<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -------------------------
Commission file number 1-13274
Mack-Cali Realty Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 22-3305147
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11 Commerce Drive, Cranford, New Jersey 07016-3501
- --------------------------------------------------------------------------------
(Address or principal executive office)
(Zip Code)
(908) 272-8000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 twelve (12) months (or such shorter period that the
Registrant was required to file such report) YES |X| NO |_| and (2) has been
subject to such filing requirements for the past ninety (90) days YES |X| NO
|_|.
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 1, 2001, there were 56,307,934 shares of $0.01 par value common
stock outstanding.
<Page>
MACK-CALI REALTY CORPORATION
FORM 10-Q
INDEX
<Table>
<Caption>
PART I FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 2001
and December 31, 2000 .............................. 4
Consolidated Statements of Operations for the three
and six month periods ended June 30, 2001 and 2000 . 5
Consolidated Statement of Changes in Stockholders'
Equity for the six months ended June 30, 2001 ...... 6
Consolidated Statements of Cash Flows for the six
months ended June 30, 2001 and 2000 ................ 7
Notes to Consolidated Financial Statements ............ 8-28
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................ 29-37
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ........................................ 38
PART II OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings ..................................... 39
Item 2. Changes in Securities and Use of Proceeds ............. 39
Item 3. Defaults Upon Senior Securities ....................... 39
Item 4. Submission of Matters to a Vote of Security Holders ... 39
Item 5. Other Information ..................................... 39
Item 6. Exhibits .............................................. 40-43
Signatures ............................................ 44
</Table>
2
<Page>
MACK-CALI REALTY CORPORATION
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
The accompanying unaudited consolidated balance sheets, statements
of operations, of changes in stockholders' equity, and of cash flows
and related notes, have been prepared in accordance with generally
accepted accounting principles ("GAAP") for interim financial
information and in conjunction with the rules and regulations of the
Securities and Exchange Commission ("SEC"). Accordingly, they do not
include all of the disclosures required by GAAP for complete
financial statements. The financial statements reflect all
adjustments consisting only of normal, recurring adjustments, which
are in the opinion of management, necessary for a fair presentation
for the interim periods.
The aforementioned financial statements should be read in
conjunction with the notes to the aforementioned financial
statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations and the financial statements and
notes thereto included in Mack-Cali Realty Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000.
The results of operations for the three and six month periods ended
June 30, 2001 are not necessarily indicative of the results to be
expected for the entire fiscal year or any other period.
3
<Page>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
================================================================================
<Table>
<Caption>
June 30,
2001 December 31,
ASSETS (UNAUDITED) 2000
- --------------------------------------------------------------------------------------------------------
Rental property
Land and leasehold interests $ 488,288 $ 542,841
Buildings and improvements 2,679,435 2,934,383
Tenant improvements 120,707 106,208
Furniture, fixtures and equipment 7,046 6,445
- --------------------------------------------------------------------------------------------------------
3,295,476 3,589,877
Less - accumulated depreciation and amortization (314,239) (302,932)
- --------------------------------------------------------------------------------------------------------
2,981,237 3,286,945
Rental property held for sale, net 450,932 107,458
- --------------------------------------------------------------------------------------------------------
Net investment in rental property 3,432,169 3,394,403
Cash and cash equivalents 22,738 13,179
Investments in unconsolidated joint ventures 130,944 101,438
Unbilled rents receivable, net 58,118 50,499
Deferred charges and other assets, net 100,337 102,655
Restricted cash 7,492 6,557
Accounts receivable, net of allowance for doubtful accounts
of $693 and $552 8,121 8,246
- --------------------------------------------------------------------------------------------------------
Total assets $ 3,759,919 $ 3,676,977
========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------
Senior unsecured notes $ 1,096,599 $ 798,099
Revolving credit facilities 76,500 348,840
Mortgages and loans payable 547,701 481,573
Dividends and distributions payable 43,080 43,496
Accounts payable and accrued expenses 51,712 53,608
Rents received in advance and security deposits 31,592 31,146
Accrued interest payable 26,814 17,477
- --------------------------------------------------------------------------------------------------------
Total liabilities 1,873,998 1,774,239
- --------------------------------------------------------------------------------------------------------
MINORITY INTERESTS:
Operating Partnership 448,088 447,523
Partially-owned properties -- 1,925
- --------------------------------------------------------------------------------------------------------
Total minority interests 448,088 449,448
- --------------------------------------------------------------------------------------------------------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized, none issued -- --
Common stock, $0.01 par value, 190,000,000 shares authorized,
56,299,124 and 56,980,893 shares outstanding 563 570
Additional paid-in capital 1,494,124 1,513,037
Dividends in excess of net earnings (51,837) (57,149)
Unamortized stock compensation (5,017) (3,168)
- --------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,437,833 1,453,290
- --------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 3,759,919 $ 3,676,977
========================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<Page>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
================================================================================
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
REVENUES 2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Base rents $ 129,419 $122,072 $254,795 $243,670
Escalations and recoveries from tenants 13,430 14,627 28,192 31,295
Parking and other 3,060 6,128 5,406 9,450
Equity in earnings of unconsolidated joint ventures 2,037 1,070 5,446 2,207
Interest income 472 1,992 1,085 2,246
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 148,418 145,889 294,924 288,868
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
Real estate taxes 15,510 14,733 30,797 29,437
Utilities 10,699 10,014 22,655 20,393
Operating services 17,686 16,822 35,565 34,564
General and administrative 6,856 5,159 12,866 11,272
Depreciation and amortization 21,951 22,945 45,435 45,127
Interest expense 28,555 26,835 56,920 53,261
Non-recurring charges -- 9,228 -- 9,228
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 101,257 105,736 204,238 203,282
- ------------------------------------------------------------------------------------------------------------------------------------
Income before realized gains and unrealized losses
on disposition of rental property and minority interests 47,161 40,153 90,686 85,586
Realized gains and unrealized losses on disposition of
rental property 22,510 73,921 1,947 76,169
- ------------------------------------------------------------------------------------------------------------------------------------
Income before minority interests 69,671 114,074 92,633 161,755
MINORITY INTERESTS:
Operating partnership 11,998 16,784 18,222 25,760
Partially-owned properties -- 2,982 -- 5,072
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 57,673 $ 94,308 $ 74,411 $ 130,923
====================================================================================================================================
Basic earnings per share $ 1.02 $ 1.61 $ 1.31 $ 2.24
Diluted earnings per share $ 0.98 $ 1.52 $ 1.30 $ 2.14
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $ 0.61 $ 0.58 $ 1.22 $ 1.16
- ------------------------------------------------------------------------------------------------------------------------------------
Basic weighted average shares outstanding 56,519 58,545 56,662 58,420
Diluted weighted average shares outstanding 71,044 73,284 71,198 73,237
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<Page>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS)
(UNAUDITED)
================================================================================
<Table>
<Caption>
Additional Dividends in Unamortized Total
Common Stock Paid-In Excess of Stock Stockholders'
Shares Par Value Capital Net Earnings Compensation Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2001 56,981 $570 $1,513,037 $(57,149) $(3,168) $1,453,290
Net income -- -- -- 74,411 -- 74,411
Dividends -- -- -- (69,099) -- (69,099)
Redemption of common units for
shares of common stock 7 -- 192 -- -- 192
Proceeds from stock options exercised 106 1 2,388 -- -- 2,389
Deferred compensation plan for directors -- -- 76 -- -- 76
Issuance of Restricted Stock Awards 94 1 2,526 -- (2,527) --
Amortization of stock compensation -- -- -- -