expenses it incurs relating to the ownership and operation of the Operating Partnership.
As of December 31, 2006, the Operating Partnership owned or had interests in 300 properties plus developable land (collectively, the “Properties”). The Properties aggregate approximately 34.3 million square feet, which are comprised of 289 buildings, primarily office and office/flex buildings, totaling approximately 33.9 million square feet (which include 44 buildings, primarily office buildings aggregating approximately 5.4 million square feet owned by unconsolidated joint ventures in which the Operating Partnership has investment interests), six industrial/warehouse buildings totaling approximately 387,400 square feet, two retail properties totaling approximately 17,300 square feet, one hotel (which is owned by an unconsolidated joint venture in which the Operating Partnership has an investment interest) and two parcels of land leased to others. The Properties are located in seven states, primarily in the Northeast, plus the District of Columbia.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include all accounts of the Operating Partnership, its majority-owned and/or controlled subsidiaries, which consist principally of Mack-Cali Realty, L.P. (the “Operating Partnership”) and variable interest entities for which the Operating Partnership has determined itself to be the primary beneficiary, if any. See Note 2: Significant Accounting Policies - Investments in Unconsolidated Joint Ventures, Net for the Operating Partnership’s treatment of unconsolidated joint venture interests. Intercompany accounts and transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Certain reclassifications have been made to prior period amounts in order to conform with current period presentation.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Rental
Property | Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Included in total rental property is construction and development in-progress of $116,151,000 and $118,815,000 (including land of $63,136,000 and $58,883,000) as of December 31, 2006 and 2005, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts. |
The Operating Partnership considers a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup). If portions of a rental project are substantially completed and occupied by tenants, or held available for occupancy, and other portions have not yet reached that stage, the substantially completed portions are accounted for as a separate project. The Operating Partnership allocates costs incurred between the portions under construction and the portions substantially completed and held available for occupancy, and capitalizes only those costs associated with the portion under construction.
Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:
| | Leasehold interests | Remaining lease term | |
| | Buildings and improvements | 5 to 40 years | |
| | Tenant improvements | The shorter of the term of the | |
| | | related lease or useful life | |
| | Furniture, fixtures and equipment | 5 to 10 years | |
Upon acquisition of rental property, the Operating Partnership estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships. The Operating Partnership allocates the purchase price to the assets acquired and liabilities assumed based on their relative fair values. In estimating the fair value of the tangible and intangible assets acquired, the Operating Partnership considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.
Above-market and below-market lease values for acquired properties are recorded based on the present value, (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases.
Other intangible assets acquired include amounts for in-place lease values and tenant relationship values, which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Operating Partnership’s overall relationship with the respective tenant. Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the
expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses. Characteristics considered by management in valuing tenant relationships include the nature and extent of the Operating Partnership’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals. The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases. The value of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships.
On a periodic basis, management assesses whether there are any indicators that the value of the Operating Partnership’s real estate properties held for use may be impaired. A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. The Operating Partnership’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved. Management does not believe that the value of any of the Operating Partnership’s rental properties is impaired.
Rental Property
Held for Sale and
Discontinued
Operations | When assets are identified by management as held for sale, the Operating Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. If, in management’s opinion, the net sales price of the assets which have been identified as held for sale is less than the net book value of the assets, a valuation allowance is established. Properties identified as held for sale and/or sold are presented in discontinued operations for all periods presented. See Note 7: Discontinued Operations. If circumstances arise that previously were considered unlikely and, as a result, the Operating Partnership decides not to sell a property previously classified as held for sale, the property is reclassified as held and used. A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the property been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell. |
Investments in
Unconsolidated
Joint Ventures, Net | The Operating Partnership accounts for its investments in unconsolidated joint ventures for which Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46”) does not apply under the equity method of accounting as the Operating Partnership exercises significant influence, but does not control these entities. These investments are recorded initially at cost, as Investments in Unconsolidated Joint Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions. |
| | FIN 46 provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIE (the “primary beneficiary”). Generally, FIN 46 applies when either (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest, (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. |
The Operating Partnership has evaluated its joint ventures with regards to FIN 46. The adoption and application of FIN 46 and FIN 46R has not had a material impact on the Operating Partnership’s consolidated financial statements.
On a periodic basis, management assesses whether there are any indicators that the value of the Operating Partnership’s investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management’s estimate of the value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the value of the investment. Management does not believe that the value of any of the Operating Partnership’s investments in unconsolidated joint ventures is impaired. See Note 4: Investments in Unconsolidated Joint Ventures.
Cash and Cash
Equivalents | All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. |
Marketable
Securities | The Operating Partnership classifies its marketable securities among three categories: Held-to-maturity, trading and available-for-sale. Unrealized holding gains and losses relating to available-for-sale securities are excluded from earnings and reported as other comprehensive income (loss) in stockholders’ equity until realized. A decline in the market value of any marketable security below cost that is deemed to be other than temporary results in a reduction in the carrying amount to fair value. Any impairment would be charged to earnings and a new cost basis for the security established. |
The Operating Partnership’s marketable securities at December 31, 2005 carried a value of $50.8 million and consisted of 1,468,300 shares of common stock in CarrAmerica Realty Corporation, which were all acquired in 2005. The Operating Partnership’s marketable securities at December 31, 2005 were all classified as available-for-sale and were carried at fair value based on quoted market prices. The Operating Partnership recorded an unrealized holding loss of $790,000 as other comprehensive loss in 2005. From January 1, 2006 through January 25, 2006, the Operating Partnership purchased an additional 336,500 shares of common stock in CarrAmerica for a total purchase price of $11.9 million.
The Operating Partnership received dividend income of approximately $902,000 from its holdings in CarrAmerica stock during the three months ended March 31, 2006, which is included in interest and other investment income. During the three months ended March 31, 2006, the Operating Partnership sold all of its 1,804,800 shares of CarrAmerica common stock realizing a gain of approximately $15.1 million.
Deferred
Financing Costs | Costs incurred in obtaining financing are capitalized and amortized on a straight-line basis, which approximates the effective interest method, over the term of the related indebtedness. Amortization of such costs is included in interest expense and was $3,157,000, $3,271,000 and $4,163,000 for the years ended December 31, 2006, 2005 and 2004, respectively. |
Deferred
Leasing Costs | Costs incurred in connection with leases are capitalized and amortized on a straight-line basis over the terms of the related leases and included in depreciation and amortization. Unamortized deferred leasing costs are charged to amortization expense upon early termination of the lease. Certain employees of the Operating Partnership are compensated for providing leasing services to the Properties. The portion of such compensation, which is capitalized and amortized, approximated $3,749,000, $3,855,000 and $3,907,000 for the years ended December 31, 2006, 2005 and 2004, respectively. |
Derivative
Instruments | The Operating Partnership measures derivative instruments, including certain derivative instruments embedded in other contracts, at fair value and records them as an asset or liability, depending on the Operating Partnership’s rights or obligations under the applicable derivative contract. For derivatives designated and qualifying as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of the derivative are reported in other comprehensive income (“OCI”) and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedging and ineffective portions of hedges are recognized in earnings in the affected period. |
Revenue
Recognition | Base rental revenue is recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements. Above-market and below-market lease values for acquired properties are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed-rate renewal options for below-market leases. The capitalized above-market lease values for acquired properties are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases. Escalations and recoveries from tenants are received from tenants for certain costs as provided in the lease agreements. These costs generally include real estate taxes, utilities, insurance, common area maintenance and other recoverable costs. See Note 16: Tenant Leases. Construction services revenue includes fees earned and reimbursements received by the Operating Partnership for providing construction management and general contractor services to clients. Construction services revenue is recognized on the percentage of completion method. Using this method, profits are recorded on the basis of estimates of the overall profit and percentage of completion of individual contracts. A portion of the estimated profits is accrued based upon estimates of the percentage of completion of the construction contract. This revenue recognition method involves inherent risks relating to profit and cost estimates. Real estate services revenue includes property management, facilities management, leasing commission fees and other services, and payroll and related costs reimbursed from clients. Other income includes income from parking spaces leased to tenants, income from tenants for additional services arranged for by the Operating Partnership and income from tenants for early lease terminations. |
Allowance for
Doubtful Accounts | Management periodically performs a detailed review of amounts due from tenants to determine if accounts receivable balances are impaired based on factors affecting the collectibility of those balances. Management’s estimate of the allowance for doubtful accounts requires management to exercise significant judgment about the timing, frequency and severity of collection losses, which affects the allowance and net income. |
Income and
Other Taxes The Operating Partnership is a partnership and, as a result, all income and losses of the partnership are allocated to the partners for inclusion in their respective income tax returns. Accordingly, no provision or benefit for income taxes has been made in the accompanying financial statements.
As of December 31, 2006, the estimated net basis of the rental property for Federal income tax purposes was lower than the net assets as reported in the Operating Partnership’s financial statements by approximately $907,086,000. The Operating Partnership’s taxable income for the year ended December 31, 2006 was estimated to be approximately $210,162,000 and for the years ended December 31, 2005 and 2004 was approximately $176,224,000 and $174,249,000, respectively. The differences between book income and taxable income primarily result from differences in depreciation expense, the recording of rental income, differences in the deductibility of certain expenses for tax purposes, differences in revenue recognition and the rules for tax purposes of a property exchange
Earnings
Per Unit | The Operating Partnership presents both basic and diluted earnings per unit (“EPU”). Basic EPU excludes dilution and is computed by dividing net income available to common unitholders by the weighted average number of units outstanding for the period. Diluted EPU reflects the potential dilution that could occur if securities or other contracts to issue common units were exercised or converted into common units, where such exercise or conversion would result in a lower EPU amount. |
Distributions
Payable | The distributions payable at December 31, 2006 represents distributions payable to preferred unitholders (10,000 Series C preferred units) and common unitholders (78,267,554 common units), for all such holders of record as of January 4, 2007 with respect to the fourth quarter 2006. The fourth quarter 2006 Series C preferred units distributions of $50.00 per preferred unit and common unit distributions of $0.64 per common unit were approved by the Board of Directors on December 5, 2006. The common unit distributions payable were paid on January 12, 2007. The preferred unit distributions payable were paid on January 16, 2007. |
The distributions payable at December 31, 2005 represents distributions payable to preferred unitholders (10,000 Series C preferred units) and common unitholders (75,678,745 common units) for all such holders of record as of January 5, 2006 with respect to the fourth quarter 2005. The fourth quarter 2005 Series C preferred unit distributions of $50.00 per preferred unit and common unit distributions of $0.63 per common unit were approved by the Corporation’s Board of Directors on December 6, 2005. The common unit distributions payable were paid on January 13, 2006. The preferred unit distributions payable were paid on January 17, 2006.
The Corporation has determined that the $2.53 dividend per common share paid during the year ended December 31, 2006 represented approximately 81 percent ordinary income and approximately 19 percent capital gain to its stockholders; the $2.52 dividend per common share paid during the year ended December 31, 2005 represented 100 percent ordinary income to its stockholders; and the $2.52 dividend per common share paid during the year ended December 31, 2004 represented approximately 91 percent ordinary income and approximately 9 percent capital gain to its stockholders.
Costs Incurred
For Preferred
Stock Issuances | Costs incurred in connection with the Corporation’s preferred stock issuances are reflected as a reduction of General Partner’s capital. |
Stock
Compensation | The Operating Partnership accounts for stock options and restricted stock awards granted prior to 2002 using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations (“APB No. 25”). Under APB No. 25, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Corporation’s stock at the date of grant over the exercise price of the option granted. Compensation cost for stock options is recognized ratably over the vesting period. The Corporation’s policy is to grant options with an exercise price equal to the quoted closing market price of the Corporation’s stock on the business day preceding the grant date. Accordingly, no compensation cost has been recognized under the Corporation’s stock option plans for the granting of stock options made prior to 2002. Restricted stock awards granted prior to 2002 are valued at the vesting dates of such awards with compensation cost for such awards recognized ratably over the vesting period. |
In 2002, the Operating Partnership adopted the provisions of FASB No. 123, and in 2006, the Operating Partnership adopted the provisions of FASB No. 123(R), which did not have a material effect on the Operating Partnership’s financial position and results of operations. These provisions require that the estimated fair value of restricted stock (“Restricted Stock Awards”) and stock options at the grant date be amortized ratably into expense over the appropriate vesting period. For the years ended December 31, 2006, 2005 and 2004, the Operating Partnership recorded restricted stock and stock options expense of $6,360,000, $5,109,000 and $5,432,000, respectively. FASB No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, was issued in December 2002 and amends FASB No. 123, Accounting for Stock Based Compensation. FASB No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based compensation. In addition, this Statement amends the disclosure requirements of FASB No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. FASB No. 148 disclosure requirements are presented below:
The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding and unvested stock awards in each period: (dollars in thousands)
| | | Year Ended December 31, | |
| | | 2005 | | 2004 | |
| Net income, as reported | | $ | 118,119 | | $ | 130,990 | |
Add: Stock-based compensation expense included in reported | | | | | | | |
net income (net of minority interest) | | | 5,109 | | | 5,432 | |
Deduct: Total stock-based compensation expense determined | | | | | | | |
under fair value based method for all awards | | | (5,391 | ) | | (6,308 | ) |
| Pro forma net income | | | 117,837 | | | 130,114 | |
Deduct: Preferred unit distributions | | | (5,909 | ) | | (17,636 | ) |
| Pro forma net income available to common unitholders - basic | | $ | 111,928 | | $ | 112,478 | |
| | | | | | | | |
| Earnings Per Unit: | | | | | | | |
Basic - as reported | | $ | 1.52 | | $ | 1.66 | |
Basic - pro forma | | $ | 1.52 | | $ | 1.65 | |
| | | | | | | | |
Diluted - as reported | | $ | 1.51 | | $ | 1.65 | |
Diluted - pro forma | | $ | 1.51 | | $ | 1.64 | |
Other
Comprehensive
Income | Other comprehensive income (loss) includes items that are recorded in equity, such as unrealized holding gains or losses on marketable securities available for sale. |
| 3. | REAL ESTATE TRANSACTIONS |
Gale/Green Transactions
On May 9, 2006, the Operating Partnership completed the acquisitions of: (i) The Gale Company and certain of its related businesses, which engage in construction, property management, facilities management, and leasing services (collectively, the “Gale Company”); (ii) three office properties; and (iii) indirect interests in a portfolio of office properties, located primarily in New Jersey, which were owned indirectly by The Gale Company and its affiliates (“Gale”) and affiliates of SL Green Realty Corp. (“SL Green”). The agreements (“Gale/Green Agreements”) to complete the aforementioned acquisitions (collectively, the “Gale/Green Transactions”) required that the Operating Partnership complete all of the acquisitions. Simultaneous with the completion of the Gale/Green Transactions, The Gale Company’s President, Mark Yeager, was named an executive vice president of the Company.
Under the Gale/Green Agreements, the Operating Partnership acquired 100 percent of the ownership interests in three office properties located in New Jersey, aggregating 518,257 square feet (the “Wholly-Owned Properties”).
Also, as part of the Gale/Green Agreements, the Operating Partnership entered into a joint venture with an entity controlled by SL Green (in which Stanley C. Gale has an interest), known as Mack-Green-Gale LLC (“Mack-Green”), to hold an approximate 96 percent interest and act as general partner of Gale SLG NJ Operating Partnership, L.P. (the “OP LP”). The OP LP owns 100 percent of entities which own 25 office properties (collectively, the“OP LP Properties”) which aggregate 3.5 million square feet (consisting of 17 office properties aggregating 2.3 million square feet located in New Jersey and eight properties aggregating 1.2 million square feet located in Troy, Michigan), as well as a minor, non-controlling interest in four office properties aggregating 419,000 square feet located in Naperville, Illinois.
Mr. Gale has agreed to pay Mark Yeager, an executive officer of the Corporation, 49 percent of any payments he receives on account of Mr. Gale’s interest with SL Green in Mack-Green.
The Gale Company, the Wholly-Owned Properties, and the interest in Mack-Green were acquired by the Operating Partnership for a total initial acquisition cost of approximately $245 million consisting of: (i) the issuance by the Operating Partnership of 224,719 common units of the Operating Partnership; (ii) the payment of a total of approximately $194 million in cash, which was primarily funded through borrowing under the Operating Partnership’s revolving credit facility; and (iii) the assumption of $39.9 million in existing mortgage indebtedness on two of the Wholly-Owned Properties. Mr. Gale has agreed to transfer to Mark Yeager 33,700 of his common units of the Operating Partnership on April 30, 2009, provided that Mr. Yeager’s employment with the Corporation has not been terminated involuntarily without cause (“Employment Continuation”) prior to such date. Additionally, the agreement to acquire the Gale Company (“Gale Agreement”) contains earn-out provisions providing for the payment of contingent purchase consideration of up to $18 million in cash based upon the achievement of Gross Income and NOI (as such terms are defined in the Gale Agreement) targets and other events for The Gale Company for the three years following the closing date.
Mr. Gale has agreed to pay to Mr. Yeager 49 percent of all amounts he receives pursuant to the Gale Agreement earn-out provisions, subject to certain conditions including Mr. Yeager’s Employment Continuation.
The Operating Partnership has not yet obtained all the information necessary to finalize its estimates to complete the purchase price allocations related to the Gale/Green Transactions. The purchase price allocations will be finalized once the information identified by the Operating Partnership has been received, which should not be longer than one year from the date of acquisition.
In addition, the Gale Agreement provides for the Operating Partnership to acquire certain other ownership interests in up to 11 real estate projects (the “Non-Portfolio Properties”), subject to obtaining certain third party consents and the satisfaction of various project-related and/or other conditions. Each of the Operating Partnership’s acquired interests in the Non Portfolio Properties will provide for the initial distributions of net cash flow solely to the Operating Partnership, and thereafter an affiliate of Mr. Gale (“Gale Affiliate”) has participation rights (“Gale Participation Rights”) in 50 percent of the excess net cash flow remaining after the distribution to the Operating Partnership of the aggregate amount equal to the sum of: (a) the Operating Partnership’s capital contributions, plus (b) an internal rate of return (“IRR”) of 10 percent per annum, accruing on the date or dates of the Operating Partnership’s investments.
Mr. Gale has agreed to pay to Mr. Yeager 49 percent of any payments he receives with respect to the Gale Participation Rights, subject to adjustments for payments Mr. Yeager receives from his direct interests in such rights and subject to, in certain cases, Mr. Yeager’s Employment Continuation. Mr. Gale has also agreed to pay to Mr. Yeager 49 percent of the distributions he receives with respect to Mr. Gale’s interest in certain land located in Florham Park, New Jersey, which is one of the Non-Portfolio Properties not yet acquired by the Operating Partnership. Such distribution may include the amounts Mr. Gale receives from the conveyance of his interest in the Florham Park land to the Operating Partnership.
With respect to the arrangements between Mr. Gale and Mr. Yeager regarding the Gale Agreement earn-out provisions and the Florham Park land, they have agreed to consider offering payments to certain persons that have been employed by certain subsidiaries of The Gale Company, which may include current employees of the Corporation.
Through December 31, 2006, the Operating Partnership has completed acquisitions of eight of the interests in the Non-Portfolio Properties, which included the acquisitions of interests in: a 527,015 square foot, mixed-use office/retail complex; a 416,429 square-foot multi-tenanted office property; a 139,750 square-foot fully-leased office property; an office property in development; two vacant land parcels (one of which Mr. Yeager has a 16.49 percent interest in the Participation Rights) and two pre-developed projects. The aggregate cost of the completed acquisitions was approximately $25.6 million.
Pursuant to Mr. Gale’s agreements with Mr. Yeager, as described herein, Mr. Yeager received approximately $5.6 million during the year ended December 31, 2006.
In connection with the Operating Partnership’s acquisition of the Gale Company, Mr. Gale and certain other affiliates of Gale are restricted from competing with the Operating Partnership or hiring the Corporation’s employees for a period of four years expiring on May 9, 2010.
Property Acquisitions
The Operating Partnership acquired the following office properties during the year ended December 31, 2006: (dollars in thousands)
| Acquisition | | | # of | Rentable | Acquisition |
| Date | Property/Address | Location | Bldgs. | Square Feet | Cost |
| 02/28/06 | Capital Office Park (a) | Greenbelt, Maryland | 7 | 842,258 | $166,011 |
| 05/09/06 | 35 Waterview Boulevard (b) (c) | Parsippany, New Jersey | 1 | 172,498 | 33,586 |
| 05/09/06 | 105 Challenger Road (b) (d) | Ridgefield Park, New Jersey | 1 | 150,050 | 34,960 |
| 05/09/06 | 343 Thornall Street (b) (e) | Edison, New Jersey | 1 | 195,709 | 46,193 |
| 07/31/06 | 395 W. Passaic Street (f) | Rochelle Park, New Jersey | 1 | 100,589 | 22,219 |
| | | | | |
| Total Property Acquisitions: | | 11 | 1,461,104 | $302,969 |
| | | | | |
| (a) This transaction was funded primarily through the assumption of $63.2 million of mortgage debt and the issuance of 1.9 million common operating partnership units valued at $87.2 million. |
(b) The property was acquired as part of the Gale/Green Transactions. |
(c) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility and the assumption of $20.4 million of mortgage debt. |
(d) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility and the assumption of $19.5 million of mortgage debt. |
(e) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility. |
(f) Transaction was funded primarily through borrowing on the Operating Partnership’s revolving credit facility and the assumption of $13.1 million of mortgage debt. |
Property Sales
The Operating Partnership sold the following office properties during the year ended December 31, 2006: (dollars in thousands)
| | | | | Rentable | Net | Net | Realized |
| Sale | | | # of | Square | Sales | Book | Gain/ |
| Date | Property/Address | Location | Bldgs. | Feet | Proceeds | Value | (Loss) |
| 06/28/06 | Westage Business Center | Fishkill, New York | 1 | 118,727 | $ 14,765 | $ 10,872 | $ 3,893 |
| 06/30/06 | 1510 Lancer Drive | Moorestown, New Jersey | 1 | 88,000 | 4,146 | 3,134 | 1,012 |
| 11/10/06 | Colorado portfolio | Various cities, Colorado | 19 | 1,431,610 | 193,404 | 165,072 | 28,332 |
| 12/21/06 | California portfolio | San Francisco, California | 2 | 450,891 | 124,182 | 97,814 | 26,368 |
| | | | | | | |
| Total Sales: | | 23 | 2,089,228 | $336,497 | $276,892 | $59,605 |
| | | | | | | |
On November 7, 2006, the Operating Partnership sold 10.1 acres of developable land adjacent to its Horizon Center properties in Hamilton Township, New Jersey for net sales proceeds of approximately $1.5 million, realizing a gain of approximately $1.1 million.
| 4. | INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES |
The debt of the Operating Partnership’s unconsolidated joint ventures aggregating $571.7 million as of December 31, 2006 is non-recourse to the Operating Partnership, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions and material misrepresentations, and except as otherwise indicated below.
MEADOWLANDS XANADU
On November 25, 2003, the Operating Partnership and affiliates of The Mills Corporation (“Mills”) entered into a joint venture agreement (“Meadowlands Xanadu Venture Agreement”) to form Meadowlands Mills/Mack-Cali Limited Partnership (“Meadowlands Venture”) for the purpose of developing a $1.3 billion family entertainment, recreation and retail complex with an office and hotel component to be built at the Meadowlands sports complex in East Rutherford, New Jersey (“Meadowlands Xanadu”). The First Amendment to the Meadowlands Xanadu Venture Agreement was entered into as of June 30, 2005. Meadowlands Xanadu’s approximately 4.76 million-square-foot complex is expected to feature a family entertainment, recreation and retail destination comprising five themed zones: sports; entertainment; children’s education; fashion; and food and home, in addition to four office buildings, aggregating approximately 1.8 million square feet, and a 520-room hotel.
On December 3, 2003, the Meadowlands Venture entered into a redevelopment agreement (the “Redevelopment Agreement”) with the New Jersey Sports and Exposition Authority (“NJSEA”) for the redevelopment of the area surrounding the Continental Airlines Arena in East Rutherford, New Jersey and the construction of the Meadowlands Xanadu project. The Redevelopment Agreement provides for a 75-year ground lease and requires the Meadowlands Venture to pay the NJSEA a $160 million development rights fee and fixed rent over the term. Fixed rent will be in the amount of $1,000 per year for the first 15 years, increasing to $7.5 million from the 16th to the 18th years, increasing to $8.4 million in the 19th year, increasing to $8.7 million in the 20th year, increasing to $9.0 million in the 21st year, then to $9.2 million in the 23rd to 26th years, with additional increases over the remainder of the term, as set forth in the ground lease. The ground lease also allows for the potential for participation rent payments by the Meadowlands Venture, as described in the ground lease agreement. The First Amendment to the Redevelopment Agreement and the ground lease, itself, were signed on October 5, 2004. The Meadowlands Venture received all necessary permits and approvals from the NJSEA and U.S. Army Corps of Engineers in March 2005 and commenced construction in the same month. As a condition to fill wetlands pursuant to the permit issued by the U.S. Army Corps of Engineers and pursuant to the Redevelopment Agreement, as amended, Mills conveyed certain vacant land, known as the Empire Tract, to a conservancy trust. On June 30, 2005, the $160 million development rights fee was deposited into an escrow account by the Meadowlands Venture in accordance with the terms of the First Amendment to the Redevelopment Agreement. On such date, the following amounts were paid from escrow: (i) approximately $37.2 million to defease certain debt obligations of the NJSEA; and (ii) $26.8 million to the NJSEA, which, in turn, paid such amount to the Meadowlands Venture for the Empire Tract. Subsequently, the remainder of the monies were released from the escrow account to the NJSEA.
The Operating Partnership and Mills owned a 20 percent and 80 percent interest, respectively, in the Meadowlands Venture. These interests were subject to certain participation rights by The New York Giants, which were subsequently terminated in April 2004. The Meadowlands Xanadu Venture Agreement required the Operating Partnership to make an equity contribution up to a maximum of $32.5 million, which it fulfilled in April 2005. Pursuant to the Meadowlands Xanadu Venture Agreement, Mills received subordinated capital credit in the venture of approximately $118.0 million, which represented certain costs incurred by Mills in connection with the Empire Tract prior to the creation of the Meadowlands Venture. However, under the First Amendment to the Meadowlands Xanadu Venture Agreement, the Operating Partnership and Mills agreed that due to the expected receipt by the Meadowlands Venture of certain other sums and certain development costs savings in connection with Meadowlands Xanadu, Mills’ subordinated capital credit in the venture for the Empire Tract should be reduced to $60.0 million as of the date of the First Amendment to the Meadowlands Xanadu Venture Agreement. The Meadowlands Xanadu Venture Agreement required Mills to contribute the balance of the capital required to complete the entertainment phase, subject to certain limitations. The Operating Partnership was to receive a 9 percent preferred return on its equity investment, only after Mills received a 9 percent preferred return on its equity investment. Residual returns, subject to participation by other parties, were to be in proportion to each partner’s respective percentage interest.
Mills was to develop, lease and operate the entertainment phase of the Meadowlands Xanadu project. The Meadowlands Venture has formed and owns, directly and indirectly, all of the partnership interests in and to the component ventures which were formed for the future development of the office and hotel phases, which the Operating Partnership may develop, lease and operate. Upon the Operating Partnership’s exercise of its rights under the Meadowlands Xanadu Venture Agreement to develop the office and hotel phases, the Meadowlands Venture was to convey ownership of the component ventures to the Operating Partnership and Mills or its affiliate, and the Operating Partnership or its affiliate was to own an 80 percent interest and Mills or its affiliate was to own a 20 percent interest in such component ventures. However, under the First Amendment to the Meadowlands Xanadu Venture Agreement, if the Meadowlands Venture developed a hotel that had video lottery terminals (or “slots”), or any other legalized form of gaming on or in its premises, then the Operating Partnership or its affiliate would own a 50 percent interest in such component venture and Mills or its affiliate would own a 50 percent interest. The Meadowlands Xanadu Venture Agreement required that the Operating Partnership exercise its rights with respect to the first office and hotel phase no later than four years after the grand opening of the entertainment phase, and required that the Operating Partnership exercise all of its rights with respect to the office and hotel phases no later than 10 years from such date, but did not require that any or all components be developed. However, under the Meadowlands Xanadu Venture Agreement, Mills had the right to accelerate such exercise schedule, subject to certain conditions. Should the Operating Partnership fail to meet the time schedule described above for the exercise of its rights with respect to the office and hotel phases, the Operating Partnership would forfeit its rights to control future development. If this occurs, Mills will have the right to develop the additional phases, subject to the Operating Partnership’s right to participate, or to cause the Meadowlands Venture to sell such components to a third party, subject to a sales price limitation of 95 percent of the value that would have been required to form such component ventures.
Commencing three years after the grand opening of the entertainment phase of the Meadowlands Xanadu project, either Mills or the Operating Partnership could sell its partnership interest to a third party subject to the following provisions:
| · | Mills had certain “drag-along” rights and the Operating Partnership had certain “tag-along” rights in connection with such sale of interest to a third party; and |
| · | Mills had a right of first refusal with respect of a sale by the Operating Partnership of its partnership interests. |
In addition, commencing on the sixth anniversary of the opening, the Operating Partnership could cause Mills to purchase, and Mills may cause the Operating Partnership to sell to Mills, all of the Operating Partnership’s partnership interests at a price based on the then fair market value of the project. Notwithstanding the exercise by Mills or the Operating Partnership of any of the foregoing rights with respect to the sale of the Operating Partnership’s partnership interest to Mills or a third party, the Operating Partnership would retain its right to component ventures for the future development of the office and hotel phases.
On August 21, 2006, The Mills Corporation (“TMC”) announced that it had signed a non-binding letter of intent with Colony Capital Acquisitions, LLC (“Colony”) and Kan Am USA Management XXII Limited Partnership (“Kan Am”) under which Colony would arrange for construction financing for Meadowlands Xanadu and make a significant equity infusion into the Meadowlands Venture, and TMC would not have any financial obligations post closing (“Colony Transaction”). Kan Am has been a partner with Mills in the Meadowlands Venture.
On November 22, 2006, the Operating Partnership entered into and consummated a Redemption Agreement (the “Redemption Agreement”) with the Meadowlands Venture, Meadowlands Developer Holding Corp., a limited partner in the Meadowlands Venture, and the Meadowlands Limited Partnership (f/k/a Meadowlands/Mills Limited Partnership, and hereafter “MLP”), a general partner and a limited partner in the Meadowlands Venture. Immediately prior to entering into the Redemption Agreement, the investors in MLP undertook a restructuring of MLP whereby Colony became an indirect owner of MLP.
In connection with the Colony Transaction and pursuant to the Redemption Agreement, the Meadowlands Venture redeemed (the “Redemption”) the Operating Partnership’s entire interest in the Meadowlands Venture and its right to participate in the development of the ERC Component in exchange for (i) $22.5 million in cash and (ii) a non-economic partner interest in each of the office and hotel components of Meadowlands Xanadu. In connection with the Redemption, the Operating Partnership also received a non-interest bearing promissory note for an additional $2.5 million, which note is payable in full by MLP only at such time as the Operating Partnership exercises one of its options to develop the first of the office and hotel components of Meadowlands Xanadu. The Operating Partnership’s remaining investment of approximately $11.9 million is included in deferred charges and other assets, net, as of December 31, 2006.
Concurrent with the execution of the Redemption Agreement, the Operating Partnership also entered into the Mack-Cali Rights, Obligations and Option Agreement (the “Rights Agreement”) by and among the Meadowlands Venture, MLP, Meadowlands Mack-Cali GP, L.L.C., Mack-Cali, Baseball Meadowlands Limited Partnership, A-B Office Meadowlands Mack-Cali Limited Partnership, C-D Office Meadowlands Limited Partnership, Hotel Meadowlands Mack-Cali Limited Partnership and ERC Meadowlands Mills/Mack-Cali Limited Partnership. Pursuant to the Rights Agreement, the Operating Partnership retained certain rights and obligations it held under the Meadowlands Xanadu Venture Agreement with respect to the development of the office and hotel components of Meadowlands Xanadu, including an option to develop any of the office or hotel components of Meadowlands Xanadu (each, a “Take Down Option”). Upon the exercise of an initial Take Down Option, the Operating Partnership will receive economic interests in each of the office or hotel component partnerships as both a general partner and a limited partner in the applicable office or hotel component, and following receipt of $2.5 million in full payment of the note from MLP, the Operating Partnership’s ownership interest in each of the office or hotel component partnerships will be reduced from 80 percent (as provided in the Meadowlands Xanadu Venture Agreement) to 75 percent.
In October 2006, Mills, the then manager of the Meadowlands Venture, provided the Operating Partnership information regarding the restatements of financial information it had previously presented to the Operating Partnership for the period from November 25, 2003 (the inception of the Meadowlands Venture) through December 31, 2005. Included in the Operating Partnership’s equity in loss of unconsolidated joint ventures from the Meadowlands Venture of $1.8 million for the three and nine months ended September 30, 2006 is $1.4 million related to the Operating Partnership’s allocated share of the loss arising from the restatement for the period referenced above.
On February 12, 2003, the NJSEA selected The Mills Corporation and the Operating Partnership to redevelop the Continental Airlines Arena site (“Arena Site”) for mixed uses, including retail. In March 2003, Hartz Mountain Industries, Inc., (“Hartz”), filed a lawsuit in the Superior Court of New Jersey, Law Division, for Bergen County, seeking to enjoin NJSEA from entering into a contract with the Meadowlands Venture for the redevelopment of the Continental Airlines Arena site. In May 2003, the court denied Hartz’s request for an injunction and dismissed its suit for failure to exhaust administrative remedies. In June 2003, the NJSEA held hearings on Hartz’s protest, and on a parallel protest filed by another rejected developer, Westfield, Inc. (“Westfield”). On September 10, 2003, the NJSEA ruled against Hartz’s and Westfield’s protests. Hartz and Westfield, as well as Elliot Braha and three other taxpayers (collectively “Braha”), thereafter filed appeals from the NJSEA’s final decision. By decision dated May 14, 2004, the Appellate Division of the Superior Court of New Jersey rejected the appellants’ contention that the NJSEA lacks statutory authority to allow retail development of its property. The Appellate Division also remanded Hart’s claim under the Open Public Records Acts, seeking disclosure of additional documents from NJSEA, to the Law Division for further proceedings. The Supreme Court of New Jersey declined to review the Appellate Division’s decision. On August 19, 2004, the Law Division issued a decision resolving Hartz’s Open Public Records Act claim and ordered NJSEA to disclose some, but not all, of the documents Hartz was seeking. The Appellate Division, in a decision rendered on November 24, 2004, upheld the findings of the Law Division in the remand proceeding. The Supreme Court of New Jersey declined to review the Appellate Division’s decision. At Hartz’s request, the NJSEA thereafter held further hearings on December 15 and 16, 2004, to review certain additional facts in support of Hartz’s and Westfield’s bid protest. Braha, as a taxpayer, did not have standing to participate in the supplemental protest hearing. On March 4, 2005, the Hearing Officer rendered his Supplemental Report and Recommendation to the NJSEA, finding no merit in the protests presented by Hartz and Westfield. The NJSEA accepted the Hearing Officer’s Supplemental Report and Recommendation on March 30, 2005 and Hartz and Braha have appealed that decision to the Appellate Division.
In January 2004, Hartz and Westfield also appealed to the Appellate Division of the Superior Court of New Jersey from the NJSEA’s December 2003 approval and execution of the Redevelopment Agreement with the Meadowlands Venture.
In November 2004, Hartz and Westfield filed additional appeals in the Appellate Division challenging NJSEA’s resolution authorizing the execution of the First Amendment to the Redevelopment Agreement with Meadowlands Venture and the ground lease with the Meadowlands Venture.
All of the above appeals were consolidated by the Appellate Division. On August 17, 2006, the Appellate Division issued an opinion affirming NJSEA’s selection of the Meadowlands Venture and rejecting the appellants’ arguments in all respects. On August 28, 2006, Hartz made a motion before the Appellate Division for reconsideration of this decision and for supplementation of the record. That motion was denied, and neither Hartz nor Braha has sought review in the New Jersey Supreme Court. These consolidated appeals are now resolved.
On September 30, 2004, the Borough of Carlstadt filed an action in the Superior Court of New Jersey Law Division, challenging Meadowlands Xanadu, which asserted claims that are substantially the same as claims asserted by Hartz and Braha in the above appeals. By Order dated November 19, 2004, the Law Division transferred that matter to the Superior Court of New Jersey, Appellate Division. This matter was voluntarily dismissed by Carlstadt in accordance with a March 22, 2006, Settlement Agreement and Release between Carlstadt and the Meadowlands Venture.
Several appeals filed by Hartz, the Sierra Club and others, including certain environmental groups, that challenge certain approvals received by the Meadowlands Venture from the NJSEA, the New Jersey Meadowlands Commission (“NJMC”) and the New Jersey Department of Environmental Protection (“NJDEP”) remain pending before the Appellate Division. Some of these appeals challenge NJDEP’s issuance of a stream encroachment permit, waterfront development permit, and coastal zone consistency determination for Meadowlands Xanadu. Other of these appeals are from NJDEP’s and NJMC’s issuance of reports in connection with a consultation process the NJSEA was statutorily required to undertake in connection with any NJSEA-development project.
A Hartz affiliate and a trade association have filed an appeal from an advisory opinion favorable to the Meadowlands Venture issued by the Director of the Division of Alcoholic Beverage Control concerning the availability of special concessionaire permits. That appeal is also pending in the Appellate Division of the Superior Court of New Jersey.
Three separate lawsuits have been filed in the United States District Court for the District of New Jersey, challenging a permit issued by the U.S. Army Corps of Engineers (“USACE”) in connection with the project. The first suit was filed on March 30, 2005, by the Sierra Club, the New Jersey Public Interest Research Group, Citizen Lobby, Inc. and the New Jersey Environmental Federation. Additional suits were filed on May 16 and May 31, 2005, respectively, by Hartz (together with one of its officers as an individually-named plaintiff) and the Borough of Carlstadt. The Sierra Club also filed a motion for a preliminary injunction to stop certain construction activities on the project, which the Court denied on July 6, 2005. On October 26, 2005, the court granted the motions of the Meadowlands Venture and the USACE to dismiss the Hartz complaint for lack of standing. The deadline for appealing that decision has passed, so the Hartz action is ended. On October 31, 2005, the USACE filed a motion to dismiss the complaint filed by the Borough of Carlstadt for lack of standing. On February 7, 2006, the Court granted the motion and dismissed the Borough of Carlstadt’s complaint in its entirety. On March 9, 2006, Carlstadt filed a notice of appeal of this decision to the United States Court of Appeals for the Third Circuit. This appeal has been dismissed pursuant to the Settlement Agreement and Release executed by Carlstadt and the Meadowlands Venture.
On April 5, 2005, the New York Football Giants (“Giants”) filed an emergent application with the Supreme Court of New Jersey, Chancery Division, seeking an injunction stopping all work on the Meadowlands Xanadu project as being in violation of its existing lease with the NJSEA. After hearing oral argument on the application on August 5, 2005, the court denied the Giants’ motion for preliminary injunctive relief. On June 22, 2006, the court entered a Stipulation and Consent Order that dismissed without prejudice the parties’ respective claims.
The New Jersey Builders’ Association (“NJBA”) has commenced an action, which is pending in the Appellate Division, alleging that the NJSEA has failed to meet a purported obligation to provide affordable housing at the Meadowlands Complex and seeking, among other relief, an order enjoining the construction of Meadowlands Xanadu. NJBA filed an application for preliminary injunctive relief seeking to enjoin further construction of Meadowlands Xanadu, which the Appellate Division denied on July 28, 2005. The Meadowlands Venture is not a party to that action.
On January 25, 2006, the Bergen Cliff Hawks Baseball Club, LLC (the “Cliff Hawks”), filed a complaint against the Operating Partnership and Mills, alleging that the Operating Partnership and Mills breached an agreement to provide the Cliff Hawks with a minor league baseball park as part of the Xanadu Project. This matter is pending.
The Operating Partnership believes that the Meadowlands Venture’s proposal and the planned project comply with applicable laws, and the Meadowlands Venture intends to continue its vigorous defense of its rights under the Redevelopment Agreement and Ground Lease. Although there can be no assurance, the Operating Partnership does not believe that the pending lawsuits will have any material affect on its ability to develop the Meadowlands Xanadu project.
G&G MARTCO (Convention Plaza)
The Operating Partnership held a 50 percent interest in G&G Martco, which owns Convention Plaza, a 305,618 square foot office building, located in San Francisco, California. On November 6, 2006, the Operating Partnership sold substantially all of its interest in the venture to an affiliate of its joint venture partner for approximately $16.3 million, realizing a gain on the sale of approximately $10.8 million. The Operating Partnership performed management and leasing services for the property owned by the joint venture through the date of sale and recognized $132,000, $161,000 and $143,000 in fees for such services in the years ended December 31, 2006, 2005 and 2004, respectively.
PLAZA VIII AND IX ASSOCIATES, L.L.C./AMERICAN FINANCIAL EXCHANGE L.L.C.
On May 20, 1998, the Operating Partnership entered into a joint venture with Columbia Development Company, L.L.C. (“Columbia”) to form American Financial Exchange L.L.C. (“AFE”). The venture was formed to acquire land for future development, located on the Hudson River waterfront in Jersey City, New Jersey, adjacent to the Operating Partnership’s Harborside Financial Center office complex. Among other things, the partnership agreement provides for a preferred return on the Operating Partnership’s invested capital in the venture, in addition to the Operating Partnership’s proportionate share of the venture’s profit, as defined in the agreement.
AFE distributed its interests in Plaza VIII and IX Associates, L.L.C., which owned the undeveloped land currently used as a parking facility, to its then partners, the Operating Partnership and Columbia. The Operating Partnership and Columbia subsequently entered into a new joint venture to own and manage the undeveloped land and related parking operations through Plaza VIII and IX Associates, L.L.C. The Operating Partnership and Columbia each hold a 50 percent interest in the new venture.
RAMLAND REALTY ASSOCIATES L.L.C. (One Ramland Road)
On August 20, 1998, the Operating Partnership entered into a joint venture with S.B. New York Realty Corp. to form Ramland Realty Associates L.L.C. The venture was formed to own, manage and operate One Ramland Road, a 232,000 square foot office/flex building and adjacent developable land, located in Orangeburg, New York. In August 1999, the joint venture completed redevelopment of the property and placed the office/flex building in service. The Operating Partnership holds a 50 percent interest in the joint venture. The venture has a mortgage loan with a $14.9 million balance at December 31, 2006 secured by its office/flex property. The mortgage bears interest at a rate of LIBOR plus 175 basis points and was scheduled to mature in January 2007, with one two-year extension option, subject to certain conditions. In November 2006, the venture exercised its option to extend the term of the loan until January 2009.
The Operating Partnership performs management, leasing and other services for the property owned by the joint venture and recognized $100,000, $93,000 and $165,000 in fees for such services in the years ended December 31, 2006, 2005 and 2004, respectively.
ASHFORD LOOP ASSOCIATES L.P. (1001 South Dairy Ashford/2100 West Loop South)
On September 18, 1998, the Operating Partnership entered into a joint venture with Prudential to form Ashford Loop Associates L.P. The venture was formed to own, manage and operate 1001 South Dairy Ashford, a 130,000 square foot office building acquired on September 18, 1998, and 2100 West Loop South, a 168,000 square foot office building acquired on November 25, 1998, both located in Houston, Texas. The Operating Partnership held a 20 percent interest in the joint venture. On February 25, 2005, the Operating Partnership sold its interest in the venture to Prudential for $2.7 million.
SOUTH PIER AT HARBORSIDE - HOTEL DEVELOPMENT
On November 17, 1999, the Operating Partnership entered into a joint venture with Hyatt Corporation (“Hyatt”) to develop a 350-room hotel on the South Pier at Harborside Financial Center, Jersey City, New Jersey, which was completed and commenced initial operations in July 2002. The Operating Partnership owns a 50 percent interest in the venture.
On October 12, 2006, the venture obtained a $70.0 million mortgage loan collateralized by the hotel property using the proceeds principally to retire $38.9 million of floating-rate debt and to make distributions to partners. The new loan carries an interest rate of 6.15 percent and matures in November 2016. The venture has a loan with a balance as of December 31, 2006 of $7.3 million with the City of Jersey City, provided by the U.S. Department of Housing and Urban Development. The loan currently bears interest at fixed rates ranging from 6.09 percent to 6.62 percent and matures in August 2020. The Operating Partnership has posted a $7.3 million letter of credit in support of this loan, $3.6 million of which is indemnified by Hyatt.
RED BANK CORPORATE PLAZA L.L.C./RED BANK CORPORATE PLAZA II, L.L.C.
On March 23, 2006, the Operating Partnership entered into a joint venture with the PRC Group (“PRC”) to form Red Bank Corporate Plaza L.L.C. The venture was formed to develop Red Bank Corporate Plaza, a 92,878 square foot office building located in Red Bank, New Jersey, which has been fully pre-leased to Hovnanian Enterprises, Inc. for a 10-year term. The Operating Partnership holds a 50 percent interest in the venture. PRC contributed the vacant land for the development of the office building as its initial capital in the venture. The Operating Partnership funded the costs of development up to the value of the land contributed by PRC of $3.5 million as its initial capital. PRC and the Operating Partnership each funded development costs of the venture of $1.1 million in excess of their initial capital contributed.
On October 20, 2006, the venture entered into a $22.0 million construction loan with a commercial bank collateralized by the land and development project. The loan (with a balance as of December 31, 2006 of $8.7 million), carries an interest rate of LIBOR plus 130 basis points and matures in April 2008. The loan currently has three one-year extension options subject to certain conditions, each of which requires payment of a fee.
On July 20, 2006, the Operating Partnership entered into a second joint venture agreement with PRC to form Red Bank Corporate Plaza II L.L.C. The venture was formed to hold land on which it plans to develop Red Bank Corporate Plaza II, an 18,561 square foot office building located in Red Bank, New Jersey. The Operating Partnership holds a 50 percent interest in the venture. The terms of the venture are similar to Red Bank Corporate Plaza L.L.C. PRC contributed the vacant land as its initial capital in the venture.
MACK-GREEN-GALE LLC
On May 9, 2006, as part of the Gale/Green Transactions, the Operating Partnership entered into a joint venture, Mack-Green-Gale LLC (“Mack-Green”), with SL Green, pursuant to which Mack-Green holds a 96 percent interest and acts as general partner of Gale SLG NJ Operating Partnership, L.P. (the “OP LP”). The Operating Partnership’s acquisition cost for its interest in Mack-Green was approximately $125 million, which was funded primarily through borrowing under the Operating Partnership’s revolving credit facility. The OP LP owns 100 percent of entities which own 25 office properties (the “OP LP Properties”) which aggregate 3.5 million square feet (consisting of 17 office properties aggregating 2.3 million square feet located in New Jersey and eight properties aggregating 1.2 million square feet located in Troy, Michigan), as well as a minor, non-controlling interest in four office properties aggregating 419,000 square feet located in Naperville, Illinois.
As defined in the Mack-Green operating agreement, the Operating Partnership shares decision-making equally with SL Green regarding: (i) all major decisions involving the operations of Mack-Green; and (ii) overall general partner responsibilities in operating the OP LP.
The Mack-Green operating agreement generally provides for profits and losses to be allocated as follows:
| (i) | 99 percent of Mack-Green’s share of the profits and losses from 10 specific OP LP Properties allocable to the Operating Partnership and one percent allocable to SL Green; |
| (ii) | one percent of Mack-Green’s share of the profits and losses from eight specific OP LP Properties and its minor interest in four office properties allocable to the Operating Partnership and 99 percent allocable to SL Green; and |
| (iii) | 50 percent of all other profits and losses allocable to the Operating Partnership and 50 percent allocable to SL Green. |
Substantially all of the OP LP Properties are encumbered by mortgage loans with an aggregate outstanding principal balance of $358.1 million. $189.8 million of the mortgage loans bear interest at a weighted average fixed interest rate of 6.32 percent per annum and mature at various times through May 2016. $168.3 million of the mortgage loans bear interest at a floating rate ranging from LIBOR plus 185 basis points to LIBOR plus 275 basis points per annum and mature at various times through August 2008. Included in the floating rate mortgage loans are $90.3 million provided by an affiliate of SL Green.
On August 9, 2006, $69.7 million of mortgage loans were refinanced. The new loan has a maximum principal amount of $90.0 million with $78.0 million drawn at December 31, 2006. The loan provides the ability to draw funds for qualified leasing and capital improvement costs. The loan bears interest at a rate of LIBOR plus 185 basis points and matures on August 8, 2008 with a two-year extension option.
The Operating Partnership performs management, leasing, and construction services for the properties owned by the joint venture and recognized $2.3 million in income (net of $2.2 million in direct costs) for such services in the year ended December 31, 2006.
GE/GALE FUNDING LLC (PFV)
On May 9, 2006, as part of the Gale/Green Transactions, the Operating Partnership acquired from a Gale Affiliate for $1.8 million a 50 percent controlling interest in GMW Village Associates, LLC (“GMW Village”). GMW Village holds a 20 percent interest in GE/Gale Funding LLC (“GE Gale”). GE Gale owns a 100 percent interest in the entity owning Princeton Forrestal Village, a mixed-use, office/retail complex aggregating 527,015 square feet and located in Plainsboro, New Jersey (“Princeton Forrestal Village” or “PFV”).
In addition to the cash consideration paid to acquire the interest, the Operating Partnership provided a Gale Affiliate with the Gale Participation Rights.
The operating agreement of GE Gale, which is owned 80 percent by GEBAM, Inc., provides for, among other things, distributions of net cash flow, initially, in proportion to each member’s interest and subject to adjustment upon achievement of certain financial goals, as defined in the operating agreement.
GE Gale has a mortgage loan in an amount not to exceed $52.8 million, which has a balance at December 31, 2006, of $47.8 million. The loan provides the venture the ability to draw funds for qualified leasing and capital improvement costs. The loan bears interest at a rate of LIBOR plus 275 basis points and matures on January 9, 2009, with an extension option through January 9, 2011.
The Operating Partnership performs management, leasing, and construction services for PFV and recognized $956,000 in income (net of $7.0 million in direct costs) for such services in the year ended December 31, 2006.
ROUTE 93 MASTER LLC (“Route 93 Participant”)/ROUTE 93 BEDFORD MASTER LLC (with the Route 93 Participant, collectively, the “Route 93 Venture”)
On June 1, 2006, the Route 93 Venture was formed between the Route 93 Participant, a majority-owned subsidiary of the Operating Partnership, having a 30 percent interest and the Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank having a 70 percent interest, for the purpose of acquiring seven office buildings, aggregating 666,697 square feet, located in the towns of Andover, Bedford and Billerica, Massachusetts. Profits and losses are shared by the partners in proportion to their respective interests until the investment yields an 11 percent IRR, then sharing will shift to 40/60, and when the IRR reaches 15 percent, then sharing will shift to 50/50.
The Route 93 Participant is a joint venture between the Operating Partnership and a Gale affiliate. Profits and losses are shared by the partners under this venture in proportion to their respective interests until the investment yields an 11 percent IRR, then sharing will shift to 50/50.
The Route 93 Ventures have mortgage loans with an amount not to exceed $58.6 million, with a $39.4 million balance at December 31, 2006 collateralized by its office properties. The loan provides the venture the ability to draw additional monies for qualified leasing and capital improvement costs. The loan bears interest at a rate of LIBOR plus 220 basis points and matures on July 11, 2008, with three one-year extension options.
The Operating Partnership performs management and construction services for the properties owned by the Route 93 Ventures and recognized $17,800 for such services in the year ended December 31, 2006.
GALE KIMBALL, L.L.C.
On June 15, 2006, the Operating Partnership entered into a joint venture with a Gale Affiliate to form M-C Kimball, LLC (“M-C Kimball”). M-C Kimball was formed for the sole purpose of acquiring a Gale Affiliate’s 33.33 percent membership interest in Gale Kimball, L.L.C. (“Gale Kimball”), an entity holding a 25 percent interest in 100 Kimball Drive LLC (“100 Kimball”), which is developing a 175,000 square foot office property located at 100 Kimball Drive, Parsippany, New Jersey (the “Kimball Property”).
The operating agreement of M-C Kimball provides, among other things, for the Gale Participation Rights (of which Mr. Yeager has a direct 26 percent interest).
Gale Kimball is owned 33.33 percent by M-C Kimball and 66.67 percent by the Hampshire Generational Fund, L.L.C. (“Hampshire”). The operating agreement of Gale Kimball provides, among other things, for the distribution of net cash flow, initially, in accordance with its members’ respective membership interests and, upon achievement of certain financial conditions, 50 percent to each of the Operating Partnership and Hampshire.
100 Kimball is owned 25 percent by Gale Kimball and 75 percent by 100 Kimball Drive Realty Member LLC, an affiliate of JP Morgan (“JPM”). The operating agreement of 100 Kimball provides, among other things, for the distributions to be made in the following order:
| (i) | first, to JPM, such that JPM is provided with an annual 12 percent compound preferred return on Preferred Equity Capital Contributions (as such term is defined in the operating agreement of 100 Kimball and largely comprised of development and construction costs); |
| (ii) | second, to JPM, as return of Preferred Equity Capital Contributions until complete repayment of such Preferred Equity Capital Contributions; |
| (iii) | third, to each of JPM and Gale Kimball in proportion to their respective membership interests until each member is provided, as a result of such distributions, with an annual twelve percent compound return on the Member’s Capital Contributions (as defined in the operating agreement of 100 Kimball, and excluding Preferred Equity Capital Contributions, if any); and |
| (iv) | fourth, 50 percent to each of JPM and Gale Kimball. |
100 Kimball has a construction loan in an amount not to exceed $29 million, with a balance at December 31, 2006 of $15.3 million. The loan bears interest at a rate of LIBOR plus 195 basis points and matures on December 8, 2008 with a one-year extension option.
The Operating Partnership performs construction and development services for the property owned by 100 Kimball for which it recognized $271,000 in income (net of $6.6 million in direct costs) in the year ended December 31, 2006.
55 CORPORATE PARTNERS, LLC
On June 9, 2006, the Operating Partnership entered into a joint venture with a Gale Affiliate to form 55 Corporate Partners, LLC (“55 Corporate”). 55 Corporate was formed for the sole purpose of acquiring from a Gale Affiliate a 50 percent interest in SLG 55 Corporate Drive II, LLC (“SLG 55”), an entity indirectly holding a condominium interest in a vacant land parcel located in Bridgewater, New Jersey, which can accommodate development of an approximately 200,000 square foot office building. Sanofi-Aventis, which occupies neighboring buildings, has an option to cause the venture to construct the building, which it would lease on a long-term basis. Sanofi-Aventis is required to pay a penalty of $7 million, subject to certain conditions, in the event it fails to exercise the option by November 2007. The remaining 50 percent in SLG 55 is owned by SLG Gale 55 Corporate LLC, an affiliate of SL Green Realty Corp (“SLG Gale 55”).
The operating agreement of 55 Corporate provides, among other things, for the Gale Participation Rights (of which Mr. Yeager has a direct 26 percent interest). If Mr. Gale receives any commission payments with respect to a Sanofi lease on the development property, Mr. Gale has agreed to pay to Mr. Yeager 26 percent of such payments.
The operating agreement of SLG 55 provides, among other things, for the distribution of the available net cash flow to each of 55 Corporate and SLG Gale 55 in proportion to their respective membership interests in SLG 55 (50 percent each).
12 VREELAND ASSOCIATES, L.L.C.
On September 8, 2006, the Operating Partnership entered into a joint venture with a Gale Affiliate to form M-C Vreeland, LLC (“M-C Vreeland”). M-C Vreeland was formed for the sole purpose of acquiring a Gale Affiliate’s 50 percent membership interest in 12 Vreeland Associates, L.L.C., an entity owning an office property located at 12 Vreeland Road, Florham Park, New Jersey.
The operating agreement of M-C Vreeland provides, among other things, for the Gale Participation Rights (of which Mr. Yeager has a direct 15 percent interest).
The office property at 12 Vreeland is a 139,750 square foot office building that is fully leased to a single tenant through June 15, 2012. The property is subject to a mortgage loan, which matures on July 1, 2012, in the initial amount of $18.1 million bearing interest at 6.9 percent per annum. As of December 31, 2006 the outstanding balance on the mortgage note was $10.3 million.
Under the operating agreement of 12 Vreeland Associates, L.L.C., M-C Vreeland has a 50 percent interest, with S/K Florham Park Associates, L.L.C. (the managing member) and its affiliate holding the other 50 percent.
BOSTON-FILENES
On October 20, 2006, the Operating Partnership formed a joint venture (the “MC/Gale JV LLC”) with Gale International/426 Washington St. LLC (“Gale/426”), which, in turn, entered into a joint venture (the “Vornado JV LLC”) with VNO 426 Washington Street JV LLC (“Vornado”), an affiliate of Vornado Realty LP, which was formed to acquire and redevelop the Filenes property located in the Downtown Crossing district of Boston, Massachusetts (the “Filenes Property”).
On January 25, 2007, (i) each of M-C/Gale JV LLC, Gale and Washington Street Realty Member LLC (“JPM”) formed a joint venture (“JPM JV LLC”), (ii) M-C/Gale JV LLC assigned its entire 50 percent ownership interest in the Vornado JV LLC to JPM JV LLC, (iii) the Limited Liability Company Agreement of Vornado JV LLC was amended to reflect, among other things, the change in the ownership structure described in subsection (ii) above, and (iv) the Limited Liability Company Agreement of MC/Gale JV LLC was amended and restated to reflect, among other things, the change in the ownership structure described in subsection (ii) above. In January 2007, the Operating Partnership funded an additional $9.6 million in the venture. The Vornado JV LLC acquired the Filenes Property on January 29, 2007, for approximately $100 million.
As a result of the foregoing transactions, as of January 29, 2007, (i) the Filenes Property is owned by Vornado JV LLC, (ii) Vornado JV LLC is owned 50 percent by each of Vornado and JPM JV LLC, (iii) JPM JV LLC is owned 30 percent by M-C/Gale, 70 percent by JPM and managed by Gale/426, which has no ownership interest in JPM JV LLC, and (iv) MC/Gale JV LLC is owned 99.99 percent by the Operating Partnership and 0.01 percent by Gale/426. Thus, the Operating Partnership holds approximately a 15 percent indirect ownership interest in the Vornado JV LLC and the Filenes Property.
Distributions are made (i) by Vornado JV LLC in proportion to its members’ respective ownership interests, (ii) by JPM JV LLC (a) initially, in proportion to its members’ respective ownership interests until JPM’s investment yields an 11 percent IRR, (b) thereafter, 60/40 to JPM and MC/Gale JV LLC, respectively, until JPM’s investment yields a 15 percent IRR and (c) thereafter, 50/50 to JPM and MC/Gale JV LLC, respectively, and (iii) by MC/Gale JV LLC (w) initially, in proportion to its members’ respective ownership interests until each member has received a 10 percent IRR on its investment, (x) thereafter, 65/35 to the Operating Partnership and Gale/426, respectively, until the Operating Partnership’s investment yields a 15 percent IRR, (y) if by the time the Operating Partnership receives a 15 percent IRR on its investment, Gale/426 has not done so, 100 percent to Gale/426 until Gale/426’s investment yields a 15 percent IRR, and (z) thereafter, 50/50 to each of the Operating Partnership and Gale/426.
The joint venture’s current plans for the development of the Filenes Property include over 1.2 million square feet consisting of office, retail, condominium apartments, hotel and a garage. The project is subject to governmental approvals.
NKFGMS OWNERS, LLC
On December 28, 2006, the Operating Partnership contributed its facilities management business, which was acquired on May 9, 2006 as part of the Gale/Green Transactions, to a newly-formed joint venture called NKFGMS Owners, LLC. With the contribution, the Operating Partnership received $600,000 in cash and a 40 percent interest in the joint venture. The Operating Partnership and a joint venture partner agreed to loan up to $3 million in total to the venture from time to time until December 28, 2009, which shall be funded by each of the Operating Partnership and the joint venture partner on a pro-rata basis in an amount not to exceed $1.5 million, respectively. The joint venture operating agreement provides for, among other things, profits and losses generally to be allocated in proportion to each member’s interest. In connection with the Contribution, the Operating Partnership recognized a loss of approximately $1.5 million, which is included in gain (loss) on sale of land and other assets for the year ended December 31, 2006.
SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the financial position of the unconsolidated joint ventures in which the Operating Partnership had investment interests as of December 31, 2006 and 2005: (dollars in thousands)
| | December 31, 2006 |
| | | | Plaza | | | Red Bank | Mack- | Princeton | | | | | | NKFGMS | |
| | Meadowlands | G&G | VIII & IX | Ramland | Harborside | Corporate | Gale- | Forrestal | Route 93 | Gale | 55 | 12 | Boston- | Owners | Combined |
| | Xanadu | Martco | Associates | Realty | South Pier | Plaza | Green | Village | Portfolio | Kimball | Corporate | Vreeland | Filenes | LLC | Total |
Assets: | | | | | | | | | | | | | | | |
| Rental property, net | -- | -- | $ 11,404 | $ 12,029 | $ 69,302 | $ 12,462 | $ 480,905 | $ 39,549 | $ 54,620 | $ 26,601 | $ 8,500 | $ 8,221 | -- | $ 239 | $ 723,832 |
| Other assets | -- | -- | 1,408 | 950 | 11,485 | 3,309 | 75,392 | 25,015 | 7,189 | 654 | -- | 909 | $ 10,500 | 2,638 | 139,449 |
| Total assets | -- | -- | $ 12,812 | $ 12,979 | $ 80,787 | $ 15,771 | $ 556,297 | $ 64,564 | $ 61,809 | $ 27,255 | $ 8,500 | $ 9,130 | $ 10,500 | $ 2,877 | $ 863,281 |
Liabilities and | | | | | | | | | | | | | | | |
partners’/members’ | | | | | | | | | | | | | | | |
capital (deficit): | | | | | | | | | | | | | | | |
| Mortgages, loans | | | | | | | | | | | | | | | |
| payable and other | | | | | | | | | | | | | | | |
| obligations | -- | -- | -- | $ 14,936 | $ 77,217 | $ 8,673 | $ 358,063 | $ 47,761 | $ 39,435 | $ 15,350 | -- | $ 10,253 | -- | -- | $ 571,688 |
| Other liabilities | -- | -- | $ 532 | 254 | 1,045 | 8 | 39,525 | 6,553 | 836 | -- | -- | -- | -- | $ 1,329 | 50,082 |
| Partners’/members’ | | | | | | | | | | | | | | | |
| capital (deficit) | -- | -- | 12,280 | (2,211) | 2,525 | 7,090 | 158,709 | 10,250 | 21,538 | 11,905 | $ 8,500 | (1,123) | $ 10,500 | 1,548 | 241,511 |
| Total liabilities and | | | | | | | | | | | | | | | |
| partners’/members’ | | | | | | | | | | | | | | | |
| capital (deficit) | -- | -- | $ 12,812 | $ 12,979 | $ 80,787 | $ 15,771 | $ 556,297 | $ 64,564 | $ 61,809 | $ 27,255 | $ 8,500 | $ 9,130 | $ 10,500 | $ 2,877 | $ 863,281 |
| Operating Partnership’s | | | | | | | | | | | | | | | |
| investment | | | | | | | | | | | | | | | |
| in unconsolidated | | | | | | | | | | | | | | | |
| joint ventures, net | -- | -- | $ 6,060 | -- | -- | $ 3,647 | $ 119,061 | $ 2,560 | $ 6,669 | $ 1,024 | $ 8,500 | $ 7,130 | $ 5,250 | $ 400 | $ 160,301 |
| | December 31, 2005 |
| | | | Plaza | | | Red Bank | Mack- | Princeton | | | | | | NKFGMS | |
| | Meadowlands | G&G | VIII & IX | Ramland | Harborside | Corporate | Gale- | Forrestal | Route 93 | Gale | 55 | 12 | Boston- | Owners | Combined |
| | Xanadu | Martco | Associates | Realty | South Pier | Plaza | Green | Village | Portfolio | Kimball | Corporate | Vreeland | Filenes | LLC | Total |
Assets: | | | | | | | | | | | | | | | |
| Rental property, net | $390,488 | $ 10,628 | $12,024 | $ 12,511 | $ 74,466 | -- | -- | -- | -- | -- | -- | -- | -- | -- | $500,117 |
| Other assets | 171,029 | 6,427 | 1,661 | 1,188 | 11,393 | -- | -- | -- | -- | -- | -- | -- | -- | -- | 191,698 |
| Total assets | $561,517 | $ 17,055 | $13,685 | $ 13,699 | $ 85,859 | -- | -- | -- | -- | -- | -- | -- | -- | -- | 691,815 |
Liabilities and | | | | | | | | | | | | | | | |
partners’/members’ | | | | | | | | | | | | | | | |
capital (deficit): | | | | | | | | | | | | | | | |
| Mortgages, loans | | | | | | | | | | | | | | | |
| payable and other | | | | | | | | | | | | | | | |
| obligations | -- | $ 46,588 | -- | $ 14,936 | $ 56,970 | -- | -- | -- | -- | -- | -- | -- | -- | -- | $118,494 |
| Other liabilities | $ 60,447 | 876 | $ 1,358 | 220 | 4,341 | -- | -- | -- | -- | -- | -- | -- | -- | -- | 67,242 |
| Partners’/members’ | | | | | | | | | | | | | | | |
| capital (deficit) | 501,070 | (30,409) | 12,327 | (1,457) | 24,548 | -- | -- | -- | -- | -- | -- | -- | -- | -- | 506,079 |
| Total liabilities and | | | | | | | | | | | | | | | |
| partners’/members’ | | | | | | | | | | | | | | | |
| capital (deficit) | $561,517 | $ 17,055 | $13,685 | $ 13,699 | $ 85,859 | -- | -- | -- | -- | -- | -- | -- | -- | -- | $691,815 |
| Operating Partnership’s | | | | | | | | | | | | | | | |
| investment | | | | | | | | | | | | | | | |
| in unconsolidated | | | | | | | | | | | | | | | |
| joint ventures, net | $ 34,640 | $ 6,438 | $ 6,084 | $ -- | $ 14,976 | -- | -- | -- | -- | -- | -- | -- | -- | -- | $ 62,138 |
SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the results of operations of the unconsolidated joint ventures for the period in which the Operating Partnership had investment interests during the years ended December 31, 2006, 2005 and 2004: (dollars in thousands)
| | Year Ended December 31, 2006 |
| | | | | Plaza | | | | Red Bank | Mack- | Princeton | | | | | |
| | Meadowlands | | G&G | VIII & IX | Ramland | Ashford | Harborside | Corporate | Green- | Forrestal | Route 93 | Gale | 55 | 12 | Combined |
| | Xanadu | HPMC | Martco | Associates | Realty | Loop | South Pier | Plaza | Gale | Village | Portfolio | Kimball | Corporate | Vreeland | Total |
| Total revenues | -- | -- | $ 5,990 | $ 755 | $ 2,158 | -- | $ 39,268 | $ 15 | $ 44,121 | $ 8,904 | $ 3,609 | $ 4 | -- | $ 2,102 | $106,926 |
| Operating and | | | | | | | | | | | | | | | |
| other expenses | -- | -- | (2,702) | (186) | (1,497) | -- | (23,533) | -- | (19,639) | (5,832) | (1,502) | (1) | -- | (76) | (54,968) |
| Depreciation and | | | | | | | | | | | | | | | |
| amortization | -- | -- | (1,216) | (616) | (836) | -- | (5,853) | -- | (21,129) | (2,883) | (811) | -- | -- | (352) | (33,696) |
| Interest expense | -- | -- | (2,499) | -- | (1,029) | -- | (3,962) | -- | (17,117) | (3,059) | (1,890) | -- | -- | (755) | (30,311) |
| | | | | | | | | | | | | | | | |
| Net income | -- | -- | $ (427) | $ (47) | $ (1,204) | -- | $ 5,920 | $ 15 | $(13,764) | $ (2,870) | $ (594) | $ 3 | -- | $ 919 | $ (12,049) |
Operating Partnership’s | | | | | | | | | | | | | | | |
| equity in | | | | | | | | | | | | | | | |
| earnings (loss) | | | | | | | | | | | | | | | |
| of unconsolidated | | | | | | | | | | | | | | | |
| joint ventures | $(1,876) | -- | $ (930) | $ (24) | $ (225) | | $ 2,820 | -- | $ (4,945) | $ (436) | $ (148) | -- | | $ 208 | $ (5,556) |
| | Year Ended December 31, 2005 |
| | | | | Plaza | | | | Red Bank | Mack- | Princeton | | | | | |
| | Meadowlands | | G&G | VIII & IX | Ramland | Ashford | Harborside | Corporate | Green- | Forrestal | Route 93 | Gale | 55 | 12 | Combined |
| | Xanadu | HPMC | Martco | Associates | Realty | Loop | South Pier | Plaza | Gale | Village | Portfolio | Kimball | Corporate | Vreeland | Total |
| Total revenues | -- | -- | $ 6,767 | $ 396 | $ 2,028 | -- | $ 35,198 | -- | -- | -- | -- | -- | -- | -- | $ 44,389 |
| Operating and | | | | | | | | | | | | | | | |
| other expenses | -- | -- | (3,662) | (169) | (1,407) | -- | (22,251) | -- | -- | -- | -- | -- | -- | -- | (27,489) |
| Depreciation and | | | | | | | | | | | | | | | |
| amortization | -- | -- | (1,205) | (616) | (638) | -- | (5,778) | -- | -- | -- | -- | -- | -- | -- | (8,237) |
| Interest expense | -- | -- | (2,270) | -- | (759) | -- | (4,176) | -- | -- | -- | -- | -- | -- | -- | (7,205) |
| | | | | | | | | | | | | | | | |
| Net income | -- | | $ (370) | $ (389) | $ (776) | -- | $ 2,993 | -- | -- | -- | -- | -- | -- | -- | $ 1,458 |
| Operating Partnership’s | | | | | | | | | | | | | | | |
| equity in | | | | | | | | | | | | | | | |
| earnings (loss) | | | | | | | | | | | | | | | |
| of unconsolidated | | | | | | | | | | | | | | | |
| joint ventures | -- | -- | $(1,219) | $(196) | -- | $ (30) | $ 1,693 | -- | -- | -- | -- | -- | -- | -- | $ 248 |
| | Year Ended December 31, 2004 |
| | | | | Plaza | | | | Red Bank | Mack- | Princeton | | | | | |
| | Meadowlands | | G&G | VIII & IX | Ramland | Ashford | Harborside | Corporate | Green- | Forrestal | Route 93 | Gale | 55 | 12 | Combined |
| | Xanadu | HPMC | Martco | Associates | Realty | Loop | South Pier | Plaza | Gale | Village | Portfolio | Kimball | Corporate | Vreeland | Total |
| Total revenues | -- | $ 10,755 | $ 7,113 | $ 91 | $ 1,958 | $ 2,937 | $ 30,345 | -- | -- | -- | -- | -- | -- | -- | $ 53,199 |
| Operating and | | | | | | | | | | | | | | | |
| other expenses | -- | (259) | (3,676) | (166) | (1,516) | (3,403) | (19,613) | -- | -- | -- | -- | -- | -- | -- | (28,633) |
| Depreciation and | | | | | | | | | | | | | | | |
| amortization | -- | -- | (1,002) | (616) | (630) | (25,550) | (5,767) | -- | -- | -- | -- | -- | -- | -- | (33,565) |
| Interest expense | -- | -- | (1,342) | -- | (479) | -- | (3,146) | -- | -- | -- | -- | -- | -- | -- | (4,967) |
| | | | | | | | | | | | | | | | |
| Net income | -- | $ 10,496 | $ 1,093 | $ (691) | $ (667) | $(26,016) | $ 1,819 | -- | -- | -- | -- | -- | -- | -- | $(13,966) |
| Operating Partnership’s | | | | | | | | | | | | | | | |
| equity in | | | | | | | | | | | | | | | |
| earnings (loss) | | | | | | | | | | | | | | | |
| of unconsolidated | | | | | | | | | | | | | | | |
| joint ventures | -- | $ 661 | $ 730 | $ (346) | $ (600) | $ (5,203) | $ 872 | -- | -- | -- | -- | -- | -- | -- | $ (3,886) |
| 5. | DEFERRED CHARGES AND OTHER ASSETS |
| | December 31, |
(dollars in thousands) | 2006 | 2005 |
| Deferred leasing costs | $184,175 | $182,975 |
| Deferred financing costs | 21,252 | 21,764 |
| | 205,427 | 204,739 |
| Accumulated amortization | (76,407) | (73,410) |
| Deferred charges, net | 129,020 | 131,329 |
| Notes receivable | 11,769 | 11,919 |
| In-place lease values and related intangible assets, net | 58,495 | 37,028 |
| Prepaid expenses and other assets, net | 41,353 | 17,358 |
| | | |
| Total deferred charges and other assets, net | $240,637 | $197,634 |
Restricted cash includes security deposits for certain of the Operating Partnership’s properties, and escrow and reserve funds for debt service, real estate taxes, property insurance, capital improvements, tenant improvements, and leasing costs established pursuant to certain mortgage financing arrangements, and is comprised of the following: (dollars in thousands)
| | | December 31, | |
| | | 2006 | | 2005 | |
| Security deposits | | $ | 8,496 | | $ | 8,398 | |
| Escrow and other reserve funds | | | 6,952 | | | 823 | |
| | | | | | | | |
| Total restricted cash | | $ | 15,448 | | $ | 9,221 | |
| 7. | DISCONTINUED OPERATIONS |
On March 23, 2006, the Operating Partnership entered into an agreement to sell its 118,727 square-foot office building located at 300 Westage Business Center Drive in Fishkill, New York. On June 28, 2006, the Operating Partnership completed the sale of the building, received net sales proceeds of approximately $14.8 million, and recognized a gain of approximately $3.9 million on the sale.
On June 30, 2006, the Operating Partnership sold 1510 Lancer Drive, an 88,000 square-foot office/flex building located in Moorestown, New Jersey, for $4.2 million, and recognized a gain of approximately $1.0 million on the sale.
On August 9, 2006, the Operating Partnership entered into an agreement to sell its entire Colorado portfolio, which consists of 19 office buildings totaling approximately 1.4 million square feet, plus 7.1 acres of vacant land and a 1.6 acre site being developed for additional parking at one of the office buildings. On November 10, 2006, the Operating Partnership completed the sale of the portfolio, received net sales proceeds of approximately $193.4 million, and recognized a gain of approximately $28.3 million on the sale.
On September 25, 2006, the Operating Partnership entered into an agreement to sell its California portfolio, which consists of two office buildings totaling approximately 450,891 square feet. On December 21, 2006, the Operating Partnership completed the sale of the portfolio, received net sales proceeds of $124.2 million, and recognized a gain of approximately $26.4 million on the sale.
As the Operating Partnership sold 111 East Shore Road and 600 Community Drive in North Hempstead, New York; 210 South 16th Street in Omaha, Nebraska; 3600 South Yosemite in Denver, Colorado; 201 Willowbrook Boulevard in Wayne, New Jersey; 1122 Alma Road in Richardson, Texas; and 3 Skyline Drive in Hawthorne, New York during the year ended December 31, 2005; and 3030 L.B.J. Freeway in Dallas, Texas; 84 N.E. Loop 410 in San Antonio, Texas; and 340 Mt. Kemble Avenue in Morris Township, New Jersey during the year ended December 31, 2004; the Operating Partnership has presented these assets as discontinued operations in the statement of operations for all periods presented.
There are no properties identified as held for sale as of December 31, 2006.
The following tables summarize income from discontinued operations and the related realized gains (losses) and unrealized losses on disposition of rental property, net for the years ended December 31, 2006, 2005 and 2004: (dollars in thousands)
| | | Year Ended December 31, | |
| | | 2006 | | 2005 | | 2004 | |
| Total revenues | | $ | 35,348 | | $ | 48,527 | | $ | 65,916 | |
| Operating and other expenses | | | (15,166 | ) | | (18,818 | ) | | (24,872 | ) |
| Depreciation and amortization | | | (7,090 | ) | | (12,506 | ) | | (15,477 | ) |
| Interest expense (net of interest income) | | | 102 | | | 42 | | | (407 | ) |
| | | | | | | | | | | |
| Income from discontinued operations | | $ | 13,194 | | $ | 17,245 | | $ | 25,160 | |
| | | Year Ended December 31, | |
| | | 2006 | | 2005 | | 2004 | |
| Realized gains (losses) on disposition of rental property, net | | $ | 59,605 | | $ | 7,136 | | $ | 11,130 | |
| Unrealized losses on disposition of rental property | | | -- | | | (1,614 | ) | | (11,856 | ) |
| | | | | | | | | | | |
| Realized gains (losses) and unrealized losses on disposition | | | | | | | | | | |
| of rental property, net | | $ | 59,605 | | $ | 5,522 | | $ | (726 | ) |
| 8. | SENIOR UNSECURED NOTES |
A summary of the Operating Partnership’s senior unsecured notes as of December 31, 2006 and 2005 is as follows: (dollars in thousands)
| | | December 31, | | Effective | |
| | | 2006 | | 2005 | | Rate (1) | |
| 7.250% Senior Unsecured Notes, due March 15, 2009 | | $ | 299,481 | | $ | 299,246 | | | 7.49 | % |
| 5.050% Senior Unsecured Notes, due April 15, 2010 | | | 149,819 | | | 149,765 | | | 5.27 | % |
| 7.835% Senior Unsecured Notes, due December 15, 2010 | | | 15,000 | | | 15,000 | | | 7.95 | % |
| 7.750% Senior Unsecured Notes, due February 15, 2011 | | | 299,295 | | | 299,122 | | | 7.93 | % |
| 5.250% Senior Unsecured Notes, due January 15, 2012 | | | 99,015 | | | -- | | | 5.46 | % |
| 6.150% Senior Unsecured Notes, due December 15, 2012 | | | 91,981 | | | 91,488 | | | 6.89 | % |
| 5.820% Senior Unsecured Notes, due March 15, 2013 | | | 25,420 | | | 25,309 | | | 6.45 | % |
| 4.600% Senior Unsecured Notes, due June 15, 2013 | | | 99,815 | | | 99,787 | | | 4.74 | % |
| 5.125% Senior Unsecured Notes, due February 15, 2014 | | | 201,708 | | | 201,948 | | | 5.11 | % |
| 5.125% Senior Unsecured Notes, due January 15, 2015 | | | 149,256 | | | 149,164 | | | 5.30 | % |
| 5.800% Senior Unsecured Notes, due January 15, 2016 | | | 200,692 | | | 99,680 | | | 5.81 | % |
| | | | | | | | | | | |
| Total Senior Unsecured Notes | | $ | 1,631,482 | | $ | 1,430,509 | | | 6.28 | % |
| | | | | | | | | | | |
(1) Includes the cost of terminated treasury lock agreements (if any), offering and other transaction costs and the discount on the notes, as applicable. |
On January 24, 2006, the Operating Partnership issued $100 million face amount of 5.80 percent senior unsecured notes due January 15, 2016 with interest payable semi-annually in arrears, and $100 million face amount of 5.25 percent senior unsecured notes due January 15, 2012 with interest payable semi-annually in arrears. The total proceeds from the issuances, including accrued interest on the 5.80 percent notes, of approximately $200.8 million were used to reduce outstanding borrowings under the Operating Partnership’s unsecured facility.
On November 15, 2005, the Operating Partnership issued $100 million face amount of 5.80 percent senior unsecured notes due January 15, 2016 with interest payable semi-annually in arrears. The proceeds from the issuance (net of selling commissions and discount) of approximately $99 million were used to reduce outstanding borrowings under the Operating Partnership’s unsecured facility.
On April 15, 2005, the Operating Partnership issued $150 million face amount of 5.05 percent senior unsecured notes due April 15, 2010 with interest payable semi-annually in arrears. The proceeds from the issuance (net of selling commissions and discount) of approximately $148.8 million were used to reduce outstanding borrowings under the Operating Partnership’s unsecured facility.
On January 25, 2005, the Operating Partnership issued $150 million face amount of 5.125 percent senior unsecured notes due January 15, 2015 with interest payable semi-annually in arrears. The proceeds from the issuance (including premium and net of selling commissions) of approximately $148.1 million were used primarily to reduce outstanding borrowings under the Operating Partnership’s unsecured facility.
| 9. | UNSECURED REVOLVING CREDIT FACILITY |
The Operating Partnership has an unsecured revolving credit facility with a borrowing capacity of $600 million (expandable to $800 million). The interest rate on outstanding borrowings (not electing the Operating Partnership’s competitive bid feature) under the unsecured facility is currently LIBOR plus 65 basis points. The facility has a competitive bid feature, which allows the Operating Partnership to solicit bids from lenders under the facility to borrow up to $300 million at interest rates less than the current LIBOR plus 65 basis point spread. As of December 31, 2006, the Operating Partnership’s outstanding borrowings carried a weighted average interest rate of LIBOR plus 41 basis points. The Operating Partnership may also elect an interest rate representing the higher of the lender’s prime rate or the Federal Funds rate plus 50 basis points. The unsecured facility, which also requires a 15 basis point facility fee on the current borrowing capacity payable quarterly in arrears, is scheduled to mature in November 2009 and has an extension option of one year, which would require a payment of 25 basis points of the then borrowing capacity of the facility upon exercise.
The interest rate and the facility fee are subject to adjustment, on a sliding scale, based upon the operating partnership’s unsecured debt ratings. In the event of a change in the Operating Partnership’s unsecured debt rating, the interest and facility fee rates will be adjusted in accordance with the following table:
Operating Partnership’s | Interest Rate - | |
Unsecured Debt Ratings: | Applicable Basis Points | Facility Fee |
S&P Moody’s/Fitch (a) | Above LIBOR | Basis Points |
| No ratings or less than BBB-/Baa3/BBB- | 112.5 | 25.0 |
| BBB-/Baa3/BBB- | 80.0 | 20.0 |
| BBB/Baa2/BBB (current) | 65.0 | 15.0 |
| BBB+/Baa1/BBB+ | 55.0 | 15.0 |
| A-/A3/A- or higher | 50.0 | 15.0 |
| | | |
(a) If the Operating Partnership has debt ratings from two rating agencies, one of which is Standard & Poor’s Rating Services (“S&P”) or Moody’s Investors Service (“Moody’s”), the rates per the above table shall be based on the lower of such ratings. If the Operating Partnership has debt ratings from three rating agencies, one of which is S&P or Moody’s, the rates per the above table shall be based on the lower of the two highest ratings. If the Operating Partnership has debt ratings from only one agency, it will be considered to have no rating or less than BBB-/Baa3/BBB- per the above table. |
The terms of the unsecured facility include certain restrictions and covenants which limit, among other things, the payment of dividends (as discussed below), the incurrence of additional indebtedness, the incurrence of liens and the disposition of real estate properties (to the extent that: (i) such property dispositions cause the Operating Partnership to default on any of the financial ratios of the facility described below, or (ii) the property dispositions are completed while the Operating Partnership is under an event of default under the facility, unless, under certain circumstances, such disposition is being carried out to cure such default), and which require compliance with financial ratios relating to the maximum leverage ratio, the maximum amount of secured indebtedness, the minimum amount of tangible net worth, the minimum amount of fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property interest coverage and certain investment limitations. The dividend restriction referred to above provides that, except to enable the Corporation to continue to qualify as a REIT under the Code, the Corporation will not during any four consecutive fiscal quarters make distributions with respect to common stock or other common equity interests in an aggregate amount in excess of 90 percent of funds from operations (as defined in the facility agreement) for such period, subject to certain other adjustments.
The lending group for the credit facility consists of: JPMorgan Chase Bank, N.A., as administrative agent; Bank of America, N.A., as syndication agent; The Bank of Nova Scotia, New York Agency; Wachovia Bank, National Association; and Wells Fargo Bank, National Association, as documentation agents; SunTrust Bank, as senior managing agent; US Bank National Association; Citicorp North America, Inc.; and PNC Bank National Association, as managing agents; and Bank of China, New York Branch; The Bank of New York; Chevy Chase Bank, F.S.B.; The Royal Bank of Scotland, plc; Mizuho Corporate Bank, Ltd.; UFJ Bank Limited, New York Branch; The Governor and Company of the Bank of Ireland; Bank Hapoalim B.M.; Comerica Bank; Chang Hwa Commercial Bank, Ltd., New York Branch; First Commercial Bank, New York Agency; Chiao Tung Bank Co., Ltd., New York Agency; Deutsche Bank Trust Company Americas; and Hua Nan Commercial Bank, New York Agency.
SUMMARY
As of December 31, 2006 and 2005, the Operating Partnership had outstanding borrowings of $145 million and $227 million, respectively, under its unsecured revolving credit facility.
| 10. | MORTGAGES, LOANS PAYABLE AND OTHER OBLIGATIONS |
The Operating Partnership has mortgages, loans payable and other obligations which primarily consist of various loans collateralized by certain of the Operating Partnership’s rental properties. As of December 31, 2006, 20 of the Operating Partnership’s properties, with a total book value of approximately $600.9 million, are encumbered by the Operating Partnership’s mortgages and loans payable. Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only.
A summary of the Operating Partnership’s mortgages, loans payable and other obligations as of December 31, 2006 and 2005 is as follows: (dollars in thousands)
| | | Effective | Principal Balance at | |
| | | Interest | December 31, | |
Property Name | Lender | Rate (a) | 2006 | 2005 | Maturity |
| Mack-Cali Airport | Allstate Life Insurance Co. | 7.05% | $ 9,422 | $ 9,644 | 04/01/07 (b) |
| 6303 Ivy Lane | State Farm Life Insurance Co. | 5.57% | 6,020 | -- | 07/01/07 (c) |
| 6404 Ivy Lane | TIAA | 5.58% | 13,665 | -- | 08/01/08 |
| Assumed obligations | Various | 4.90% | 38,742 | 53,241 | 05/01/09 (d) |
| Various (e) | Prudential Insurance Co. | 4.84% | 150,000 | 150,000 | 01/15/10 |
| 105 Challenger Road | Archon Financial CMBS | 6.24% | 18,748 | -- | 06/06/10 |
| 2200 Renaissance Boulevard | TIAA | 5.89% | 17,819 | 18,174 | 12/01/12 |
| Soundview Plaza | TIAA | 6.02% | 18,013 | 18,427 | 01/01/13 |
| 9200 Edmonston Road | Principal Commercial Funding, L.L.C. | 5.53% | 5,232 | -- | 05/01/13 |
| 6305 Ivy Lane | John Hancock Life Insurance Co. | 5.53% | 7,285 | -- | 01/01/14 |
| 395 West Passaic | State Farm Life Insurance Co. | 6.00% | 12,996 | -- | 05/01/14 |
| 6301 Ivy Lane | John Hancock Life Insurance Co. | 5.52% | 6,821 | -- | 07/01/14 |
| 35 Waterview | Wachovia CMBS | 6.35% | 20,318 | -- | 08/11/14 |
| 500 West Putnam Avenue | New York Life Ins. Co. | 5.57% | 25,000 | 25,000 | 01/10/16 |
| 23 Main Street | JP Morgan CMBS | 5.59% | 33,396 | 33,500 | 09/01/18 |
| Harborside - Plaza 2 and 3 | Northwestern/Principal | -- | -- | 144,642 | 01/01/06 (f) |
| Monmouth Executive Center | Lehman Brothers CMBS | -- | -- | 16,044 | 09/01/06 (g) |
| | | | | | |
| Total Mortgages, loans payable and other obligations: | | | $383,477 | $468,672 | |
| | | | | | |
(a) Reflects effective rate of debt, including deferred financing costs, comprised of the cost of terminated treasury lock agreements (if any), debt initiation costs and other transaction costs, as applicable. |
(b) On February 5, 2007, the Operating Partnership repaid this mortgage loan at par, using available cash. |
(c) On February 15, 2007, the Operating Partnership repaid this mortgage loan at par, using available cash. |
(d) The obligations mature at various times through May 2009. |
(e) Mortgage is collateralized by seven properties. |
(f) On January 3, 2006, the Operating Partnership repaid this mortgage loan at par, using borrowings under the Unsecured Facility. |
(g) On August 1, 2006, the Operating Partnership repaid the loan at par, using borrowings under the Operating Partnership’s revolving credit facility. |
SCHEDULED PRINCIPAL PAYMENTS
Scheduled principal payments and related weighted average annual interest rates for the Operating Partnership’s senior unsecured notes (see Note 8), unsecured revolving credit facility and mortgages, loans payable and other obligations as of December 31, 2006 are as follows: (dollars in thousands)
| | | | | | | | | Weighted Avg. | |
| | | Scheduled | | Principal | | | | Interest Rate of | |
Period | | Amortization | | Maturities | | Total | | Future Repayments (a) | |
| 2007 | | $ | 19,126 | | $ | 15,152 | | $ | 34,278 | | | 5.67 | % |
| 2008 | | | 17,971 | | | 12,563 | | | 30,534 | | | 5.25 | % |
| 2009 | | | 10,100 | | | 445,000 | | | 455,100 | | | 6.89 | % |
| 2010 | | | 2,795 | | | 334,500 | | | 337,295 | | | 5.26 | % |
| 2011 | | | 3,580 | | | 300,000 | | | 303,580 | | | 7.91 | % |
| Thereafter | | | 11,685 | | | 993,091 | | | 1,004,776 | | | 5.57 | % |
| Sub-total | | | 65,257 | | | 2,100,306 | | | 2,165,563 | | | 6.11 | % |
| Adjustment for unamortized debt | | | | | | | | | | | | | |
| discount/premium, net, as of | | | | | | | | | | | | | |
| December 31, 2006 | | | (5,604 | ) | | -- | | | (5,604 | ) | | -- | |
| | | | | | | | | | | | | | |
| Totals/Weighted Average | | $ | 59,653 | | $ | 2,100,306 | | $ | 2,159,959 | | | 6.11 | % |
| (a) | Actual weighted average LIBOR contract rates relating to the Operating Partnership’s outstanding debt as of December 31, 2005 of 5.35 percent was used in calculating revolving credit facility and other variable rate debt interest rates. |
CASH PAID FOR INTEREST AND INTEREST CAPITALIZED
Cash paid for interest for the years ended December 31, 2006, 2005 and 2004 was $132,904,000, $115,359,000 and $110,092,000, respectively. Interest capitalized by the Operating Partnership for the years ended December 31, 2006, 2005 and 2004 was $6,058,000, $5,518,000 and $3,920,000, respectively.
SUMMARY OF INDEBTEDNESS
As of December 31, 2006, the Operating Partnership’s total indebtedness of $2,159,959,000 (weighted average interest rate of 6.11 percent) was comprised of $145,000,000 of revolving credit facility borrowings (weighted average rate of 5.76 percent) and fixed rate debt and other obligations of $2,014,959,000 (weighted average rate of 6.14 percent).
As of December 31, 2005, the Operating Partnership’s total indebtedness of $2,126,181,000 (weighted average interest rate of 6.15 percent) was comprised of $227,000,000 of revolving credit facility borrowings (weighted average rate of 4.84 percent) and fixed rate debt and other obligations of $1,899,181,000 (weighted average rate of 6.30 percent).
Partners’ capital in the accompanying consolidated financial statements relates to: (a) General Partner’s capital, consisting of common units and Series C preferred units held by the Corporation in the Operating Partnership, and (b) Limited Partners’ capital, consisting of common units held by the limited partners.
Any transactions resulting in the issuance of additional common and preferred stock of the Corporation result in a corresponding issuance by the Operating Partnership of an equivalent amount of common and preferred units to the Corporation.
GENERAL PARTNER:
COMMON STOCK
On February 7, 2007, the Corporation completed an underwritten offer and sale of 4,650,000 shares of its common stock and used the net proceeds, which totaled approximately $252 million (after offering costs), primarily to pay down the outstanding borrowings under the Operating Partnership’s revolving credit facility and for general corporate purposes. Concurrent with this transaction, the Corporation purchased from the Operating Partnership 4,650,000 of its outstanding common units for approximately $252 million.
PREFERRED STOCK
On March 14, 2003, in a publicly registered transaction with a single institutional buyer, the Corporation completed the sale and issuance of 10,000 shares of eight-percent Series C cumulative redeemable perpetual preferred stock (“Series C Preferred Stock”) in the form of 1,000,000 depositary shares ($25 stated value per depositary share). Each depositary share represents 1/100th of a share of Series C Preferred Stock. The Corporation received net proceeds of approximately $24.8 million from the sale.
The Series C Preferred Stock has preference rights with respect to liquidation and distributions over the common stock. Holders of the Series C Preferred Stock, except under certain limited conditions, will not be entitled to vote on any matters. In the event of a cumulative arrearage equal to six quarterly dividends, holders of the Series C Preferred Stock will have the right to elect two additional members to serve on the Corporation’s Board of Directors until dividends have been paid in full. At December 31, 2006, there were no dividends in arrears. The Corporation may issue unlimited additional preferred stock ranking on a parity with the Series C Preferred Stock but may not issue any preferred stock senior to the Series C Preferred Stock without the consent of two-thirds of its holders. The Series C Preferred Stock is essentially on an equivalent basis in priority with the Preferred Units.
Except under certain conditions relating to the Corporation’s qualification as a REIT, the Series C Preferred Stock is not redeemable prior to March 14, 2008. On and after such date, the Series C Preferred Stock will be redeemable at the option of the Corporation, in whole or in part, at $25 per depositary share, plus accrued and unpaid dividends.
REPURCHASE OF GENERAL PARTNER UNITS
The Corporation has authorization to repurchase up to $45.5 million of its outstanding common stock, which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Corporation has a dividend reinvestment and stock purchase plan, which commenced in March 1999.
SHAREHOLDER RIGHTS PLAN
On June 10, 1999, the Board of Directors of the Corporation authorized a dividend distribution of one preferred share purchase right (“Right”) for each outstanding share of common stock which were distributed to all holders of record of the common stock on July 6, 1999. Each Right entitles the registered holder to purchase from the Corporation one one-thousandth of a share of Series A junior participating preferred stock, par value $0.01 per share (“Preferred Shares”), at a price of $100.00 per one one-thousandth of a Preferred Share (“Purchase Price”), subject to adjustment as provided in the rights agreement. The Rights expire on July 6, 2009, unless the expiration date is extended or the Right is redeemed or exchanged earlier by the Corporation.
The Rights are attached to each share of common stock. The Rights are generally exercisable only if a person or group becomes the beneficial owner of 15 percent or more of the outstanding common stock or announces a tender offer for 15 percent or more of the outstanding common stock (“Acquiring Person”). In the event that a person or group becomes an Acquiring Person, each holder of a Right will have the right to receive, upon exercise, common stock having a market value equal to two times the Purchase Price of the Right.
STOCK OPTION PLANS
In May 2004, the Corporation established the 2004 Incentive Stock Plan under which a total of 2,500,000 shares have been reserved for issuance. No options have been granted through December 31, 2006 under this plan. In September 2000, the Corporation established the 2000 Employee Stock Option Plan (“2000 Employee Plan”) and the Amended and Restated 2000 Director Stock Option Plan (“2000 Director Plan”). In May 2002, shareholders of the Corporation approved amendments to both plans to increase the total shares reserved for issuance under both of the 2000 plans from 2,700,000 to 4,350,000 shares of the Corporation’s common stock (from 2,500,000 to 4,000,000 shares under the 2000 Employee Plan and from 200,000 to 350,000 shares under the 2000 Director Plan). In 1994, and as subsequently amended, the Corporation established the Mack-Cali Employee Stock Option Plan (“Employee Plan”) and the
Mack-Cali Director Stock Option Plan (“Director Plan”) under which a total of 5,380,188 shares (subject to adjustment) of the Corporation’s common stock had been reserved for issuance (4,980,188 shares under the Employee Plan and 400,000 shares under the Director Plan). As the Employee Plan and Director Plan expired in 2004, stock options may no longer be issued under those plans. Stock options granted under the Employee Plan in 1994 and 1995 became exercisable over a three-year period. Stock options granted under the 2000 Employee Plan and those options granted subsequent to 1995 under the Employee Plan become exercisable over a five-year period. All stock options granted under both the 2000 Director Plan and Director Plan become exercisable in one year. All options were granted at the fair market value at the dates of grant and have terms of ten years. As of December 31, 2006 and December 31, 2005, the stock options outstanding had a weighted average remaining contractual life of approximately 4.7 and 5.7 years, respectively. Stock options exercisable at December 31, 2006 and December 31, 2005 had a weighted average remaining contractual life of approximately 4.5 and 5.2 years, respectively.
Information regarding the Corporation’s stock option plans is summarized below:
| | | Weighted | Aggregate |
| | Shares | Average | Intrinsic |
| | Under | Exercise | Value |
| | Options | Price | $(000’s) |
| Outstanding at January 1, 2004 | 2,990,135 | $30.56 | |
| Granted | 10,000 | $38.07 | |
| Exercised | (1,250,864) | $32.40 | |
| Lapsed or canceled | (45,640) | $28.49 | |
| Outstanding at December 31, 2004 | 1,703,631 | $29.31 | |
| Granted | 5,000 | $45.47 | |
| Exercised | (574,506) | $28.92 | |
| Lapsed or canceled | (50,540) | $28.60 | |
| Outstanding at December 31, 2005 | 1,083,585 | $29.63 | |
| Exercised | (352,699) | $29.65 | |
| Lapsed or canceled | (40,580) | $28.53 | |
| Outstanding at December 31, 2006 ($24.63 - $45.47) | 690,306 | $29.68 | $14,717 |
| Options exercisable at December 31, 2005 | 782,905 | $29.96 | $10,366 |
| Options exercisable at December 31, 2006 | 571,026 | $29.94 | $12,017 |
| Available for grant at December 31, 2005 | 4,590,098 | | |
| Available for grant at December 31, 2006 | 4,547,214 | -- | -- |
The weighted average fair value of options granted during 2005 and 2004 was $3.62 and $3.28 per option. The fair value of each significant option grant is estimated on the date of grant using the Black-Scholes model. The following weighted average assumptions are included in the Corporation’s fair value calculations of stock options granted in 2005 and 2004:
| | | 2005 | 2004 |
| Expected life (in years) | | 6 | 6 |
| Risk-free interest rate | | 3.97% | 3.74% |
| Volatility | | 15.00% | 19.50% |
| Dividend yield | | 5.54% | 6.65% |
No stock options were granted during the year ended December 31, 2006.
Cash received from options exercised under all stock option plans was $10.5 million, $16.6 million and $40.5 million for the years ended December 31, 2006, 2005 and 2004, respectively. The total intrinsic value of options exercised during the years ended December 31, 2006, 2005 and 2004 was $6.2 million, $9.1 million and $12.3 million, respectively. The Corporation has a policy of issuing new shares to satisfy stock option exercises.
The Operating Partnership recognized stock options expense of $465,000, $448,000 and $415,000 for the years ended December 31, 2006, 2005 and 2004, respectively. Included in stock options expense for the year ended December 31, 2006 was a stock option charge of $323,000, which resulted from the accelerated vesting of 16,840 unvested options during the year ended December 31, 2006. As of December 31, 2006, the Corporation had 4.4 million of total unrecognized compensation cost related to unvested stock compensation granted under the Corporation’s stock compensation plans. That cost is expected to be recognized over a weighted average period of 1.8 years.
STOCK COMPENSATION
The Corporation has granted stock awards (“Restricted Stock Awards”) to officers, certain other employees, and non-employee members of the Board of Directors of the Corporation, which allow the holders to each receive a certain amount of shares of the Corporation’s common stock generally over a one to five-year vesting period and generally based on time and service, of which 216,620 shares were outstanding at December 31, 2006. Of the outstanding Restricted Stock Awards granted to executive officers and senior management, 93,746 are contingent upon the Corporation meeting certain performance and/or stock price appreciation objectives. All Restricted Stock Awards provided to the officers and certain other employees were granted under the 2000 Employee Plan and the Employee Plan. Restricted Stock Awards granted to directors were granted under the 2000 Director Plan.
Information regarding the Restricted Stock Awards is summarized below:
| | | Weighted-Average |
| | | Grant - Date |
| | Shares | Fair Value |
| Outstanding at January 1, 2004 | 280,869 | $ 32.51 |
| Granted (a) | 47,056 | $ 40.51 |
| Vested | (109,938) | $ 35.17 |
| Forfeited | (19,284) | $ 29.84 |
| Outstanding at December 31, 2004 | 198,703 | $ 33.19 |
| Granted (b) | 165,660 | $ 43.41 |
| Vested | (109,419) | $ 40.36 |
| Forfeited | (8,000) | $ 43.85 |
| Outstanding at December 31, 2005 | 246,944 | $ 37.17 |
| Granted (c) | 81,034 | $ 52.94 |
| Vested | (102,808) | $ 43.72 |
| Forfeited | (8,550) | $ 43.59 |
| | | |
| Outstanding at December 31, 2006 | 216,620 | $ 39.78 |
| | |
(a) Included in the 47,056 Restricted Stock Awards granted in 2004 were 34,056 awards granted to the Corporation’s four executive officers, Mitchell E. Hersh, Barry Lefkowitz, Roger W. Thomas and Michael Grossman. |
(b) Included in the 165,660 Restricted Stock Awards granted in 2005 were 37,960 awards granted to the Corporation’s four executive officers, Mitchell E. Hersh, Barry Lefkowitz, Roger W. Thomas and Michael Grossman. |
(c) Included in the 81,034 Restricted Stock Awards granted in 2006 were 67,834 awards granted to the Corporation’s five executive officers, Mitchell E. Hersh, Barry Lefkowitz, Roger W. Thomas, Michael Grossman and Mark Yeager. |
DEFERRED STOCK COMPENSATION PLAN FOR DIRECTORS
The Deferred Compensation Plan for Directors, which commenced January 1, 1999, allows non-employee directors of the Corporation to elect to defer up to 100 percent of their annual retainer fee into deferred stock units. The deferred stock units are convertible into an equal number of shares of common stock upon the directors’ termination of service from the Board of Directors or a change in control of the Corporation, as defined in the plan. Deferred stock units are credited to each director quarterly using the closing price of the Corporation’s common stock on the applicable dividend record date for the respective quarter. Each participating director’s account is also credited for an equivalent amount of deferred stock units based on the dividend rate for each quarter.
During the years ended December 31, 2006, 2005 and 2004, 6,266, 6,655 and 6,230 deferred stock units were earned, respectively. As of December 31, 2006 and 2005, there were 37,263 and 30,903 director stock units outstanding, respectively.
LIMITED PARTNERS’ CAPITAL:
Minority interests in the accompanying consolidated financial statements relate to (i) preferred units (“Preferred Units”) and common units in the Operating Partnership, held by parties other than the Corporation, and (ii) interests in consolidated joint ventures for the portion of such properties not owned by the Operating Partnership.
SERIES B PREFERRED UNITS
The Series B Preferred Units had a stated value of $1,000 per unit and were preferred as to assets over any class of common units or other class of preferred units of the Operating Partnership, based on circumstances per the applicable unit certificates. The quarterly distribution on each Series B Preferred Unit was an amount equal to the greater of (i) $16.875 (representing 6.75 percent of the Series B Preferred Unit stated value of an annualized basis) or (ii) the quarterly distribution attributable to a Series B Preferred Unit determined as if such unit had been converted into common units, subject to adjustment for customary anti-dilution rights.
On June 13, 2005, the Operating Partnership caused the mandatory conversion (the “Conversion”) of all 215,018 outstanding Series B Preferred Units into 6,205,425.72 Common Units. Each Series B Preferred Unit was converted into whole and fractional Common Units equal to (x) the $1,000 stated value, divided by (y) the conversion price of $34.65. A description of the rights, preferences and privileges of the Common Units is set forth below.
COMMON UNITS
Certain individuals and entities own common units in the Operating Partnership. A common unit and a share of common stock of the Corporation have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Operating Partnership. Common units are redeemable by the common unitholders at their option, subject to certain restrictions, on the basis of one common unit for either one share of common stock or cash equal to the fair market value of a share at the time of the redemption. The Corporation has the option to deliver shares of common stock in exchange for all or any portion of the cash requested. The common unitholders may not put the units for cash to the Corporation or the Operating Partnership. When a unitholder redeems a common unit for common stock of the Corporation limited partners’ capital is reduced and the General Partner’s capital is increased.
As of December 31, 2006, 2005 and 2004, the Operating Partnership had 15,342,283, 13,650,439 and 7,616,447 common units outstanding, respectively.
EARNINGS PER UNIT
Basic EPU excludes dilution and is computed by dividing net income available to common unitholders by the weighted average number of units outstanding for the period. Diluted EPU reflects the potential dilution that could occur if securities or other contracts to issue common units were exercised or converted into common units.
The following information presents the Operating Partnership’s results for the years ended December 31, 2006, 2005 and 2004 in accordance with FASB No. 128: (dollars in thousands)
| | | Year Ended December 31, | |
Computation of Basic EPU | | 2006 | | 2005 | | 2004 | |
| Income from continuing operations | | $ | 106,893 | | $ | 95,352 | | $ | 106,556 | |
| Deduct: Preferred unit distributions | | | (2,000 | ) | | (5,909 | ) | | (17,636 | ) |
| Income from continuing operations available to common unitholders | | | 104,893 | | | 89,443 | | | 88,920 | |
| Income from discontinued operations | | | 72,799 | | | 22,767 | | | 24,434 | |
| Net income available to common unitholders | | $ | 177,692 | | $ | 112,210 | | $ | 113,354 | |
| | | | | | | | | | | |
| Weighted average common units | | | 77,523 | | | 73,729 | | | 68,110 | |
| | | | | | | | | | | |
Basic EPU: | | | | | | | | | | |
| Income from continuing operations | | $ | 1.35 | | $ | 1.21 | | $ | 1.30 | |
| Income from discontinued operations | | | 0.94 | | | 0.31 | | | 0.36 | |
| Net income available to common unitholders | | $ | 2.29 | | $ | 1.52 | | $ | 1.66 | |
| | | Year Ended December 31, | |
Computation of Diluted EPU | | 2006 | | 2005 | | 2004 | |
| Income from continuing operations available to common unitholders | | 104,893 | | 89,445 | | 88,920 | |
| Income from discontinued operations for diluted earnings per unit | | 72,799 | | 22,765 | | 24,434 | |
| Net income available to common unitholders | | $ | 177,692 | | $ | 112,210 | | $ | 113,354 | |
| | | | | | | | | | | |
| Weighted average common units | | | 77,901 | | | 74,189 | | | 68,743 | |
| | | | | | | | | | | |
Diluted EPU: | | | | | | | | | | |
| Income from continuing operations | | $ | 1.35 | | $ | 1.20 | | $ | 1.29 | |
| Income from discontinued operations | | | 0.93 | | | 0.31 | | | 0.36 | |
| Net income available to common unitholders | | $ | 2.28 | | $ | 1.51 | | $ | 1.65 | |
The following schedule reconciles the units used in the basic EPU calculation to the units used in the diluted EPU calculation:
| | | Year Ended December 31, | |
| | | 2006 | | 2005 | | 2004 | |
| Basic EPU units | | | 77,523 | | | 73,729 | | | 68,110 | |
Add: Stock options | | | 310 | | | 401 | | | 569 | |
| Restricted Stock Awards | | | 68 | | | 59 | | | 58 | |
| Stock Warrants | | | -- | | | -- | | | 6 | |
| Diluted EPU Units | | | 77,901 | | | 74,189 | | | 68,743 | |
Not included in the computations of diluted EPU were 0, 1,507, and 0 stock options as such securities were anti-dilutive during the years ended December 31, 2006, 2005 and 2004, respectively. Also excluded from diluted EPU computations were 1,530,105 and 6,205,426 Series B Preferred Units, on an as converted basis into common units, as such securities were anti-dilutive during the years ended December 31, 2005 and 2004, respectively. Unvested restricted stock outstanding as of December 31, 2006, 2005 and 2004 were 216,620, 246,944 and 198,703, respectively.
12. CONSOLIDATED JOINT VENTURES
The Operating Partnership has ownership interests in certain joint ventures which it consolidates. Various entities and/or individuals hold minority interests in many of these ventures.
| 13. | EMPLOYEE BENEFIT 401(k) PLAN |
Employees of the Corporation, other than those assigned to the Gale Company and affiliated employers, who meet certain minimum age and period of service requirements are eligible to participate in a 401(k) defined contribution plan (the “401(k) Plan”). The 401(k) Plan allows eligible employees to defer from 1 to 30 percent of their annual compensation, subject to certain limitations imposed by federal law. The amounts contributed by employees are immediately vested and non-forfeitable. The Corporation, at management’s discretion, may match employee contributions and/or make discretionary contributions. Total expense recognized by the Operating Partnership for the 401(k) Plan for each of the three years ended December 31, 2006, 2005 and 2004 was $400,000.
All employees of the Gale Company and other affiliated participating employers, other than certain employees who are represented for collective bargaining purposes by a labor organization, who meet certain minimum age and period of service requirements are eligible to participate in a 401(k) defined contribution plan (the “Gale Plan”). The Gale Plan allows eligible employees to defer from their annual compensation, the maximum amount permitted under federal law. The amounts contributed by employees are immediately vested and non-forfeitable. The Gale Company or the participant’s employer matches the employee’s deferral at the rate of 50 percent on the first six percent of the employee’s annual compensation for employees who have at least 1,000 hours of service and are employed on the last day of the plan year. In addition, the Corporation, at management’s discretion, may make discretionary contributions. Participants become 50 percent vested in employer contributions after two years of service and become 100 percent vested after three years of service. Total expense recognized after the completion of the Gale/Green Transactions by the Operating Partnership for the Gale Plan for the year ended December 31, 2006 was $370,000.
| 14. | DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS |
The following disclosure of estimated fair value was determined by management using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Operating Partnership could realize on disposition of the financial instruments at December 31, 2006 and 2005. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
Cash equivalents, marketable securities, receivables, accounts payable, and accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values as of December 31, 2006 and 2005.
The fair value of the fixed-rate mortgage debt and unsecured notes as of December 31, 2006 approximated the book value of approximately $2.0 billion. As of December 31, 2005, the fair value of fixed-rate mortgage debt and unsecured notes was approximately $39.4 million higher than the book value of approximately $1.9 billion. The fair value of the mortgage debt and the unsecured notes was determined by discounting the future contractual interest and principal payments by a market rate.
Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2006 and 2005. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 2006 and current estimates of fair value may differ significantly from the amounts presented herein.
| 15. | COMMITMENTS AND CONTINGENCIES |
TAX ABATEMENT AGREEMENTS
Harborside Financial Center
Pursuant to agreements with the City of Jersey City, New Jersey, the Operating Partnership is required to make payments in lieu of property taxes (“PILOT”) on certain of its properties located in Jersey City, as follows:
The Harborside Plaza 4-A agreement, which commenced in 2000, is for a term of 20 years. The PILOT is equal to two percent of Total Project costs, as defined, and increases by 10 percent in years 7, 10 and 13 and by 50 percent in year 16. Total Project costs, as defined, are $45.5 million. The PILOT totaled $910,000 for each of the years ended December 31, 2006, 2005 and 2004.
The Harborside Plaza 5 agreement, as amended, which commenced in 2002 upon substantial completion of the property, as defined, is for a term of 20 years. The PILOT is equal to two percent of Total Project Costs. Total Project Costs, as defined, are $159.6 million. The PILOT totaled $3.2, $3.2 and $3.2 million for each of the years ended December 31, 2006, 2005 and 2004.
At the conclusion of the above-referenced PILOT agreements, it is expected that the properties will be assessed by the municipality and be subject to real estate taxes at the then prevailing rates.
LITIGATION
The Operating Partnership is a defendant in litigation arising in the normal course of its business activities. Management does not believe that the ultimate resolution of these matters will have a materially adverse effect upon the Operating Partnership’s financial condition taken as whole.
OPERATING LEASE AGREEMENTS
Future minimum rental payments under the terms of all non-cancelable operating leases under which the Operating Partnership is the lessee, as of December 31, 2006, are as follows: (dollars in thousands)
| Year | Amount |
| 2007 | $412 |
| 2008 | 68 |
| 2009 | 16 |
| 2010 | 3 |
| | |
| Total | $499 |
GROUND LEASE AGREEMENTS
Future minimum rental payments under the terms of all non-cancelable ground leases under which the Operating Partnership is the lessee, as of December 31, 2006, are as follows: (dollars in thousands)
| Year | Amount |
| 2007 | $ 508 |
| 2008 | 486 |
| 2009 | 501 |
| 2010 | 501 |
| 2011 | 501 |
| 2012 through 2084 | 35,453 |
| | |
| Total | $37,950 |
Ground lease expense incurred by the Operating Partnership during the years ended December 31, 2006, 2005 and 2004 amounted to $698,000, $606,000 and $583,000, respectively.
OTHER
The Operating Partnership may not dispose of or distribute certain of its properties, currently comprising 50 properties with an aggregate net book value of approximately $1.3 billion, which were originally contributed by members of either the Mack Group (which includes William L. Mack, Chairman of the Corporation’s Board of Directors; David S. Mack, a director of the Corporation; Earle I. Mack, a former director of the Corporation; and Mitchell E. Hersh, president, chief executive officer and a director of the Corporation), the Robert Martin Group (which includes, Robert F. Weinberg a director of the Corporation; Martin S. Berger, a former director of the Corporation; and Timothy M. Jones, former president of the Corporation), the Cali Group (which includes John R. Cali, a director of the Corporation, and John J. Cali, a former director of the Corporation) or certain other common unitholders without the express written consent of a representative of the Mack Group, the Robert Martin Group, the Cali Group or the specific certain other common unitholders, as applicable, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate Mack Group, Robert Martin Group, Cali Group members or the specific certain other common unitholders for the tax consequences of the recognition of such built-in-gains (collectively, the “Property Lock-Ups”). The aforementioned restrictions do not apply in the event that the Operating Partnership sells all of its properties or in connection with a sale transaction which the Corporation’s Board of Directors determines is reasonably necessary to satisfy a material monetary default on any unsecured debt, judgment or liability of the Corporation or the Operating Partnership or to cure any material monetary default on any mortgage secured by a property. The Property Lock-Ups expire periodically through 2016. Upon the expiration of the Property Lock-Ups, the Operating Partnership is generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the appropriate Mack Group, Robert Martin Group, Cali Group members or the specific certain other common unitholders. 88 of our properties, with an aggregate net book value of approximately $809.0 million, have lapsed restrictions and are subject to these conditions.
The Properties are leased to tenants under operating leases with various expiration dates through 2026. Substantially all of the leases provide for annual base rents plus recoveries and escalation charges based upon the tenant’s proportionate share of and/or increases in real estate taxes and certain operating costs, as defined, and the pass-through of charges for electrical usage.
Future minimum rentals to be received under non-cancelable operating leases at December 31, 2006 are as follows: (dollars in thousands)
| Year | Amount |
| 2007 | $ 550,259 |
| 2008 | 510,918 |
| 2009 | 463,182 |
| 2010 | 408,125 |
| 2011 | 340,610 |
| 2012 and thereafter | 1,016,936 |
| | |
| Total | $3,290,030 |
The Operating Partnership operates in two business segments: (i) real estate and (ii) construction services. The Operating Partnership provides leasing, property and facilities management, acquisition, development, construction and tenant-related services for its portfolio. In May 2006, in conjunction with the Operating Partnership’s acquisition of the Gale Company and related businesses, the Operating Partnership acquired a business specializing solely in construction and related services whose operations comprise the Operating Partnership’s construction services segment. Included in the Operating Partnership’s revenues for the year ended December 31, 2006 was $4,806,000 derived from foreign countries. The Operating Partnership had no long lived assets in foreign locations as of December 31, 2006 and December 31, 2005. The accounting policies of the segments are the same as those described in Note 2: Significant Accounting Policies, excluding depreciation and amortization.
The Operating Partnership evaluates performance based upon net operating income from the combined properties in the real estate segment and net operating income from its construction services segment.
Selected results of operations for the years ended December 31, 2006, 2005 and 2004 and selected asset information as of December 31, 2006 and 2005 regarding the Operating Partnership’s operating segments are as follows: (dollars in thousands)
| | | Real Estate | | Construction Services | | Corporate & Other (d) | | Total Operating Partnership | | | |
Total revenues: | | | | | | | | | | | |
2006 | | $ | 676,593 | | $ | 56,582 | | $ | 7,134 | | $ | 740,309 | | | | |
2005 | | | 597,381 | | | -- | | | 2,750 | | | 600,131 | | | | |
2004 | | | 533,358 | | | -- | | | 3,881 | | | 537,239 | | | | |
| | | | | | | | | | | | | | | | | |
Total operating and interest expenses (a): | | | | | | | | | | | | | | | | |
2006 | | $ | 260,736 | | $ | 55,871 | | $ | 176,087 | | $ | 492,694 | | | (e | ) |
2005 | | | 210,445 | | | -- | | | 150,950 | | | 361,395 | | | (f | ) |
2004 | | | 168,433 | | | -- | | | 141,987 | | | 310,420 | | | (g | ) |
| | | | | | | | | | | | | | | | | |
Equity in earnings of unconsolidated | | | | | | | | | | | | | | | | |
joint ventures: | | | | | | | | | | | | | | | | |
2006 | | $ | (5,556 | ) | $ | -- | | $ | -- | | $ | (5,556 | ) | | | |
2005 | | | 248 | | | -- | | | -- | | | 248 | | | | |
2004 | | | (3,886 | ) | | -- | | | -- | | | (3,886 | ) | | | |
| | | | | | | | | | | | | | | | | |
Net operating income (b): | | | | | | | | | | | | | | | | |
2006 | | $ | 410,301 | | $ | 711 | | $ | (168,953 | ) | $ | 242,059 | | | (e | ) |
2005 | | | 387,184 | | | -- | | | (148,200 | ) | | 238,984 | | | (f | ) |
2004 | | | 361,039 | | | -- | | | (138,106 | ) | | 222,933 | | | (g | ) |
| | | | | | | | | | | | | | | | | |
Total assets: | | | | | | | | | | | | | | | | |
2006 | | $ | 4,281,222 | | $ | 28,353 | | $ | 113,314 | | $ | 4,422,889 | | | | |
2005 | | | 4,097,098 | | | -- | | | 150,404 | | | 4,247,502 | | | | |
| | | | | | | | | | | | | | | | | |
Total long-lived assets (c): | | | | | | | | | | | | | | | | |
2006 | | $ | 4,036,393 | | $ | -- | | $ | 1,550 | | $ | 4,037,943 | | | | |
2005 | | | 3,921,536 | | | -- | | | 2,066 | | | 3,923,602 | | | | |
| | | | | | | | | | | | | | | | | |
| (a) | Total operating and interest expenses represent the sum of: real estate taxes; utilities; operating services; direct construction costs; real estate services salaries, wages and other costs; general and administrative and interest expense (net of interest income). All interest expense, net of interest income, (including for property-level mortgages) is excluded from segment amounts and classified in Corporate & Other for all periods. |
| (b) | Net operating income represents total revenues less total operating and interest expenses [as defined in Note (a)], plus equity in earnings (loss) of unconsolidated joint ventures, for the period. |
| (c) | Long-lived assets are comprised of net investment in rental property, unbilled rents receivable and investments in unconsolidated joint ventures. |
| (d) | Corporate & Other represents all corporate-level items (including interest and other investment income, interest expense and non-property general and administrative expense) as well as intercompany eliminations necessary to reconcile to consolidated Operating Partnership totals. |
| (e) | Excludes $160,859 of depreciation and amortization. |
| (f) | Excludes $143,593 of depreciation and amortization. |
| (g) | Excludes $117,097 of depreciation and amortization. |
| 18. | RELATED PARTY TRANSACTIONS |
William L. Mack, Chairman of the Board of Directors of the Corporation (“W. Mack”), David S. Mack, a director of the Corporation, and Earle I. Mack, a former director of the Corporation (“E. Mack”), are the executive officers, directors and stockholders of a corporation that leases approximately 7,801 square feet at one of the Operating Partnership’s office properties, which is scheduled to expire in November 2008. The Operating Partnership has recognized $228,000, $242,000 and $227,000 in revenue under this lease for the years ended December 31, 2006, 2005 and 2004, respectively, and had no accounts receivable from the corporation as of December 31, 2006 and 2005.
The Operating Partnership has conducted business with certain entities (“RMC Entity” or “RMC Entities”), whose principals include Timothy M. Jones, Robert F. Weinberg and Martin S. Berger, each of whom are affiliated with the Operating Partnership as the former president of the Corporation, a current member of the Board of Directors of the Corporation and a former member of the Board of Directors of the Corporation, respectively. In connection with the Operating Partnership’s acquisition of 65 Class A properties from The Robert Martin Company (“Robert Martin”) on January 31, 1997, as subsequently modified, the Operating Partnership granted Robert Martin the right to designate one seat on the Corporation’s Board of Directors (“RM Board Seat”), which right has since expired. The RM Board Seat had historically been shared between Robert F. Weinberg and Martin S. Berger, each of whom had agreed that, for so long as either of them serves on the Board of Directors, that such board seat would be rotated among Mr. Berger and Mr. Weinberg annually at the time of each annual meeting of stockholders. At the Corporation’s 2003 annual meeting of stockholders, Mr. Berger was elected to the Board of Directors and he continued to share his board seat with Mr. Weinberg. At the Corporation’s 2006 annual meeting of stockholders, Mr. Weinberg was elected to the Board of Directors and he intends to continue sharing his board seat with Mr. Berger. The business that the Operating Partnership has conducted with RMC Entities was as follows:
| (1) | The Operating Partnership provides management, leasing and construction-related services to properties in which RMC Entities have an ownership interest. The Operating Partnership recognized approximately $2 million, $1.1 million and $2 million in revenue from RMC Entities for the years ended December 31, 2006, 2005 and 2004, respectively. As of December 31, 2006 and 2005, respectively, the Operating Partnership had $131,000 and zero accounts receivable from RMC Entities. |
| (2) | An RMC Entity leased space at one of the Operating Partnership’s office properties for approximately 3,330 square feet, which, after a three-year renewal and expansion signed with the Operating Partnership in 2005, now leases 4,860 square feet which is scheduled to expire in October 2008. The Operating Partnership has recognized $119,000, $89,000 and $91,000, in revenue under this lease for the years ended December 31, 2006, 2005 and 2004, respectively, and had zero accounts receivable due from the RMC Entity, as of December 31, 2006 and 2005, respectively. |
Mr. Berger holds a 24 percent interest, acts as chairman and chief executive officer, Mr. Weinberg also holds a 24 percent interest and is a director, and W. Mack holds a nine percent interest and is a director of City and Suburban Federal Savings Bank and/or one of its affiliates, which leases a total of 15,879 square feet of space at two of the Operating Partnership’s office properties, comprised of 3,037 square feet scheduled to expire in June 2008 and 12,842 square feet scheduled to expire in April 2013. As of February 13, 2004, City & Suburban assigned its lease with respect to 3,037 square feet of office space to an unaffiliated third party and has no continuing obligations under such lease. The Operating Partnership recognized $404,000, $396,000 and $398,000 in revenue under the leases for the years ended December 31, 2006, 2005 and 2004, respectively, and had no accounts receivable from the company as of December 31, 2006 and 2005.
The son of Mr. Berger, a former officer of the Corporation, served as an officer and had a financial interest which was sold in 2004 in a company which provides cleaning and other related services to certain of the Operating Partnership’s properties. The Operating Partnership has incurred costs from this company of approximately $5.9 million and $6.2 million for the years ended December 31, 2004 and 2003, respectively. As of December 31, 2004, the Operating Partnership had no accounts payable to this company.
Pursuant to an agreement between the Corporation and certain members and associates of the Cali family executed June 27, 2000, John J. Cali served as the Chairman Emeritus and a Board member of the Corporation, and as a consultant to the Operating Partnership and was paid an annual salary of $150,000 from June 27, 2000 through June 27, 2003. Additionally, the Operating Partnership provided office space and administrative support to John J. Cali, Angelo Cali, his brother, and Ed Leshowitz, his business partner (the “Cali Group”). Such services were in effect from June 27, 2000 through June 27, 2004. From June 27, 2004 through June 26, 2005, the Operating Partnership agreed to provide office space at no cost to the Cali Group, as well as provide administrative support and related services for which it was reimbursed $184,000 and $115,000 from the Cali Group for the years ended December 31, 2006 and 2005, respectively. On June 27, 2005, an affiliate of the Cali Group entered into a three-year lease for 1,825 square feet of space at one of the Operating Partnership’s office properties, which is scheduled to expire in June 2008. On September 18, 2006, an affiliate of the Cali Group entered into another lease agreement for 806 additional square feet, in the same building, commencing on December 29, 2006, which is scheduled to expire at the end of 2011. Furthermore, it extended the term of its current lease to expire on that date as well. The Operating Partnership recognized approximately $47,000 and $24,000 in total revenue under this lease for the year ended December 31, 2006 and 2005, respectively, and had no accounts receivable from the affiliate as of December 31, 2006 and 2005.
| 19. | IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS |
FASB INTERPRETATION No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Operating Partnership does not expect that the implementation of FIN 48 will have a material effect on the Operating Partnership's consolidated financial position or results of operations.
FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) STATEMENT NO. 157 (“FASB No. 157”), Fair Value Measurements
FASB No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. FASB No. 157 applies under other accounting pronouncements that require or permit fair value measurements, FASB having previously concluded in those accounting pronouncements that fair value is their relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of this statement will change current practice. This statement is effective for financial statements for fiscal years beginning after November 15, 2007. The Operating Partnership does not expect that the implementation of FASB No. 157 will have a material effect on the Operating Partnership’s consolidated financial position or results of operations.
STAFF ACCOUNTING BULLETIN NO. 108 (“SAB No. 108”)
The interpretations in SAB 108 express the staff’s views regarding the process of quantifying financial statement misstatements. The SEC staff is aware of diversity in practice. For example, certain registrants do not consider the effects of prior year errors on current year financial statements, thereby allowing improper assets or liabilities to remain unadjusted. While these errors may not be material if considered only in relation to the balance sheet, correcting the errors could be material to the current year income statement. Certain registrants have proposed to the staff that allowing these errors to remain on the balance sheet as assets or liabilities in perpetuity is an appropriate application of generally accepted accounting principles. The staff believes that approach is not in the best interest of the users of financial statements. The interpretations in this SAB 108 are being issued to address diversity in practice in quantifying financial statement misstatements and the potential under current practice for the build up of improper amounts on the balance sheet. There have been two widely-recognized methods for quantifying the effects of financial statement errors: the “roll-over” method and the “iron curtain” method. The roll-over method focuses primarily on the impact of a misstatement on the income statement--including the reversing effect of prior year misstatements--but its use can lead to the accumulation of misstatements in the balance sheet. The iron-curtain method, on the other hand, focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement. In SAB 108, the SEC staff establishes an approach that requires quantification of financial statement errors based on the effects of the error on each of the company's financial statements and the related financial statement disclosures. This model is commonly referred to as a "dual approach" because it essentially requires quantification of errors under both the iron-curtain and the roll-over methods. SAB 108 is effective for financial statements for fiscal years ending after November 15, 2006. SAB 108 did not have a material effect on the Operating Partnership’s consolidated financial position or results of operations.
| 20. | CONDENSED QUARTERLY FINANCIAL INFORMATION (unaudited) |
The following summarizes the condensed quarterly financial information for the Operating Partnership: (dollars in thousands)
Quarter Ended 2006: | December 31 | September 30 | June 30 | March 31 |
| Total revenues | $ 198,172 | $ 203,217 | $ 184,953 | $ 153,967 |
| Operating and other expenses | 60,093 | 65,057 | 56,833 | 56,129 |
| Direct construction costs | 18,454 | 22,568 | 12,580 | -- |
| Real estate services, salaries, wages and other costs | 7,780 | 6,686 | 4,134 | -- |
| General and administrative | 16,280 | 12,173 | 11,849 | 8,775 |
| Depreciation and amortization | 43,879 | 40,132 | 39,918 | 36,930 |
Total expenses | 146,486 | 146,616 | 125,314 | 101,834 |
| Operating Income | 51,686 | 56,601 | 59,639 | 52,133 |
| Interest expense | (35,737) | (35,815) | (33,382) | (31,423) |
| Interest and other investment income | 696 | 513 | 399 | 1,446 |
| Equity in earnings (loss) of unconsolidated | | | | |
joint ventures | (200) | (4,757) | (846) | 247 |
| Minority interest in consolidated joint ventures | 75 | 113 | 30 | -- |
| Gain on sale of investment in marketable securities | -- | -- | -- | 15,060 |
| Gain on sale of investment in unconsolidated | | | | |
joint ventures | 10,831 | -- | -- | -- |
| Gain/(loss) on sale of land and other assets | (416) | -- | -- | -- |
Total other (expense) income | (24,751) | (39,946) | (33,799) | (14,670) |
| Income from continuing operations | 26,935 | 16,655 | 25,840 | 37,463 |
| Discontinued operations: | | | | |
Income from discontinued operations | 3,079 | 3,875 | 3,071 | 3,169 |
Realized gains (losses) and unrealized losses | | | | |
on disposition of rental property, net | 54,700 | -- | 4,905 | -- |
| Total discontinued operations, net | 57,779 | 3,875 | 7,976 | 3,169 |
| Net income | 84,714 | 20,530 | 33,816 | 40,632 |
Preferred unit distributions | (500) | (500) | (500) | (500) |
| Net income available to common unitholders | $ 84,214 | $ 20,030 | $ 33,316 | $ 40,132 |
| | | | | |
Basic earnings per common unit: | | | | |
| Income from continuing operations | $ 0.34 | $ 0.21 | $ 0.33 | $ 0.48 |
| Discontinued operations | 0.74 | 0.05 | 0.10 | 0.04 |
| Net income available to common unitholders | $ 1.08 | $ 0.26 | $ 0.43 | $ 0.52 |
| | | | | |
Diluted earnings per common unit: | | | | |
| Income from continuing operations | $ 0.34 | $ 0.21 | $ 0.33 | $ 0.48 |
| Discontinued operations | 0.73 | 0.05 | 0.10 | 0.04 |
| Net income available to common unitholders | $ 1.07 | $ 0.26 | $ 0.43 | $ 0.52 |
| | | | | |
| Distributions declared per common unit | $ 0.64 | $ 0.64 | $ 0.63 | $ 0.63 |
Quarter Ended 2005: | | December 31 | | September 30 | | June 30 | | March 31 | |
| Total revenues | | $ | 153,059 | | $ | 154,193 | | $ | 150,096 | | $ | 142,783 | |
| Operating and other expenses | | | 55,132 | | | 55,421 | | | 51,409 | | | 48,511 | |
| Direct construction costs | | | -- | | | -- | | | -- | | | -- | |
| Real estate services, salaries, wages and other costs | | | -- | | | -- | | | -- | | | -- | |
| General and administrative | | | 8,991 | | | 7,952 | | | 8,187 | | | 7,311 | |
| Depreciation and amortization | | | 37,527 | | | 37,838 | | | 35,186 | | | 33,042 | |
Total expenses | | | 101,650 | | | 101,211 | | | 94,782 | | | 88,864 | |
| Operating Income | | | 51,409 | | | 52,982 | | | 55,314 | | | 53,919 | |
| Interest expense | | | (30,418 | ) | | (30,158 | ) | | (30,363 | ) | | (28,398 | ) |
| Interest and other investment income | | | 364 | | | 308 | | | 120 | | | 64 | |
| Equity in earnings (loss) of unconsolidated | | | | | | | | | | | | | |
joint ventures | | | (304 | ) | | 322 | | | 542 | | | (312 | ) |
| Minority interest in consolidated joint ventures | | | -- | | | -- | | | -- | | | (74 | ) |
| Gain on sale of investment in marketable securities | | | -- | | | -- | | | -- | | | -- | |
| Gain on sale of investment in unconsolidated | | | | | | | | | | | | | |
joint ventures | | | | | | | | | | | | 35 | |
Total other (expense) income | | | (30,358 | ) | | (29,528 | ) | | (29,701 | ) | | (28,685 | ) |
| Income from continuing operations | | | 21,051 | | | 23,454 | | | 25,613 | | | 25,234 | |
| Discontinued operations: | | | | | | | | | | | | | |
Income from discontinued operations | | | 2,602 | | | 2,250 | | | 7,080 | | | 5,312 | |
Realized gains (losses) and unrealized losses | | | | | | | | | | | | | |
on disposition of rental property, net | | | (5,555 | ) | | -- | | | 11,975 | | | (897 | ) |
| Total discontinued operations, net | | | (2,953 | ) | | 2,250 | | | 19,055 | | | 4,415 | |
| Net income | | | 18,098 | | | 25,704 | | | 44,668 | | | 29,649 | |
Preferred unit distributions | | | (500 | ) | | (500 | ) | | (500 | ) | | (4,409 | ) |
| Net income available to common unitholders | | $ | 17,598 | | $ | 25,204 | | $ | 44,168 | | $ | 25,240 | |
| | | | | | | | | | | | | | |
Basic earnings per common unit: | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.27 | | $ | 0.30 | | $ | 0.33 | | $ | 0.30 | |
| Discontinued operations | | | (0.04 | ) | | 0.03 | | | 0.26 | | | 0.07 | |
| Net income available to common unitholders | | $ | 0.23 | | $ | 0.33 | | $ | 0.59 | | $ | 0.37 | |
| | | | | | | | | | | | | | |
Diluted earnings per common unit: | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.27 | | $ | 0.30 | | $ | 0.33 | | $ | 0.30 | |
| Discontinued operations | | | (0.04 | ) | | 0.03 | | | 0.25 | | | 0.06 | |
| Net income available to common unitholders | | $ | 0.23 | | $ | 0.33 | | $ | 0.58 | | $ | 0.36 | |
| | | | | | | | | | | | | | |
| Distributions declared per common unit | | $ | 0.63 | | $ | 0.63 | | $ | 0.63 | | $ | 0.63 | |
| | | | | | | | | | | |
MACK-CALI REALTY, L.P. |
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION |
December 31, 2006 |
(dollars in thousands) |
| | | | | | | | | | | |
| | | | | | | | | | SCHEDULE III |
| | | | | | | | | | | |
| | | | | | | | Gross Amount at Which | |
| | | | | | | Costs | Carried at Close of | |
| | | | | Initial Costs | Capitalized | Period (a) | |
| | Year | | Related | | Building and | Subsequent | | Building and | | Accumulated |
Property Location (b) | Built | Acquired | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation (c) |
| | | | | | | | | | | |
NEW JERSEY | | | | | | | | | | |
Atlantic County | | | | | | | | | | |
Egg Harbor | | | | | | | | | | |
| 100 Decadon Drive (O) | 1987 | 1995 | -- | 300 | 3,282 | 458 | 300 | 3,740 | 4,040 | 1,220 |
| 200 Decadon Drive (O) | 1991 | 1995 | -- | 369 | 3,241 | 604 | 369 | 3,845 | 4,214 | 1,192 |
| | | | | | | | | | | |
Bergen County | | | | | | | | | | |
Fair Lawn | | | | | | | | | | |
| 17-17 Rte 208 North (O) | 1987 | 1995 | -- | 3,067 | 19,415 | 2,334 | 3,067 | 21,749 | 24,816 | 7,335 |
Fort Lee | | | | | | | | | | |
| One Bridge Plaza (O) | 1981 | 1996 | -- | 2,439 | 24,462 | 4,062 | 2,439 | 28,524 | 30,963 | 7,751 |
| 2115 Linwood Avenue (O) | 1981 | 1998 | -- | 474 | 4,419 | 4,293 | 474 | 8,712 | 9,186 | 2,145 |
Little Ferry | | | | | | | | | | |
| 200 Riser Road (O) | 1974 | 1997 | 9,422 | 3,888 | 15,551 | 415 | 3,888 | 15,966 | 19,854 | 3,720 |
Montvale | | | | | | | | | | |
| 95 Chestnut Ridge Road (O) | 1975 | 1997 | -- | 1,227 | 4,907 | 718 | 1,227 | 5,625 | 6,852 | 1,470 |
| 135 Chestnut Ridge Road (O) | 1981 | 1997 | -- | 2,587 | 10,350 | 2,370 | 2,588 | 12,719 | 15,307 | 3,583 |
Paramus | | | | | | | | | | |
| 15 East Midland Avenue (O) | 1988 | 1997 | 20,600 | 10,375 | 41,497 | 173 | 10,374 | 41,671 | 52,045 | 9,396 |
| 461 From Road (O) | 1988 | 1997 | -- | 13,194 | 52,778 | 243 | 13,194 | 53,021 | 66,215 | 12,006 |
| 650 From Road (O) | 1978 | 1997 | 25,600 | 10,487 | 41,949 | 6,326 | 10,487 | 48,275 | 58,762 | 12,091 |
| 140 East Ridgewood | | | | | | | | | | |
| Avenue (O) | 1981 | 1997 | 16,100 | 7,932 | 31,463 | 3,784 | 7,932 | 35,247 | 43,179 | 8,054 |
| 61 South Paramus Avenue (O) | 1985 | 1997 | 20,800 | 9,005 | 36,018 | 6,114 | 9,005 | 42,132 | 51,137 | 9,598 |
Ridgefield Park | | | | | | | | | | |
| 105 Challenger Road (O) | -- | 2006 | 18,748 | 4,740 | 29,893 | -- | 4,740 | 29,893 | 34,633 | 706 |
Rochelle Park | | | | | | | | | | |
| 120 Passaic Street (O) | 1972 | 1997 | -- | 1,354 | 5,415 | 102 | 1,357 | 5,514 | 6,871 | 1,260 |
| 365 West Passaic Street (O) | 1976 | 1997 | 12,250 | 4,148 | 16,592 | 3,030 | 4,148 | 19,622 | 23,770 | 4,967 |
| 395 West Passaic Street (O) | 1979 | 2006 | 12,996 | 2,550 | 17,131 | 23 | 2,550 | 17,154 | 19,704 | 289 |
Upper Saddle River | | | -- | | | | | | | |
| 1 Lake Street (O) | 1994 | 1997 | 35,550 | 13,952 | 55,812 | 51 | 13,953 | 55,862 | 69,815 | 12,625 |
| 10 Mountainview Road (O) | 1986 | 1998 | -- | 4,240 | 20,485 | 2,300 | 4,240 | 22,785 | 27,025 | 5,070 |
Woodcliff Lake | | | | | | | | | | |
| 400 Chestnut Ridge Road (O) | 1982 | 1997 | -- | 4,201 | 16,802 | 5,080 | 4,201 | 21,882 | 26,083 | 5,089 |
| 470 Chestnut Ridge Road (O) | 1987 | 1997 | -- | 2,346 | 9,385 | 939 | 2,346 | 10,324 | 12,670 | 2,122 |
| 530 Chestnut Ridge Road (O) | 1986 | 1997 | -- | 1,860 | 7,441 | 3 | 1,860 | 7,444 | 9,304 | 1,683 |
| 300 Tice Boulevard (O) | 1991 | 1996 | -- | 5,424 | 29,688 | 3,198 | 5,424 | 32,886 | 38,310 | 9,029 |
| 50 Tice Boulevard (O) | 1984 | 1994 | 19,100 | 4,500 | -- | 27,333 | 4,500 | 27,333 | 31,833 | 15,877 |
| | | | | | | | | | | |
| | | | | | | | | | | |
MACK-CALI REALTY, L.P. |
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION |
December 31, 2006 |
(dollars in thousands) |
| | | | | | | | | | | |
| | | | | | | | | | SCHEDULE III |
| | | | | | | | | | | |
| | | | | | | | Gross Amount at Which | |
| | | | | | | Costs | Carried at Close of | |
| | | | | Initial Costs | Capitalized | Period (a) | |
| | Year | | Related | | Building and | Subsequent | | Building and | | Accumulated |
Property Location (b) | Built | Acquired | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation (c) |
| | | | | | | | | | | |
Burlington County | | | | | | | | | | |
Burlington | | | | | | | | | | |
| 3 Terri Lane (F) | 1991 | 1998 | -- | 652 | 3,433 | 1,636 | 658 | 5,063 | 5,721 | 1,223 |
| 5 Terri Lane (F) | 1992 | 1998 | -- | 564 | 3,792 | 2,026 | 569 | 5,813 | 6,382 | 1,750 |
Moorestown | | | | | | | | | | |
| 2 Commerce Drive (F) | 1986 | 1999 | -- | 723 | 2,893 | 389 | 723 | 3,282 | 4,005 | 540 |
| 101 Commerce Drive (F) | 1988 | 1998 | -- | 422 | 3,528 | 437 | 426 | 3,961 | 4,387 | 899 |
| 102 Commerce Drive (F) | 1987 | 1999 | -- | 389 | 1,554 | 321 | 389 | 1,875 | 2,264 | 341 |
| 201 Commerce Drive (F) | 1986 | 1998 | -- | 254 | 1,694 | 482 | 258 | 2,172 | 2,430 | 568 |
| 202 Commerce Drive (F) | 1988 | 1999 | -- | 490 | 1,963 | 350 | 490 | 2,313 | 2,803 | 487 |
| 1 Executive Drive (F) | 1989 | 1998 | -- | 226 | 1,453 | 418 | 228 | 1,869 | 2,097 | 494 |
| 2 Executive Drive (F) | 1988 | 2000 | -- | 801 | 3,206 | 733 | 801 | 3,939 | 4,740 | 744 |
| 101 Executive Drive (F) | 1990 | 1998 | -- | 241 | 2,262 | 524 | 244 | 2,783 | 3,027 | 627 |
| 102 Executive Drive (F) | 1990 | 1998 | -- | 353 | 3,607 | 217 | 357 | 3,820 | 4,177 | 919 |
| 225 Executive Drive (F) | 1990 | 1998 | -- | 323 | 2,477 | 427 | 326 | 2,901 | 3,227 | 713 |
| 97 Foster Road (F) | 1982 | 1998 | -- | 208 | 1,382 | 222 | 211 | 1,601 | 1,812 | 399 |
| 1507 Lancer Drive (F) | 1995 | 1998 | -- | 119 | 1,106 | 51 | 120 | 1,156 | 1,276 | 269 |
| 840 North Lenola Road (F) | 1995 | 1998 | -- | 329 | 2,366 | 527 | 333 | 2,889 | 3,222 | 767 |
| 844 North Lenola Road (F) | 1995 | 1998 | -- | 239 | 1,714 | 260 | 241 | 1,972 | 2,213 | 533 |
| 915 North Lenola Road (F) | 1998 | 2000 | -- | 508 | 2,034 | 275 | 508 | 2,309 | 2,817 | 534 |
| 1245 North Church Street (F) | 1998 | 2001 | -- | 691 | 2,810 | 17 | 691 | 2,827 | 3,518 | 406 |
| 1247 North Church Street (F) | 1998 | 2001 | -- | 805 | 3,269 | 203 | 805 | 3,472 | 4,277 | 494 |
| 1256 North Church (F) | 1984 | 1998 | -- | 354 | 3,098 | 528 | 357 | 3,623 | 3,980 | 1,026 |
| 224 Strawbridge Drive (O) | 1984 | 1997 | -- | 766 | 4,335 | 3,464 | 767 | 7,798 | 8,565 | 2,693 |
| 228 Strawbridge Drive (O) | 1984 | 1997 | -- | 766 | 4,334 | 2,208 | 767 | 6,541 | 7,308 | 1,592 |
| 232 Strawbridge Drive (O) | 1986 | 2004 | -- | 1,521 | 7,076 | 1,919 | 1,521 | 8,995 | 10,516 | 423 |
| 2 Twosome Drive (F) | 2000 | 2001 | -- | 701 | 2,807 | 18 | 701 | 2,825 | 3,526 | 400 |
| 30 Twosome Drive (F) | 1997 | 1998 | -- | 234 | 1,954 | 78 | 236 | 2,030 | 2,266 | 500 |
| 31 Twosome Drive (F) | 1998 | 2001 | -- | 815 | 3,276 | 102 | 815 | 3,378 | 4,193 | 502 |
| 40 Twosome Drive (F) | 1996 | 1998 | -- | 297 | 2,393 | 274 | 301 | 2,663 | 2,964 | 685 |
| 41 Twosome Drive (F) | 1998 | 2001 | -- | 605 | 2,459 | 12 | 605 | 2,471 | 3,076 | 370 |
| 50 Twosome Drive (F) | 1997 | 1998 | -- | 301 | 2,330 | 89 | 304 | 2,416 | 2,720 | 616 |
West Deptford | | | | | | | | | | |
| 1451 Metropolitan Drive (F) | 1996 | 1998 | -- | 203 | 1,189 | 30 | 206 | 1,216 | 1,422 | 296 |
| | | | | | | | | | | |
Essex County | | | | | | | | | | |
Millburn | | | | | | | | | | |
| 150 J.F. Kennedy Parkway (O) | 1980 | 1997 | -- | 12,606 | 50,425 | 8,705 | 12,606 | 59,130 | 71,736 | 14,234 |
| | | | | | | | | | | |
| | | | | | | | | | | |
MACK-CALI REALTY, L.P. |
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION |
December 31, 2006 |
(dollars in thousands) |
| | | | | | | | | | | |
| | | | | | | | | | SCHEDULE III |
| | | | | | | | | | | |
| | | | | | | | Gross Amount at Which | |
| | | | | | | Costs | Carried at Close of | |
| | | | | Initial Costs | Capitalized | Period (a) | |
| | Year | | Related | | Building and | Subsequent | | Building and | | Accumulated |
Property Location (b) | Built | Acquired | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation (c) |
| | | | | | | | | | | |
Roseland | | | | | | | | | | |
| 101 Eisenhower Parkway (O) | 1980 | 1994 | -- | 228 | -- | 15,690 | 228 | 15,690 | 15,918 | 9,574 |
| 103 Eisenhower Parkway (O) | 1985 | 1994 | -- | -- | -- | 14,293 | 2,300 | 11,993 | 14,293 | 6,882 |
| 105 Eisenhower Parkway (O) | 2001 | 2001 | -- | 4,430 | 42,898 | 5,729 | 3,835 | 49,222 | 53,057 | 8,745 |
| | | | | | | | | | | |
Hudson County | | | | | | | | | | |
Jersey City | | | | | | | | | | |
| Harborside Financial Center | | | | | | | | | | |
| Plaza 1 (O) | 1983 | 1996 | -- | 3,923 | 51,013 | 19,786 | 3,923 | 70,799 | 74,722 | 13,109 |
| Harborside Financial Center | | | | | | | | | | |
| Plaza 2 (O) | 1990 | 1996 | -- | 17,655 | 101,546 | 13,990 | 15,039 | 118,152 | 133,191 | 30,698 |
| Harborside Financial Center | | | | | | | | | | |
| Plaza 3 (O) | 1990 | 1996 | -- | 17,655 | 101,878 | 13,659 | 15,040 | 118,152 | 133,192 | 30,698 |
| Harborside Financial Center | | | | | | | | | | |
| Plaza 4A (O) | 2000 | 2000 | -- | 1,244 | 56,144 | 8,683 | 1,244 | 64,827 | 66,071 | 11,516 |
| Harborside Financial Center | | | | | | | | | | |
| Plaza 5 (O) | 2002 | 2002 | -- | 6,218 | 170,682 | 56,321 | 5,705 | 227,516 | 233,221 | 26,797 |
| 101 Hudson Street (O) | 1992 | 2004 | -- | 45,530 | 271,376 | 3,285 | 45,530 | 274,661 | 320,191 | 17,649 |
| | | | | | | | | | | |
Mercer County | | | | | | | | | | |
Hamilton Township | | | | | | | | | | |
| 100 Horizon Drive (F) | 1989 | 1995 | -- | 205 | 1,676 | 248 | 294 | 1,835 | 2,129 | 549 |
| 200 Horizon Drive (F) | 1991 | 1995 | -- | 205 | 3,027 | 335 | 327 | 3,240 | 3,567 | 961 |
| 300 Horizon Drive (F) | 1989 | 1995 | -- | 379 | 4,355 | 1,157 | 502 | 5,389 | 5,891 | 1,725 |
| 500 Horizon Drive (F) | 1990 | 1995 | -- | 379 | 3,395 | 767 | 467 | 4,074 | 4,541 | 1,236 |
| 600 Horizon Drive (F) | 2002 | 2002 | -- | -- | 7,549 | 651 | 685 | 7,515 | 8,200 | 767 |
Princeton | | | | | | | | | | |
| 103 Carnegie Center (O) | 1984 | 1996 | -- | 2,566 | 7,868 | 1,710 | 2,566 | 9,578 | 12,144 | 2,701 |
| 100 Overlook Center (O) | 1988 | 1997 | -- | 2,378 | 21,754 | 2,163 | 2,378 | 23,917 | 26,295 | 6,064 |
| 5 Vaughn Drive (O) | 1987 | 1995 | -- | 657 | 9,800 | 1,681 | 657 | 11,481 | 12,138 | 3,728 |
| | | | | | | | | | | |
Middlesex County | | | | | | | | | | |
East Brunswick | | | | | | | | | | |
| 377 Summerhill Road (O) | 1977 | 1997 | -- | 649 | 2,594 | 374 | 649 | 2,968 | 3,617 | 669 |
Edison | | | | | | | | | | |
| 343 Thornall Street (O) | 1991 | 2006 | -- | 5,870 | 38,336 | 2,272 | 5,870 | 40,608 | 46,478 | 907 |
Piscataway | | | | | | | | | | |
| 30 Knightsbridge Road, | | | | | | | | | | |
| Building 3 (O) | 1977 | 2004 | -- | 1,030 | 7,269 | 312 | 1,030 | 7,581 | 8,611 | 472 |
| 30 Knightsbridge Road, | | | | | | | | | | |
| Building 4 (O) | 1977 | 2004 | -- | 1,433 | 10,121 | 348 | 1,433 | 10,469 | 11,902 | 653 |
| | | | | | | | | | | |
| | | | | | | | | | | |
MACK-CALI REALTY, L.P. |
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION |
December 31, 2006 |
(dollars in thousands) |
| | | | | | | | | | | |
| | | | | | | | | | SCHEDULE III |
| | | | | | | | | | | |
| | | | | | | | Gross Amount at Which | |
| | | | | | | Costs | Carried at Close of | |
| | | | | Initial Costs | Capitalized | Period (a) | |
| | Year | | Related | | Building and | Subsequent | | Building and | | Accumulated |
Property Location (b) | Built | Acquired | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation (c) |
| | | | | | | | | | | |
| 30 Knightsbridge Road, | | | | | | | | | | |
| Building 5 (O) | 1977 | 2004 | -- | 2,979 | 21,035 | 4,776 | 2,979 | 25,811 | 28,790 | 1,470 |
| 30 Knightsbridge Road, | | | | | | | | | | |
| Building 6 (O) | 1977 | 2004 | -- | 448 | 3,161 | 3,914 | 448 | 7,075 | 7,523 | 205 |
Plainsboro | | | | | | | | | | |
| 500 College Road East (O) | 1984 | 1998 | -- | 614 | 20,626 | 1,426 | 614 | 22,052 | 22,666 | 4,795 |
South Brunswick | | | | | | | | | | |
| 3 Independence Way (O) | 1983 | 1997 | -- | 1,997 | 11,391 | 1,177 | 1,997 | 12,568 | 14,565 | 2,906 |
Woodbridge | | | | | | | | | | |
| 581 Main Street (O) | 1991 | 1997 | -- | 3,237 | 12,949 | 24,225 | 8,115 | 32,296 | 40,411 | 6,280 |
| | | | | | | | | | | |
Monmouth County | | | | | | | | | | |
Middletown | | | | | | | | | | |
| 23 Main Street (O) | 1977 | 2005 | 33,396 | 4,336 | 19,544 | 8,853 | 4,336 | 28,397 | 32,733 | 1,502 |
| 2 Paragon Way (O) | 1989 | 2005 | -- | 999 | 4,619 | 346 | 999 | 4,965 | 5,964 | 376 |
| 3 Paragon Way (O) | 1991 | 2005 | -- | 1,423 | 6,041 | 721 | 1,423 | 6,762 | 8,185 | 307 |
| 4 Paragon Way (O) | 2002 | 2005 | -- | 1,961 | 8,827 | 12 | 1,961 | 8,839 | 10,800 | 703 |
| One River Center, | | | | | | | | | | |
| Building 1 (O) | 1983 | 2004 | -- | 3,070 | 17,414 | 4,659 | 3,054 | 22,089 | 25,143 | 1,510 |
| One River Center, | | | | | | | | | | |
| Building 2 (O) | 1983 | 2004 | -- | 2,468 | 15,043 | 663 | 2,452 | 15,722 | 18,174 | 772 |
| One River Center, | | | | | | | | | | |
| Building 3 (O) | 1984 | 2004 | -- | 4,051 | 24,790 | 778 | 4,024 | 25,595 | 29,619 | 1,363 |
| 100 Willowbrook Road (O) | 1988 | 2005 | -- | 1,264 | 5,573 | 748 | 1,264 | 6,321 | 7,585 | 329 |
Neptune | | | | | | | | | | |
| 3600 Route 66 (O) | 1989 | 1995 | -- | 1,098 | 18,146 | 1,459 | 1,098 | 19,605 | 20,703 | 5,211 |
Wall Township | | | | | | | | | | |
| 1305 Campus Parkway (O) | 1988 | 1995 | -- | 335 | 2,560 | 482 | 335 | 3,042 | 3,377 | 762 |
| 1325 Campus Parkway (F) | 1988 | 1995 | -- | 270 | 2,928 | 1,203 | 270 | 4,131 | 4,401 | 1,509 |
| 1340 Campus Parkway (F) | 1992 | 1995 | -- | 489 | 4,621 | 1,506 | 489 | 6,127 | 6,616 | 1,587 |
| 1345 Campus Parkway (F) | 1995 | 1997 | -- | 1,023 | 5,703 | 1,591 | 1,024 | 7,293 | 8,317 | 2,103 |
| 1350 Campus Parkway (O) | 1990 | 1995 | -- | 454 | 7,134 | 1,437 | 454 | 8,571 | 9,025 | 2,301 |
| 1433 Highway 34 (F) | 1985 | 1995 | -- | 889 | 4,321 | 924 | 889 | 5,245 | 6,134 | 1,398 |
| 1320 Wyckoff Avenue (F) | 1986 | 1995 | -- | 255 | 1,285 | 68 | 255 | 1,353 | 1,608 | 370 |
| 1324 Wyckoff Avenue (F) | 1987 | 1995 | -- | 230 | 1,439 | 246 | 230 | 1,685 | 1,915 | 456 |
| | | | | | | | | | | |
| | | | | | | | | | | |
MACK-CALI REALTY, L.P. |
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION |
December 31, 2006 |
(dollars in thousands) |
| | | | | | | | | | | |
| | | | | | | | | | SCHEDULE III |
| | | | | | | | | | | |
| | | | | | | | Gross Amount at Which | |
| | | | | | | Costs | Carried at Close of | |
| | | | | Initial Costs | Capitalized | Period (a) | |
| | Year | | Related | | Building and | Subsequent | | Building and | | Accumulated |
Property Location (b) | Built | Acquired | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation (c) |
| | | | | | | | | | | |
Morris County | | | | | | | | | | |
Florham Park | | | | | | | | | | |
| 325 Columbia Parkway (O) | 1987 | 1994 | -- | 1,564 | -- | 14,851 | 1,564 | 14,851 | 16,415 | 6,898 |
Morris Plains | | | | | | | | | | |
| 250 Johnson Road (O) | 1977 | 1997 | -- | 2,004 | 8,016 | 1,517 | 2,004 | 9,533 | 11,537 | 2,346 |
| 201 Littleton Road (O) | 1979 | 1997 | -- | 2,407 | 9,627 | 1,063 | 2,407 | 10,690 | 13,097 | 2,567 |
Morris Township | | | | | | | | | | |
| 412 Mt. Kemble Avenue (O) | 1985 | 2004 | -- | 4,360 | 33,167 | 803 | 4,360 | 33,970 | 38,330 | 2,148 |
Parsippany | | | | | | | | | | |
| 4 Campus Drive (O) | 1983 | 2001 | -- | 5,213 | 20,984 | 1,485 | 5,213 | 22,469 | 27,682 | 3,419 |
| 6 Campus Drive (O) | 1983 | 2001 | -- | 4,411 | 17,796 | 2,247 | 4,411 | 20,043 | 24,454 | 3,400 |
| 7 Campus Drive (O) | 1982 | 1998 | -- | 1,932 | 27,788 | 107 | 1,932 | 27,895 | 29,827 | 6,196 |
| 8 Campus Drive (O) | 1987 | 1998 | -- | 1,865 | 35,456 | 3,994 | 1,865 | 39,450 | 41,315 | 9,333 |
| 9 Campus Drive (O) | 1983 | 2001 | -- | 3,277 | 11,796 | 17,191 | 5,842 | 26,422 | 32,264 | 5,654 |
| 4 Century Drive (O) | 1981 | 2004 | -- | 1,787 | 9,575 | 917 | 1,787 | 10,492 | 12,279 | 599 |
| 5 Century Drive (O) | 1981 | 2004 | -- | 1,762 | 9,341 | 331 | 1,762 | 9,672 | 11,434 | 471 |
| 6 Century Drive (O) | 1981 | 2004 | -- | 1,289 | 6,848 | 425 | 1,289 | 7,273 | 8,562 | 352 |
| 2 Dryden Way (O) | 1990 | 1998 | -- | 778 | 420 | 13 | 778 | 433 | 1,211 | 105 |
| 4 Gatehall Drive (O) | 1988 | 2000 | -- | 8,452 | 33,929 | 2,232 | 8,452 | 36,161 | 44,613 | 6,379 |
| 2 Hilton Court (O) | 1991 | 1998 | -- | 1,971 | 32,007 | 2,259 | 1,971 | 34,266 | 36,237 | 8,073 |
| 1633 Littleton Road (O) | 1978 | 2002 | -- | 2,283 | 9,550 | 163 | 2,355 | 9,641 | 11,996 | 1,453 |
| 600 Parsippany Road (O) | 1978 | 1994 | -- | 1,257 | 5,594 | 2,262 | 1,257 | 7,856 | 9,113 | 2,504 |
| 1 Sylvan Way (O) | 1989 | 1998 | -- | 1,689 | 24,699 | 394 | 1,021 | 25,761 | 26,782 | 6,985 |
| 5 Sylvan Way (O) | 1989 | 1998 | -- | 1,160 | 25,214 | 1,826 | 1,161 | 27,039 | 28,200 | 6,145 |
| 7 Sylvan Way (O) | 1987 | 1998 | -- | 2,084 | 26,083 | 2,092 | 2,084 | 28,175 | 30,259 | 6,612 |
| 35 Waterview Boulevard (O) | 1990 | 2006 | 20,318 | 4,996 | 27,218 | 256 | 4,996 | 27,474 | 32,470 | 685 |
| 5 Wood Hollow Road (O) | 1979 | 2004 | -- | 5,302 | 26,488 | 11,710 | 5,302 | 38,198 | 43,500 | 2,212 |
| | | | | | | | | | | |
Passaic County | | | | | | | | | | |
Clifton | | | | | | | | | | |
| 777 Passaic Avenue (O) | 1983 | 1994 | -- | -- | -- | 7,204 | 1,100 | 6,104 | 7,204 | 3,405 |
Totowa | | | | | | | | | | |
| 1 Center Court (F) | 1999 | 1999 | -- | 270 | 1,824 | 713 | 270 | 2,537 | 2,807 | 939 |
| 2 Center Court (F) | 1998 | 1998 | -- | 191 | -- | 2,459 | 191 | 2,459 | 2,650 | 795 |
| 11 Commerce Way (F) | 1989 | 1995 | -- | 586 | 2,986 | 228 | 586 | 3,214 | 3,800 | 1,028 |
| 20 Commerce Way (F) | 1992 | 1995 | -- | 516 | 3,108 | 52 | 516 | 3,160 | 3,676 | 875 |
| 29 Commerce Way (F) | 1990 | 1995 | -- | 586 | 3,092 | 950 | 586 | 4,042 | 4,628 | 1,280 |
| 40 Commerce Way (F) | 1987 | 1995 | -- | 516 | 3,260 | 356 | 516 | 3,616 | 4,132 | 1,247 |
| 45 Commerce Way (F) | 1992 | 1995 | -- | 536 | 3,379 | 461 | 536 | 3,840 | 4,376 | 1,198 |
| 60 Commerce Way (F) | 1988 | 1995 | -- | 526 | 3,257 | 422 | 526 | 3,679 | 4,205 | 1,099 |
| | | | | | | | | | | |
| | | | | | | | | | | |
MACK-CALI REALTY, L.P. |
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION |
December 31, 2006 |
(dollars in thousands) |
| | | | | | | | | | | |
| | | | | | | | | | SCHEDULE III |
| | | | | | | | | | | |
| | | | | | | | Gross Amount at Which | |
| | | | | | | Costs | Carried at Close of | |
| | | | | Initial Costs | Capitalized | Period (a) | |
| | Year | | Related | | Building and | Subsequent | | Building and | | Accumulated |
Property Location (b) | Built | Acquired | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation (c) |
| | | | | | | | | | | |
| 80 Commerce Way (F) | 1996 | 1996 | -- | 227 | -- | 1,567 | 227 | 1,567 | 1,794 | 734 |
| 100 Commerce Way (F) | 1996 | 1996 | -- | 226 | -- | 1,566 | 226 | 1,566 | 1,792 | 734 |
| 120 Commerce Way (F) | 1994 | 1995 | -- | 228 | -- | 1,299 | 228 | 1,299 | 1,527 | 372 |
| 140 Commerce Way (F) | 1994 | 1995 | -- | 229 | -- | 1,299 | 229 | 1,299 | 1,528 | 372 |
| 999 Riverview Drive (O) | 1988 | 1995 | -- | 476 | 6,024 | 2,154 | 1,102 | 7,552 | 8,654 | 2,148 |
| | | | | | | | | | | |
Somerset County | | | | | | | | | | |
Basking Ridge | | | | | | | | | | |
| 106 Allen Road (O) | 2000 | 2000 | -- | 3,853 | 14,465 | 3,813 | 4,093 | 18,038 | 22,131 | 4,467 |
| 222 Mt. Airy Road (O) | 1986 | 1996 | -- | 775 | 3,636 | 2,147 | 775 | 5,783 | 6,558 | 1,212 |
| 233 Mt. Airy Road (O) | 1987 | 1996 | -- | 1,034 | 5,033 | 1,646 | 1,034 | 6,679 | 7,713 | 2,101 |
Bridgewater | | | | | | | | | | |
| 721 Route 202/206 (O) | 1989 | 1997 | -- | 6,730 | 26,919 | 4,346 | 6,730 | 31,265 | 37,995 | 6,494 |
| | | | | | | | | | | |
Union County | | | | | | | | | | |
Clark | | | | | | | | | | |
| 100 Walnut Avenue (O) | 1985 | 1994 | -- | -- | -- | 16,932 | 1,822 | 15,110 | 16,932 | 8,252 |
Cranford | | | | | | | | | | |
| 6 Commerce Drive (O) | 1973 | 1994 | -- | 250 | -- | 2,791 | 250 | 2,791 | 3,041 | 1,790 |
| 11 Commerce Drive (O) | 1981 | 1994 | -- | 470 | -- | 6,097 | 470 | 6,097 | 6,567 | 3,485 |
| 12 Commerce Drive (O) | 1967 | 1997 | -- | 887 | 3,549 | 1,662 | 887 | 5,211 | 6,098 | 1,479 |
| 14 Commerce Drive (O) | 1971 | 2003 | -- | 1,283 | 6,344 | 35 | 1,283 | 6,379 | 7,662 | 519 |
| 20 Commerce Drive (O) | 1990 | 1994 | -- | 2,346 | -- | 21,833 | 2,346 | 21,833 | 24,179 | 9,175 |
| 25 Commerce Drive (O) | 1971 | 2002 | -- | 1,520 | 6,186 | 265 | 1,520 | 6,451 | 7,971 | 1,456 |
| 65 Jackson Drive (O) | 1984 | 1994 | -- | 541 | -- | 6,169 | 542 | 6,168 | 6,710 | 3,111 |
New Providence | | | | | | | | | | |
| 890 Mountain Road (O) | 1977 | 1997 | -- | 2,796 | 11,185 | 4,896 | 3,765 | 15,112 | 18,877 | 3,452 |
| | | | | | | | | | | |
NEW YORK | | | | | | | | | | |
Rockland County | | | | | | | | | | |
Suffern | | | | | | | | | | |
| 400 Rella Boulevard (O) | 1988 | 1995 | -- | 1,090 | 13,412 | 3,601 | 1,090 | 17,013 | 18,103 | 5,781 |
| | | | | | | | | | | |
Westchester County | | | | | | | | | | |
Elmsford | | | | | | | | | | |
| 11 Clearbrook Road (F) | 1974 | 1997 | -- | 149 | 2,159 | 392 | 149 | 2,551 | 2,700 | 632 |
| 75 Clearbrook Road (F) | 1990 | 1997 | -- | 2,314 | 4,716 | 107 | 2,314 | 4,823 | 7,137 | 1,179 |
| 100 Clearbrook Road (O) | 1975 | 1997 | -- | 220 | 5,366 | 902 | 220 | 6,268 | 6,488 | 1,736 |
| 125 Clearbrook Road (F) | 2002 | 2002 | -- | 1,055 | 3,676 | (51) | 1,055 | 3,625 | 4,680 | 769 |
| 150 Clearbrook Road (F) | 1975 | 1997 | -- | 497 | 7,030 | 951 | 497 | 7,981 | 8,478 | 1,977 |
| | | | | | | | | | | |
| | | | | | | | | | | |
MACK-CALI REALTY, L.P. |
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION |
December 31, 2006 |
(dollars in thousands) |
| | | | | | | | | | | |
| | | | | | | | | | SCHEDULE III |
| | | | | | | | | | | |
| | | | | | | | Gross Amount at Which | |
| | | | | | | Costs | Carried at Close of | |
| | | | | Initial Costs | Capitalized | Period (a) | |
| | Year | | Related | | Building and | Subsequent | | Building and | | Accumulated |
Property Location (b) | Built | Acquired | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation (c) |
| | | | | | | | | | | |
| 175 Clearbrook Road (F) | 1973 | 1997 | -- | 655 | 7,473 | 877 | 655 | 8,350 | 9,005 | 2,191 |
| 200 Clearbrook Road (F) | 1974 | 1997 | -- | 579 | 6,620 | 1,066 | 579 | 7,686 | 8,265 | 2,052 |
| 250 Clearbrook Road (F) | 1973 | 1997 | -- | 867 | 8,647 | 1,189 | 867 | 9,836 | 10,703 | 2,622 |
| 50 Executive Boulevard (F) | 1969 | 1997 | -- | 237 | 2,617 | 97 | 237 | 2,714 | 2,951 | 678 |
| 77 Executive Boulevard (F) | 1977 | 1997 | -- | 34 | 1,104 | 129 | 34 | 1,233 | 1,267 | 334 |
| 85 Executive Boulevard (F) | 1968 | 1997 | -- | 155 | 2,507 | 536 | 155 | 3,043 | 3,198 | 673 |
| 101 Executive Boulevard (O) | 1971 | 1997 | -- | 267 | 5,838 | 873 | 267 | 6,711 | 6,978 | 1,733 |
| 300 Executive Boulevard (F) | 1970 | 1997 | -- | 460 | 3,609 | 153 | 460 | 3,762 | 4,222 | 953 |
| 350 Executive Boulevard (F) | 1970 | 1997 | -- | 100 | 1,793 | 153 | 100 | 1,946 | 2,046 | 550 |
| 399 Executive Boulevard (F) | 1962 | 1997 | -- | 531 | 7,191 | 66 | 531 | 7,257 | 7,788 | 1,836 |
| 400 Executive Boulevard (F) | 1970 | 1997 | -- | 2,202 | 1,846 | 427 | 2,202 | 2,273 | 4,475 | 684 |
| 500 Executive Boulevard (F) | 1970 | 1997 | -- | 258 | 4,183 | 682 | 258 | 4,865 | 5,123 | 1,396 |
| 525 Executive Boulevard (F) | 1972 | 1997 | -- | 345 | 5,499 | 722 | 345 | 6,221 | 6,566 | 1,625 |
| 700 Executive Boulevard (L) | N/A | 1997 | -- | 970 | -- | -- | 970 | -- | 970 | -- |
| 3 Odell Plaza (O) | 1984 | 2003 | -- | 1,322 | 4,777 | 1,963 | 1,322 | 6,740 | 8,062 | 779 |
| 5 Skyline Drive (F) | 1980 | 2001 | -- | 2,219 | 8,916 | 704 | 2,219 | 9,620 | 11,839 | 1,747 |
| 6 Skyline Drive (F) | 1980 | 2001 | -- | 740 | 2,971 | 23 | 739 | 2,995 | 3,734 | 816 |
| 555 Taxter Road (O) | 1986 | 2000 | -- | 4,285 | 17,205 | 5,451 | 4,285 | 22,656 | 26,941 | 3,974 |
| 565 Taxter Road (O) | 1988 | 2000 | -- | 4,285 | 17,205 | 3,464 | 4,233 | 20,721 | 24,954 | 3,658 |
| 570 Taxter Road (O) | 1972 | 1997 | -- | 438 | 6,078 | 963 | 438 | 7,041 | 7,479 | 2,077 |
| 1 Warehouse Lane (I) | 1957 | 1997 | -- | 3 | 268 | 215 | 3 | 483 | 486 | 111 |
| 2 Warehouse Lane (I) | 1957 | 1997 | -- | 4 | 672 | 189 | 4 | 861 | 865 | 275 |
| 3 Warehouse Lane (I) | 1957 | 1997 | -- | 21 | 1,948 | 526 | 21 | 2,474 | 2,495 | 701 |
| 4 Warehouse Lane (I) | 1957 | 1997 | -- | 84 | 13,393 | 2,837 | 85 | 16,229 | 16,314 | 4,040 |
| 5 Warehouse Lane (I) | 1957 | 1997 | -- | 19 | 4,804 | 1,379 | 19 | 6,183 | 6,202 | 1,636 |
| 6 Warehouse Lane (I) | 1982 | 1997 | -- | 10 | 4,419 | 322 | 10 | 4,741 | 4,751 | 1,153 |
| 1 Westchester Plaza (F) | 1967 | 1997 | -- | 199 | 2,023 | 170 | 199 | 2,193 | 2,392 | 551 |
| 2 Westchester Plaza (F) | 1968 | 1997 | -- | 234 | 2,726 | 182 | 234 | 2,908 | 3,142 | 718 |
| 3 Westchester Plaza (F) | 1969 | 1997 | -- | 655 | 7,936 | 585 | 655 | 8,521 | 9,176 | 2,219 |
| 4 Westchester Plaza (F) | 1969 | 1997 | -- | 320 | 3,729 | 86 | 320 | 3,815 | 4,135 | 962 |
| 5 Westchester Plaza (F) | 1969 | 1997 | -- | 118 | 1,949 | 194 | 118 | 2,143 | 2,261 | 619 |
| 6 Westchester Plaza (F) | 1968 | 1997 | -- | 164 | 1,998 | 167 | 164 | 2,165 | 2,329 | 621 |
| 7 Westchester Plaza (F) | 1972 | 1997 | -- | 286 | 4,321 | 201 | 286 | 4,522 | 4,808 | 1,114 |
| 8 Westchester Plaza (F) | 1971 | 1997 | -- | 447 | 5,262 | 859 | 447 | 6,121 | 6,568 | 1,543 |
Hawthorne | | | | | | | | | | |
| 200 Saw Mill River Road (F) | 1965 | 1997 | -- | 353 | 3,353 | 496 | 353 | 3,849 | 4,202 | 993 |
| 1 Skyline Drive (O) | 1980 | 1997 | -- | 66 | 1,711 | 301 | 66 | 2,012 | 2,078 | 509 |
| 2 Skyline Drive (O) | 1987 | 1997 | -- | 109 | 3,128 | 471 | 109 | 3,599 | 3,708 | 1,024 |
| 4 Skyline Drive (F) | 1987 | 1997 | -- | 363 | 7,513 | 1,686 | 363 | 9,199 | 9,562 | 2,254 |
| 7 Skyline Drive (O) | 1987 | 1998 | -- | 330 | 13,013 | 1,407 | 330 | 14,420 | 14,750 | 3,260 |
| | | | | | | | | | | |
| | | | | | | | | | | |
MACK-CALI REALTY, L.P. |
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION |
December 31, 2006 |
(dollars in thousands) |
| | | | | | | | | | | |
| | | | | | | | | | SCHEDULE III |
| | | | | | | | | | | |
| | | | | | | | Gross Amount at Which | |
| | | | | | | Costs | Carried at Close of | |
| | | | | Initial Costs | Capitalized | Period (a) | |
| | Year | | Related | | Building and | Subsequent | | Building and | | Accumulated |
Property Location (b) | Built | Acquired | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation (c) |
| | | | | | | | | | | |
| 8 Skyline Drive (F) | 1985 | 1997 | -- | 212 | 4,410 | 2,205 | 212 | 6,615 | 6,827 | 2,575 |
| 10 Skyline Drive (F) | 1985 | 1997 | -- | 134 | 2,799 | 563 | 134 | 3,362 | 3,496 | 705 |
| 11 Skyline Drive (F) | 1989 | 1997 | -- | -- | 4,788 | 430 | -- | 5,218 | 5,218 | 1,420 |
| 12 Skyline Drive (F) | 1999 | 1999 | -- | 1,562 | 3,254 | 1,597 | 1,320 | 5,093 | 6,413 | 1,786 |
| 14 Skyline Drive (L) | N/A | 2002 | -- | 964 | | 16 | 980 | | 980 | -- |
| 15 Skyline Drive (F) | 1989 | 1997 | -- | -- | 7,449 | 328 | -- | 7,777 | 7,777 | 2,050 |
| 16 Skyline Drive (L) | N/A | 2002 | -- | 850 | | 31 | 881 | | 881 | -- |
| 17 Skyline Drive (O) | 1989 | 1997 | -- | -- | 7,269 | 716 | -- | 7,985 | 7,985 | 1,857 |
| 19 Skyline Drive (O) | 1982 | 1997 | -- | 2,355 | 34,254 | 3,612 | 2,356 | 37,865 | 40,221 | 11,041 |
Tarrytown | | | | | | | | | | |
| 200 White Plains Road (O) | 1982 | 1997 | -- | 378 | 8,367 | 1,235 | 378 | 9,602 | 9,980 | 2,516 |
| 220 White Plains Road (O) | 1984 | 1997 | -- | 367 | 8,112 | 1,062 | 367 | 9,174 | 9,541 | 2,414 |
| 230 White Plains Road (R) | 1984 | 1997 | -- | 124 | 1,845 | 107 | 124 | 1,952 | 2,076 | 457 |
White Plains | | | | | | | | | | |
| 1 Barker Avenue (O) | 1975 | 1997 | -- | 208 | 9,629 | 1,168 | 207 | 10,798 | 11,005 | 2,813 |
| 3 Barker Avenue (O) | 1983 | 1997 | -- | 122 | 7,864 | 1,976 | 122 | 9,840 | 9,962 | 2,787 |
| 50 Main Street (O) | 1985 | 1997 | -- | 564 | 48,105 | 6,680 | 564 | 54,785 | 55,349 | 14,412 |
| 11 Martine Avenue (O) | 1987 | 1997 | -- | 127 | 26,833 | 4,872 | 127 | 31,705 | 31,832 | 9,291 |
| 1 Water Street (O) | 1979 | 1997 | -- | 211 | 5,382 | 1,211 | 211 | 6,593 | 6,804 | 1,736 |
Yonkers | | | | | | | | | | |
| 100 Corporate Boulevard (F) | 1987 | 1997 | -- | 602 | 9,910 | 744 | 602 | 10,654 | 11,256 | 2,865 |
| 200 Corporate Boulevard | | | | | | | | | | |
| South (F) | 1990 | 1997 | -- | 502 | 7,575 | 445 | 502 | 8,020 | 8,522 | 1,914 |
| 250 Corporate Boulevard | | | | | | | | | | |
| South (L) | N/A | 2002 | -- | 1,028 | -- | 171 | 1,139 | 60 | 1,199 | -- |
| 1 Enterprise Boulevard (L) | N/A | 1997 | -- | 1,379 | -- | 1 | 1,380 | -- | 1,380 | -- |
| 1 Executive Boulevard (O) | 1982 | 1997 | -- | 1,104 | 11,904 | 2,355 | 1,105 | 14,258 | 15,363 | 3,951 |
| 2 Executive Plaza (R) | 1986 | 1997 | -- | 89 | 2,439 | 3 | 89 | 2,442 | 2,531 | 605 |
| 3 Executive Plaza (O) | 1987 | 1997 | -- | 385 | 6,256 | 1,624 | 385 | 7,880 | 8,265 | 2,423 |
| 4 Executive Plaza (F) | 1986 | 1997 | -- | 584 | 6,134 | 1,862 | 584 | 7,996 | 8,580 | 2,061 |
| 6 Executive Plaza (F) | 1987 | 1997 | -- | 546 | 7,246 | 318 | 546 | 7,564 | 8,110 | 1,935 |
| 1 Odell Plaza (F) | 1980 | 1997 | -- | 1,206 | 6,815 | 681 | 1,206 | 7,496 | 8,702 | 1,988 |
| 5 Odell Plaza (F) | 1983 | 1997 | -- | 331 | 2,988 | 241 | 331 | 3,229 | 3,560 | 819 |
| 7 Odell Plaza (F) | 1984 | 1997 | -- | 419 | 4,418 | 301 | 419 | 4,719 | 5,138 | 1,190 |
| | | | | | | | | | | |
PENNSYLVANIA | | | | | | | | | | |
Chester County | | | | | | | | | | |
Berwyn | | | | | | | | | | |
| 1000 Westlakes Drive (O) | 1989 | 1997 | -- | 619 | 9,016 | 559 | 619 | 9,575 | 10,194 | 2,489 |
| 1055 Westlakes Drive (O) | 1990 | 1997 | -- | 1,951 | 19,046 | 3,579 | 1,951 | 22,625 | 24,576 | 6,313 |
| | | | | | | | | | | |
| | | | | | | | | | | |
MACK-CALI REALTY, L.P. |
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION |
December 31, 2006 |
(dollars in thousands) |
| | | | | | | | | | | |
| | | | | | | | | | SCHEDULE III |
| | | | | | | | | | | |
| | | | | | | | Gross Amount at Which | |
| | | | | | | Costs | Carried at Close of | |
| | | | | Initial Costs | Capitalized | Period (a) | |
| | Year | | Related | | Building and | Subsequent | | Building and | | Accumulated |
Property Location (b) | Built | Acquired | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation (c) |
| | | | | | | | | | | |
| 1205 Westlakes Drive (O) | 1988 | 1997 | -- | 1,323 | 20,098 | 1,636 | 1,323 | 21,734 | 23,057 | 5,510 |
| 1235 Westlakes Drive (O) | 1986 | 1997 | -- | 1,417 | 21,215 | 3,357 | 1,418 | 24,571 | 25,989 | 5,974 |
| | | | | | | | | | | |
Delaware County | | | | | | | | | | |
Lester | | | | | | | | | | |
| 100 Stevens Drive (O) | 1986 | 1996 | -- | 1,349 | 10,018 | 2,817 | 1,349 | 12,835 | 14,184 | 3,666 |
| 200 Stevens Drive (O) | 1987 | 1996 | -- | 1,644 | 20,186 | 4,668 | 1,644 | 24,854 | 26,498 | 6,948 |
| 300 Stevens Drive (O) | 1992 | 1996 | -- | 491 | 9,490 | 1,880 | 491 | 11,370 | 11,861 | 3,212 |
Media | | | | | | | | | | |
| 1400 Providence Rd, | | | | | | | | | | |
| Center I (O) | 1986 | 1996 | -- | 1,042 | 9,054 | 2,209 | 1,042 | 11,263 | 12,305 | 3,335 |
| 1400 Providence Rd, | | | | | | | | | | |
| Center II (O) | 1990 | 1996 | -- | 1,543 | 16,464 | 2,941 | 1,544 | 19,404 | 20,948 | 5,704 |
| | | | | | | | | | | |
Montgomery County | | | | | | | | | | |
Bala Cynwyd | | | | | | | | | | |
| 150 Monument Road (O) | 1981 | 2004 | -- | 2,845 | 14,780 | 2,473 | 2,845 | 17,253 | 20,098 | 818 |
Blue Bell | | | | | | | | | | |
| 4 Sentry Parkway (O) | 1982 | 2003 | -- | 1,749 | 7,721 | 189 | 1,749 | 7,910 | 9,659 | 656 |
| 16 Sentry Parkway (O) | 1988 | 2002 | -- | 3,377 | 13,511 | 1,064 | 3,377 | 14,575 | 17,952 | 2,458 |
| 18 Sentry Parkway (O) | 1988 | 2002 | -- | 3,515 | 14,062 | 1,699 | 3,515 | 15,761 | 19,276 | 2,478 |
King of Prussia | | | | | | | | | | |
| 2200 Renaissance Blvd (O) | 1985 | 2002 | 17,819 | 5,347 | 21,453 | 2,242 | 5,347 | 23,695 | 29,042 | 4,897 |
Lower Providence | | | | | | | | | | |
| 1000 Madison Avenue (O) | 1990 | 1997 | -- | 1,713 | 12,559 | 2,247 | 1,714 | 14,805 | 16,519 | 3,295 |
Plymouth Meeting | | | | | | | | | | |
| 1150 Plymouth Meeting | | | | | | | | | | |
| Mall (O) | 1970 | 1997 | -- | 125 | 499 | 30,808 | 6,219 | 25,213 | 31,432 | 5,951 |
| Five Sentry Parkway East (O) | 1984 | 1996 | -- | 642 | 7,992 | 525 | 642 | 8,517 | 9,159 | 2,164 |
| Five Sentry Parkway West (O) | 1984 | 1996 | -- | 268 | 3,334 | 86 | 268 | 3,420 | 3,688 | 870 |
| | | | | | | | | | | |
CONNETICUT | | | | | | | | | | |
Fairfield County | | | | | | | | | | |
Greenwich | | | | | | | | | | |
| 500 West Putnam Avenue (O) | 1973 | 1998 | 25,000 | 3,300 | 16,734 | 1,755 | 3,300 | 18,489 | 21,789 | 4,588 |
Norwalk | | | | | | | | | | |
| 40 Richards Avenue (O) | 1985 | 1998 | -- | 1,087 | 18,399 | 3,038 | 1,087 | 21,437 | 22,524 | 4,876 |
Shelton | | | | | | | | | | |
| 1000 Bridgeport Avenue (O) | 1986 | 1997 | -- | 773 | 14,934 | 2,306 | 744 | 17,269 | 18,013 | 4,632 |
Stamford | | | | | | | | | | |
| 1266 East Main Street (O) | 1984 | 2002 | 18,013 | 6,638 | 26,567 | 2,595 | 6,638 | 29,162 | 35,800 | 4,537 |
| | | | | | | | | | | |
| | | | | | | | | | | |
MACK-CALI REALTY, L.P. |
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION |
December 31, 2006 |
(dollars in thousands) |
| | | | | | | | | | | |
| | | | | | | | | | SCHEDULE III |
| | | | | | | | | | | |
| | | | | | | | Gross Amount at Which | |
| | | | | | | Costs | Carried at Close of | |
| | | | | Initial Costs | Capitalized | Period (a) | |
| | Year | | Related | | Building and | Subsequent | | Building and | | Accumulated |
Property Location (b) | Built | Acquired | Encumbrances | Land | Improvements | to Acquisition | Land | Improvements | Total | Depreciation (c) |
| | | | | | | | | | | |
| 419 West Avenue (F) | 1986 | 1997 | -- | 4,538 | 9,246 | 1,266 | 4,538 | 10,512 | 15,050 | 2,784 |
| 500 West Avenue (F) | 1988 | 1997 | -- | 415 | 1,679 | 194 | 415 | 1,873 | 2,288 | 519 |
| 550 West Avenue (F) | 1990 | 1997 | -- | 1,975 | 3,856 | 22 | 1,975 | 3,878 | 5,853 | 960 |
| 600 West Avenue (F) | 1999 | 1999 | -- | 2,305 | 2,863 | 833 | 2,305 | 3,696 | 6,001 | 664 |
| 650 West Avenue (F) | 1998 | 1998 | -- | 1,328 | -- | 3,929 | 1,328 | 3,929 | 5,257 | 1,590 |
| | | | | | | | | | | |
DISTRICT OF COLUMBIA | | | | | | | | | | |
Washington, | | | | | | | | | | |
| 1201 Connecticut Avenue, | | | | | | | | | | |
| NW (O) | 1940 | 1999 | -- | 14,228 | 18,571 | 2,732 | 14,228 | 21,303 | 35,531 | 4,071 |
| 1400 L Street, NW (O) | 1987 | 1998 | -- | 13,054 | 27,423 | 6,643 | 13,054 | 34,066 | 47,120 | 6,196 |
| | | | | | | | | | | |
MARYLAND | | | | | | | | | | |
Prince George’s County | | | | | | | | | | |
Greenbelt | | | | | | | | | | |
| 9200 Edmonston Road (O) | 1973/03 | 2006 | 5,232 | 1,547 | 4,131 | -- | 1,547 | 4,131 | 5,678 | 149 |
| 6301 Ivy Lane (O) | 1979/95 | 2006 | 6,821 | 5,168 | 14,706 | 2 | 5,168 | 14,708 | 19,876 | 516 |
| 6303 Ivy Lane (O) | 1980/03 | 2006 | 6,020 | 5,115 | 13,860 | -- | 5,115 | 13,860 | 18,975 | 471 |
| 6305 Ivy Lane (O) | 1982/95 | 2006 | 7,285 | 5,615 | 14,420 | 158 | 5,615 | 14,578 | 20,193 | 539 |
| 6404 Ivy Lane (O) | 1987 | 2006 | 13,665 | 7,578 | 20,785 | 71 | 7,578 | 20,856 | 28,434 | 838 |
| 6406 Ivy Lane (O) | 1991 | 2006 | -- | 7,514 | 21,152 | -- | 7,514 | 21,152 | 28,666 | 641 |
| 6411 Ivy Lane (O) | 1984/05 | 2006 | -- | 6,867 | 17,470 | 16 | 6,867 | 17,486 | 24,353 | 625 |
Lanham | | | | | | | | | | |
| 4200 Parliament Place (O) | 1989 | 1998 | -- | 2,114 | 13,546 | 626 | 1,393 | 14,893 | 16,286 | 3,749 |
| | | | | | | | | | | |
| | | | | | | | | | | |
Projects Under Development | | | | | | | | | | |
and Developable Land | | | -- | 98,617 | 25,631 | -- | 98,617 | 25,631 | 124,248 | |
| | | | | | | | | | | |
Furniture, Fixtures | | | | | | | | | | |
and Equipment | | | -- | -- | -- | 8,224 | | 8,224 | 8,224 | 6,352 |
| | | | | | | | | | | |
| TOTALS | | | 344,735 | 645,278 | 3,267,589 | 660,720 | 659,169 | 3,914,418 | 4,573,587 | 796,793 |
| | | | | | | | | | | |
| (a) | The aggregate cost for federal income tax purposes at December 31, 2006 was approximately $2.9 billion. |
(b) Legend of Property Codes:
(O)=Office Property (R)=Stand-alone Retail Property
(F)=Office/Flex Property (L)=Land Lease
(I)=Industrial/Warehouse Property
(c) Depreciation of the buildings and improvements are calculated over lives ranging from the life of the lease to 40 years.
MACK-CALI REALTY, L.P.
NOTE TO SCHEDULE III
Changes in rental properties and accumulated depreciation for the periods ended December 31, 2006, 2005 and 2004 are as follows: (dollars in thousands)
| | | 2006 | | 2005 | | 2004 | |
Rental Properties | | | | | | | |
| Balance at beginning of year | | $ | 4,491,752 | | $ | 4,160,959 | | $ | 3,954,632 | |
Additions | | | 405,883 | | | 485,680 | | | 340,472 | |
Rental property held for sale - | | | | | | | | | | |
before accumulated depreciation | | | -- | | | -- | | | (21,929 | ) |
Properties sold | | | (313,345 | ) | | (120,755 | ) | | (112,179 | ) |
Retirements/disposals | | | (10,703 | ) | | (34,132 | ) | | (37 | ) |
| Balance at end of year | | $ | 4,573,587 | | $ | 4,491,752 | | $ | 4,160,959 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Accumulated Depreciation | | | | | | | | | | |
| Balance at beginning of year | | $ | 722,980 | | $ | 641,626 | | $ | 546,007 | |
Depreciation expense | | | 131,848 | | | 128,814 | | | 111,975 | |
Rental property held for sale | | | -- | | | -- | | | (1,550 | ) |
Properties sold | | | (53,037 | ) | | (16,691 | ) | | (14,797 | ) |
Retirements/disposals | | | (4,998 | ) | | (30,769 | ) | | (9 | ) |
| Balance at end of year | | $ | 796,793 | | $ | 722,980 | | $ | 641,626 | |
MACK-CALI REALTY, L.P.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Mack-Cali Realty, L.P.
(Registrant)
By: Mack-Cali Realty Corporation
its General Partner
Date: February 21, 2007 /s/ Barry Lefkowitz
Barry Lefkowitz
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Name | Title | Date |
| | | |
/s/ William L. Mack | Chairman of the Board | February 21, 2007 |
| William L. Mack | | |
| | | |
/s/ Mitchell E. Hersh | President and Chief Executive | February 21, 2007 |
| Mitchell E. Hersh | Officer and Director | |
| | | |
/s/ Barry Lefkowitz | Executive Vice President and | February 21, 2007 |
| Barry Lefkowitz | Chief Financial Officer | |
| | | |
/s/ Alan S. Bernikow | Director | February 21, 2007 |
| Alan S. Bernikow | | |
| | | |
/s/ John R. Cali | Director | February 21, 2007 |
| John R. Cali | | |
| | | |
/s/ Kenneth M. Duberstein | Director | February 21, 2007 |
| Kenneth M. Duberstein | | |
| | | |
/s/ Nathan Gantcher | Director | February 21, 2007 |
| Nathan Gantcher | | |
Name | Title | Date |
| | | |
/s/ David S. Mack | Director | February 21, 2007 |
| David S. Mack | | |
| | | |
/s/ Alan G. Philibosian | Director | February 21, 2007 |
| Alan G. Philibosian | | |
| | | |
/s/ Irvin D. Reid | Director | February 21, 2007 |
| Irvin D. Reid | | |
| | | |
/s/ Vincent Tese | Director | February 21, 2007 |
| Vincent Tese | | |
| | | |
/s/ Robert F. Weinberg | Director | February 21, 2007 |
| Robert F. Weinberg | | |
| | | |
/s/ Roy J. Zuckerberg | Director | February 21, 2007 |
| Roy J. Zuckerberg | | |
MACK-CALI REALTY, L.P.
EXHIBIT INDEX
Number | | Exhibit Title |
| | | |
| 3.1 | | Restated Charter of Mack-Cali Realty Corporation dated June 11, 2001 (filed as Exhibit 3.1 to the Operating Partnership’s Form 10-Q dated June 30, 2001 and incorporated herein by reference). |
| | | |
| 3.2 | | Amended and Restated Bylaws of Mack-Cali Realty Corporation dated June 10, 1999 (filed as Exhibit 3.2 to the Corporation’s Form 8-K dated June 10, 1999 and incorporated herein by reference). |
| | | |
| 3.3 | | Amendment No. 1 to the Amended and Restated Bylaws of Mack-Cali Realty Corporation dated March 4, 2003, (filed as Exhibit 3.3 to the Operating Partnership’s Form 10-Q dated March 31, 2003 and incorporated herein by reference). |
| | | |
| 3.4 | | Amendment No. 2 to the Mack-Cali Realty Corporation Amended and Restated Bylaws dated May 24, 2006 (filed as Exhibit 3.1 to the Corporation’s Form 8-K dated May 24, 2006 and incorporated herein by reference). |
| | | |
| 3.5 | | Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated December 11, 1997 (filed as Exhibit 10.110 to the Corporation’s Form 8-K dated December 11, 1997 and incorporated herein by reference). |
| | | |
| 3.6 | | Amendment No. 1 to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated August 21, 1998 (filed as Exhibit 3.1 to the Corporation’s and the Operating Partnership’s Registration Statement on Form S-3, Registration No. 333-57103, and incorporated herein by reference). |
| | | |
| 3.7 | | Second Amendment to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated July 6, 1999 (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated July 6, 1999 and incorporated herein by reference). |
| | | |
| 3.8 | | Third Amendment to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated September 30, 2003 (filed as Exhibit 3.7 to the Operating Partnership’s Form 10-Q dated September 30, 2003 and incorporated herein by reference). |
| | | |
| 3.9 | | Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Mack-Cali Realty, L.P. (filed as Exhibit 10.101 to the Corporation’s Form 8-K dated December 11, 1997 and incorporated herein by reference). |
| | | |
| 3.10 | | Articles Supplementary for the 8% Series C Cumulative Redeemable Perpetual Preferred Stock dated March 11, 2003 (filed as Exhibit 3.1 to the Corporation’s Form 8-K dated March 14, 2003 and incorporated herein by reference). |
| | | |
| 3.11 | | Certificate of Designation for the 8% Series C Cumulative Redeemable Perpetual Preferred Operating Partnership Units dated March 14, 2003 (filed as Exhibit 3.2 to the Operating Partnership’s Form 8-K dated March 14, 2003 and incorporated herein by reference). |
| | | |
Exhibit Number | | Exhibit Title |
| | | |
| 4.1 | | Amended and Restated Shareholder Rights Agreement, dated as of March 7, 2000, between Mack-Cali Realty Corporation and EquiServe Trust Company, N.A., as Rights Agent (filed as Exhibit 4.1 to the Operating Partnership’s Form 8-K dated March 7, 2000 and incorporated herein by reference). |
| | | |
| 4.2 | | Amendment No. 1 to the Amended and Restated Shareholder Rights Agreement, dated as of June 27, 2000, by and among Mack-Cali Realty Corporation and EquiServe Trust Company, N.A. (filed as Exhibit 4.1 to the Operating Partnership’s Form 8-K dated June 27, 2000 and incorporated herein by reference). |
| | | |
| 4.3 | | Indenture dated as of March 16, 1999, by and among Mack-Cali Realty, L.P., as issuer, Mack-Cali Realty Corporation, as guarantor, and Wilmington Trust Company, as trustee (filed as Exhibit 4.1 to the Operating Partnership’s Form 8-K dated March 16, 1999 and incorporated herein by reference). |
| | | |
| 4.4 | | Supplemental Indenture No. 1 dated as of March 16, 1999, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated March 16, 1999 and incorporated herein by reference). |
| | | |
| 4.5 | | Supplemental Indenture No. 2 dated as of August 2, 1999, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.4 to the Operating Partnership’s Form 10-Q dated June 30, 1999 and incorporated herein by reference). |
| | | |
| 4.6 | | Supplemental Indenture No. 3 dated as of December 21, 2000, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated December 21, 2000 and incorporated herein by reference). |
| | | |
| 4.7 | | Supplemental Indenture No. 4 dated as of January 29, 2001, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated January 29, 2001 and incorporated herein by reference). |
| | | |
| 4.8 | | Supplemental Indenture No. 5 dated as of December 20, 2002, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated December 20, 2002 and incorporated herein by reference). |
| | | |
| 4.9 | | Supplemental Indenture No. 6 dated as of March 14, 2003, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated March 14, 2003 and incorporated herein by reference). |
| | | |
| 4.10 | | Supplemental Indenture No. 7 dated as of June 12, 2003, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated June 12, 2003 and incorporated herein by reference). |
| | | |
| 4.11 | | Supplemental Indenture No. 8 dated as of February 9, 2004, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated February 9, 2004 and incorporated herein by reference). |
| | | |
Exhibit Number | | Exhibit Title |
| | | |
| 4.12 | | Supplemental Indenture No. 9 dated as of March 22, 2004, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated March 22, 2004 and incorporated herein by reference). |
| | | |
| 4.13 | | Supplemental Indenture No. 10 dated as of January 25, 2005, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated January 25, 2005 and incorporated herein by reference). |
| | | |
| 4.14 | | Supplemental Indenture No. 11 dated as of April 15, 2005, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated April 15, 2005 and incorporated herein by reference). |
| | | |
| 4.15 | | Supplemental Indenture No. 12 dated as of November 30, 2005, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated November 30, 2005 and incorporated herein by reference). |
| | | |
| 4.16 | | Supplemental Indenture No. 13 dated as of January 24, 2006, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated January 18, 2006 and incorporated herein by reference). |
| | | |
| 4.17 | | Deposit Agreement dated March 14, 2003 by and among Mack-Cali Realty Corporation, EquiServe Trust Company, N.A., and the holders from time to time of the Depositary Receipts described therein (filed as Exhibit 4.1 to the Corporation’s Form 8-K dated March 14, 2003 and incorporated herein by reference). |
| | | |
| 10.1 | | Amended and Restated Employment Agreement dated as of July 1, 1999 between Mitchell E. Hersh and Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Operating Partnership’s Form 10-Q dated June 30, 1999 and incorporated herein by reference). |
| | | |
| 10.2 | | Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty Corporation (filed as Exhibit 10.6 to the Operating Partnership’s Form 10-Q dated June 30, 1999 and incorporated herein by reference). |
| | | |
| 10.3 | | Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.7 to the Operating Partnership’s Form 10-Q dated June 30, 1999 and incorporated herein by reference). |
| | | |
| 10.4 | | Employment Agreement dated as of December 5, 2000 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.5 to the Operating Partnership’s Form 10-K for the year ended December 31, 2000 and incorporated herein by reference). |
| | | |
| 10.5 | | Employment Agreement dated as of May 9, 2006 by and between Mark Yeager and Mack-Cali Realty Corporation (filed as Exhibit 10.15 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
Exhibit Number | | Exhibit Title |
| | | |
| 10.6 | | Restricted Share Award Agreement dated as of July 1, 1999 between Mitchell E. Hersh and Mack-Cali Realty Corporation (filed as Exhibit 10.8 to the Operating Partnership’s Form 10-Q dated June 30, 1999 and incorporated herein by reference). |
| | | |
| 10.7 | | Restricted Share Award Agreement dated as of July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty Corporation (filed as Exhibit 10.12 to the Operating Partnership’s Form 10-Q dated June 30, 1999 and incorporated herein by reference). |
| | | |
| 10.8 | | Restricted Share Award Agreement dated as of July 1, 1999 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.13 to the Operating Partnership’s Form 10-Q dated June 30, 1999 and incorporated herein by reference). |
| | | |
| 10.9 | | Restricted Share Award Agreement dated as of March 12, 2001 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.10 to the Operating Partnership’s Form 10-Q dated March 31, 2001 and incorporated herein by reference). |
| | | |
| 10.10 | | Restricted Share Award Agreement dated as of March 12, 2001 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.11 to the Operating Partnership’s Form 10-Q dated March 31, 2001 and incorporated herein by reference). |
| | | |
| 10.11 | | Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.1 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.12 | | Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.13 | | First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.14 | | Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.7 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.15 | | Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.8 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.16 | | First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.9 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
Exhibit Number | | Exhibit Title |
| | | |
| 10.17 | | Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.10 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.18 | | Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.11 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.19 | | First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.12 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.20 | | First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated March 12, 2001 between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.13 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.21 | | Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.14 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.22 | | Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.15 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.23 | | Restricted Share Award Agreement dated December 6, 1999 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.16 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.24 | | First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated December 6, 1999 between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.17 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.25 | | First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated March 12, 2001 between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.18 to the Corporation’s Form 8-K dated January 2, 2003 and incorporated herein by reference). |
| | | |
| 10.26 | | Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.1 to the Corporation’s Form 8-K dated December 2, 2003 and incorporated herein by reference). |
| | | |
Exhibit Number | | Exhibit Title |
| | | |
| 10.27 | | Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Corporation’s Form 8-K dated December 2, 2003 and incorporated herein by reference). |
| | | |
| 10.28 | | Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.5 to the Corporation’s Form 8-K dated December 2, 2003 and incorporated herein by reference). |
| | | |
| 10.29 | | Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.6 to the Corporation’s Form 8-K dated December 2, 2003 and incorporated herein by reference). |
| | | |
| 10.30 | | Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.7 to the Corporation’s Form 8-K dated December 2, 2003 and incorporated herein by reference). |
| | | |
| 10.31 | | Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.8 to the Corporation’s Form 8-K dated December 2, 2003 and incorporated herein by reference). |
| | | |
| 10.32 | | Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Michael Grossman (filed as Exhibit 10.9 to the Corporation’s Form 8-K dated December 2, 2003 and incorporated herein by reference). |
| | | |
| 10.33 | | Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Michael Grossman (filed as Exhibit 10.10 to the Corporation’s Form 8-K dated December 2, 2003 and incorporated herein by reference). |
| | | |
| 10.34 | | Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Corporation’s Form 8-K dated December 7, 2004 and incorporated herein by reference). |
| | | |
| 10.35 | | Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Corporation’s Form 8-K dated December 7, 2004 and incorporated herein by reference). |
| | | |
| 10.36 | | Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.4 to the Corporation’s Form 8-K dated December 7, 2004 and incorporated herein by reference). |
| | | |
| 10.37 | | Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.5 to the Corporation’s Form 8-K dated December 7, 2004 and incorporated herein by reference). |
| | | |
| 10.38 | | Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.6 to the Corporation’s Form 8-K dated December 7, 2004 and incorporated herein by reference). |
| | | |
| 10.39 | | Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.7 to the Corporation’s Form 8-K dated December 7, 2004 and incorporated herein by reference). |
| | | |
Exhibit Number | | Exhibit Title |
| | | |
| 10.40 | | Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.8 to the Corporation’s Form 8-K dated December 7, 2004 and incorporated herein by reference). |
| | | |
| 10.41 | | Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.9 to the Corporation’s Form 8-K dated December 7, 2004 and incorporated herein by reference). |
| | | |
| 10.42 | | Restricted Share Award Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Operating Partnership’s Form 8-K dated December 6, 2005 and incorporated herein by reference). |
| | | |
| 10.43 | | Tax Gross Up Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Operating Partnership’s Form 8-K dated December 6, 2005 and incorporated herein by reference). |
| | | |
| 10.44 | | Restricted Share Award Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.4 to the Operating Partnership’s Form 8-K dated December 6, 2005 and incorporated herein by reference). |
| | | |
| 10.45 | | Tax Gross Up Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.5 to the Operating Partnership’s Form 8-K dated December 6, 2005 and incorporated herein by reference). |
| | | |
| 10.46 | | Restricted Share Award Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.6 to the Operating Partnership’s Form 8-K dated December 6, 2005 and incorporated herein by reference). |
| | | |
| 10.47 | | Tax Gross Up Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.7 to the Operating Partnership’s Form 8-K dated December 6, 2005 and incorporated herein by reference). |
| | | |
| 10.48 | | Restricted Share Award Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.8 to the Operating Partnership’s Form 8-K dated December 6, 2005 and incorporated herein by reference). |
| | | |
| 10.49 | | Tax Gross Up Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.9 to the Operating Partnership’s Form 8-K dated December 6, 2005 and incorporated herein by reference). |
| | | |
| 10.50 | | Restricted Share Award Agreement by and between Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.16 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
| 10.51 | | Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.52 | | Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
Exhibit Number | | Exhibit Title |
| | | |
| 10.53 | | Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.54 | | Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.4 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.55 | | Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.5 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.56 | | Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.6 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.57 | | Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.7 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.58 | | Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.8 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.59 | | Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.9 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.60 | | Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.10 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.61 | | Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.11 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.62 | | Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.12 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
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| 10.63 | | Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.13 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.64 | | Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.14 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.65 | | Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.15 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
Exhibit Number | | Exhibit Title |
| | | |
| 10.66 | | Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.16 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.67 | | Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.17 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.68 | | Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.18 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.69 | | Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.19 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
| | | |
| 10.70 | | Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.20 to the Operating Partnership’s Form 8-K dated December 5, 2006 and incorporated herein by reference). |
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| 10.71 | | Amended and Restated Revolving Credit Agreement dated as of September 27, 2002, among Mack-Cali Realty, L.P. and JPMorgan Chase Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto with JPMorgan Chase Bank, as administrative agent, swing lender and fronting bank, Fleet National Bank and Commerzbank AG, New York and Grand Cayman branches as syndication agents, Bank of America, N.A. and Wells Fargo Bank, National Association, as documentation agents, and J.P. Morgan Securities Inc. and Fleet Securities, Inc, as arrangers (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated September 27, 2002 and incorporated herein by reference). |
| | | |
| 10.72 | | Second Amended and Restated Revolving Credit Agreement among Mack-Cali Realty, L.P., JPMorgan Chase Bank, N.A., Bank of America, N.A., and other lending institutions that are or may become a party to the Second Amended and Restated Revolving Credit Agreement dated as of November 23, 2004 (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated November 23, 2004 and incorporated herein by reference). |
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| 10.73 | | Extension and Modification Agreement dated as of September 16, 2005 by and among Mack-Cali Realty, L.P., JPMorgan Chase Bank, N.A., as administrative agent, and the several Lenders Party thereto (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated September 16, 2005 and incorporated herein by reference). |
| | | |
| 10.74 | | Second Modification Agreement dated as of July 14, 2006 by and among Mack-Cali Realty, L.P., JPMorgan Chase Bank, N.A., as administrative agent, and the several Lenders party thereto (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated July 14, 2006 and incorporated herein by reference). |
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| 10.75 | | Amended and Restated Master Loan Agreement dated as of November 12, 2004 among Mack-Cali Realty, L.P., and Affiliates of Mack-Cali Realty Corporation and Mack-Cali Realty, L.P., as Borrowers, Mack-Cali Realty Corporation and Mack-Cali Realty L.P., as Guarantors and The Prudential Insurance Company of America, as Lender (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated November 12, 2004 and incorporated herein by reference). |
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Exhibit Number | | Exhibit Title |
| | | |
| 10.76 | | Contribution and Exchange Agreement among The MK Contributors, The MK Entities, The Patriot Contributors, The Patriot Entities, Patriot American Management and Leasing Corp., Cali Realty, L.P. and Cali Realty Corporation, dated September 18, 1997 (filed as Exhibit 10.98 to the Corporation’s Form 8-K dated September 19, 1997 and incorporated herein by reference). |
| | | |
| 10.77 | | First Amendment to Contribution and Exchange Agreement, dated as of December 11, 1997, by and among the Corporation and the Mack Group (filed as Exhibit 10.99 to the Corporation’s Form 8-K dated December 11, 1997 and incorporated herein by reference). |
| | | |
| 10.78 | | Employee Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.1 to the Corporation’s Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference). |
| | | |
| 10.79 | | Director Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Corporation’s Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference). |
| | | |
| 10.80 | | 2000 Employee Stock Option Plan (filed as Exhibit 10.1 to the Corporation’s Registration Statement on Form S-8, Registration No. 333-52478, and incorporated herein by reference), as amended by the First Amendment to the 2000 Employee Stock Option Plan (filed as Exhibit 10.17 to the Corporation’s Form 10-Q dated June 30, 2002 and incorporated herein by reference). |
| | | |
| 10.81 | | Amended and Restated 2000 Director Stock Option Plan (filed as Exhibit 10.2 to the Corporation’s Post-Effective Amendment No. 1 to Registration Statement on Form S-8, Registration No. 333-100244, and incorporated herein by reference). |
| | | |
| 10.82 | | Mack-Cali Realty Corporation 2004 Incentive Stock Plan (filed as Exhibit 10.1 to the Corporation’s Registration Statement on Form S-8, Registration No. 333-116437, and incorporated herein by reference). |
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| 10.83 | | Deferred Compensation Plan for Directors (filed as Exhibit 10.1 to the Corporation’s Registration Statement on Form S-8, Registration No. 333-80081, and incorporated herein by reference). |
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| 10.84 | | Form of Indemnification Agreement by and between Mack-Cali Realty Corporation and each of William L. Mack, John J. Cali, Mitchell E. Hersh, John R. Cali, David S. Mack, Martin S. Berger, Alan S. Bernikow, Kenneth M. Duberstein, Martin D. Gruss, Nathan Gantcher, Vincent Tese, Roy J. Zuckerberg, Alan G. Philibosian, Irvin D. Reid, Robert F. Weinberg, Barry Lefkowitz, Roger W. Thomas, Michael A. Grossman, Mark Yeager, Anthony Krug, Dean Cingolani, Anthony DeCaro Jr., Mark Durno, William Fitzpatrick, John Kropke, Nicholas Mitarotonda, Jr., Michael Nevins, Virginia Sobol, Albert Spring, Daniel Wagner, Deborah Franklin, John Marazzo, Christopher DeLorenzo, Jeffrey Warner, Diane Chayes and James Corrigan (filed as Exhibit 10.28 to the Operating Partnership’s Form 10-Q dated September 30, 2002 and incorporated herein by reference). |
| | | |
| 10.85 | | Indemnification Agreement dated October 22, 2002 by and between Mack-Cali Realty Corporation and John Crandall (filed as Exhibit 10.29 to the Operating Partnership’s Form 10-Q dated September 30, 2002 and incorporated herein by reference). |
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| 10.86 | | Second Amendment to Contribution and Exchange Agreement, dated as of June 27, 2000, between RMC Development Company, LLC f/k/a Robert Martin Company, LLC, Robert Martin Eastview North Company, L.P., the Corporation and the Operating Partnership (filed as Exhibit 10.44 to the Operating Partnership’s Form 10-K dated December 31, 2002 and incorporated herein by reference). |
Exhibit Number | | Exhibit Title |
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| 10.87 | | Limited Partnership Agreement of Meadowlands Mills/Mack-Cali Limited Partnership by and between Meadowlands Mills Limited Partnership, Mack-Cali Meadowlands Entertainment L.L.C. and Mack-Cali Meadowlands Special L.L.C. dated November 25, 2003 (filed as Exhibit 10.1 to the Corporation’s Form 8-K dated December 3, 2003 and incorporated herein by reference). |
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| 10.88 | | Redevelopment Agreement by and between the New Jersey Sports and Exposition Authority and Meadowlands Mills/Mack-Cali Limited Partnership dated December 3, 2003 (filed as Exhibit 10.2 to the Corporation’s Form 8-K dated December 3, 2003 and incorporated herein by reference). |
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| 10.89 | | First Amendment to Redevelopment Agreement by and between the New Jersey Sports and Exposition Authority and Meadowlands Mills/Mack-Cali Limited Partnership dated October 5, 2004 (filed as Exhibit 10.54 to the Corporation’s Form 10-Q dated September 30, 2004 and incorporated herein by reference). |
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| 10.90 | | Letter Agreement by and between Mack-Cali Realty Corporation and The Mills Corporation dated October 5, 2004 (filed as Exhibit 10.55 to the Corporation’s Form 10-Q dated September 30, 2004 and incorporated herein by reference). |
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| 10.91 | | First Amendment to Limited Partnership Agreement of Meadowlands Mills/Mack-Cali Limited Partnership by and between Meadowlands Mills Limited Partnership, Mack-Cali Meadowlands Entertainment L.L.C. and Mack-Cali Meadowlands Special L.L.C. dated as of June 30, 2005 (filed as Exhibit 10.66 to the Operating Partnership’s Form 10-Q dated June 30, 2005 and incorporated herein by reference). |
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| 10.92* | | Mack-Cali Rights, Obligations and Option Agreement by and between Meadowlands Developer Limited Partnership, Meadowlands Limited Partnership, Meadowlands Developer Holding Corp., Meadowlands Mack-Cali GP, L.L.C., Mack-Cali Meadowlands Special, L.L.C., Baseball Meadowlands Mills/Mack-Cali Limited Partnership, A-B Office Meadowlands Mack-Cali Limited Partnership, C-D Office Meadowlands Mack-Cali Limited Partnership, Hotel Meadowlands Mack-Cali Limited Partnership and ERC Meadowlands Mills/Mack-Cali Limited Partnership dated November 22, 2006. |
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| 10.93* | | Redemption Agreement by and among Meadowlands Developer Limited Partnership, Meadowlands Developer Holding Corp., Mack-Cali Meadowlands entertainment L.L.C., Mack-Cali Meadowlands Special L.L.C., and Meadowlands Limited Partnership dated November 22, 2006. |
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| 10.94 | | Contribution and Exchange Agreement by and between Mack-Cali Realty, L.P. and Tenth Springhill Lake Associates L.L.L.P., Eleventh Springhill Lake Associates L.L.L.P., Twelfth Springhill Lake Associates L.L.L.P., Fourteenth Springhill Lake Associates L.L.L.P., each a Maryland limited liability limited partnership, Greenbelt Associates, a Maryland general partnership, and Sixteenth Springhill Lake Associates L.L.L.P., a Maryland limited liability limited partnership, and certain other natural persons, dated as of November 21, 2005 (filed as Exhibit 10.69 to the Operating Partnership’s Form 10-K dated December 31, 2005 and incorporated herein by reference). |
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| 10.95 | | Membership Interest Purchase and Contribution Agreement by and among Mr. Stanley C. Gale, SCG Holding Corp., Mack-Cali Realty Acquisition Corp. and Mack-Cali Realty, L.P. dated as of March 7, 2006 (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated March 7, 2006 and incorporated herein by reference). |
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Exhibit Number | | Exhibit Title |
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| 10.96 | | Amendment No. 1 to Membership Interest Purchase and Contribution Agreement dated as of March 31, 2006 (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated March 28, 2006 and incorporated herein by reference). |
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| 10.97 | | Amendment No. 2 to Membership Interest Purchase and Contribution Agreement dated as of May 9, 2006 (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
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| 10.98 | | Contribution and Sale Agreement by and among Gale SLG NJ LLC, a Delaware limited liability company, Gale SLG NJ MEZZ LLC, a Delaware limited liability company, and Gale SLG RIDGEFIELD MEZZ LLC, a Delaware limited liability company and Mack-Cali Ventures L.L.C. dated as of March 7, 2006 (filed as Exhibit 10.2 to the Operating Partnership’s Form 8-K dated March 7, 2006 and incorporated herein by reference). |
| | | |
| 10.99 | | First Amendment to Contribution and Sale Agreement by and among GALE SLG NJ LLC, a Delaware limited liability company, GALE SLG NJ MEZZ LLC, a Delaware limited liability company, and GALE SLG RIDGEFIELD MEZZ LLC, a Delaware limited liability company, and Mack-Cali Ventures L.L.C., a Delaware limited liability company, dated as of May 9, 2006 (filed as Exhibit 10.4 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
| 10.100 | | Non-Portfolio Property Interest Contribution Agreement by and among Mr. Stanley C. Gale, Mr. Mark Yeager, GCF II Investor LLC, The Gale Investments Company, LLC, Gale & Wentworth Vreeland, LLC, Gale Urban Solutions LLC, MSGW-ONE Campus Investors, LLC, Mack-Cali Realty Acquisition Corp. and Mack-Cali Realty, L.P. dated as of May 9, 2006 (filed as Exhibit 10.2 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
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| 10.101 | | Loan Agreement by and among the entities set forth on Exhibit A, collectively, as Borrowers, and Gramercy Warehouse Funding I LLC, as Lender, dated May 9, 2006 (filed as Exhibit 10.5 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
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| 10.102 | | Promissory Note of One Grande SPE LLC, 1280 Wall SPE LLC, 10 Sylvan SPE LLC, 5 Independence SPE LLC, 1 Independence SPE LLC, and 3 Becker SPE LLC, as Borrowers, in favor of Gramercy Warehouse Funding I, LLC, as Lender, in the principal amount of $90,286,551 dated May 9, 2006 (filed as Exhibit 10.6 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
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| 10.103 | | Mortgage, Security Agreement and Fixture Filing by and between 4 Becker SPE LLC, as Borrower, and Wachovia Bank, National Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.7 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
| 10.104 | | Promissory Note of 4 Becker SPE LLC, as Borrower, in favor of Wachovia Bank, National Association, as Lender, in the principal amount of $43,000,000 dated May 9, 2006 (filed as Exhibit 10.8 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
| 10.105 | | Mortgage, Security Agreement and Fixture Filing by and between 210 Clay SPE LLC, as Borrower, and Wachovia Bank, National Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.9 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
| 10.106 | | Promissory Note of 210 Clay SPE LLC, as Borrower, in favor of Wachovia Bank, National Association, as Lender, in the principal amount of $16,000,000 dated May 9, 2006 (filed as Exhibit 10.10 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
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Exhibit Number | | Exhibit Title |
| | | |
| 10.107 | | Mortgage, Security Agreement and Fixture Filing by and between 5 Becker SPE LLC, as Borrower, and Wachovia Bank, National Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.11 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
| 10.108 | | Promissory Note of 5 Becker SPE LLC, as Borrower, in favor of Wachovia Bank, National Association, as Lender, in the principal amount of $15,500,000 dated May 9, 2006 (filed as Exhibit 10.12 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
| 10.109 | | Mortgage, Security Agreement and Fixture Filing by and between 51 CHUBB SPE LLC, as Borrower, and Wachovia Bank, National Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.13 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
| 10.110 | | Promissory Note of 51 CHUBB SPE LLC, as Borrower, in favor of Wachovia Bank, National Association, as Lender, in the principal amount of $4,500,000 dated May 9, 2006 (filed as Exhibit 10.14 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
| 10.111 | | Form of Amended and Restated Limited Liability Company Agreement of Mack-Green-Gale LLC dated , 2006 (filed as Exhibit 10.3 to the Operating Partnership’s Form 8-K dated March 7, 2006 and incorporated herein by reference). |
| | | |
| 10.112 | | Form of Limited Liability Company Operating Agreement (filed as Exhibit 10.3 to the Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by reference). |
| | | |
| 10.113 | | Agreement of Sale and Purchase dated August 9, 2006 by and between Mack-Cali Realty, L.P. and Westcore Properties AC, LLC (filed as Exhibit 10.91 to the Operating Partnership’s Form 10-Q dated September 30, 2006 and incorporated herein by reference). |
| | | |
| 10.114 | | First Amendment to Agreement of Sale and Purchase dated September 6, 2006 by and between Mack-Cali Realty, L.P. and Westcore Properties AC, LLC (filed as Exhibit 10.92 to the Operating Partnership’s Form 10-Q dated September 30, 2006 and incorporated herein by reference). |
| | | |
| 10.115 | | Second Amendment to Agreement of Sale and Purchase dated September 15, 2006 by and between Mack-Cali Realty, L.P. and Westcore Properties AC, LLC (filed as Exhibit 10.93 to the Operating Partnership’s Form 10-Q dated September 30, 2006 and incorporated herein by reference). |
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| 10.116 | | Agreement of Sale and Purchase dated September 25, 2006 by and between Phelan Realty Associates L.P., 795 Folsom Realty Associates L.P. and Westcore Properties AC, LLC (filed as Exhibit 10.94 to the Operating Partnership’s Form 10-Q dated September 30, 2006 and incorporated herein by reference). |
| | | |
| 10.117* | | Membership Interest Purchase and Contribution Agreement dated as of December 28, 2006, by and among NKFGMS Owners, LLC, The Gale Construction Services Company, L.L.C., NKFFM Limited Liability Company, Scott Panzer, Ian Marlow, Newmark & Company Real Estate, Inc. d/b/a Newmark Knight Frank, and Mack-Cali Realty, L.P. |
| | | |
| 10.118* | | Operating Agreement of NKFGMS Owners, LLC. |
| | | |
| 10.119* | | Loans, Sale and Services Agreement dated December 28, 2006 by and between Newmark & Company Real Estate, Inc. d/b/a Newmark Knight Frank, Mack-Cali Realty, L.P., and Newmark Knight Frank Global Management Services, LLC. |
Exhibit Number | | Exhibit Title |
| | | |
| 10.120* | | Term Loan Agreement among Mack-Cali Realty, L.P. and JPMorgan Chase Bank, N.A. as Administrative Agent, J.P. Morgan Securities Inc. as Arranger, and other lender which may become parties to this Agreement dated November 29, 2006. |
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| 21.1* | | Subsidiaries of the Operating Partnership. |
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| 23.1* | | Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm. |
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| 31.1* | | Certification of the Corporation’s President and Chief Executive Officer, Mitchell E. Hersh, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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| 31.2* | | Certification of the Corporation’s Chief Financial Officer, Barry Lefkowitz, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | |
| 32.1* | | Certification of the Corporation’s President and Chief Executive Officer, Mitchell E. Hersh, and the Corporation’s Chief Financial Officer, Barry Lefkowitz, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
*filed herewith
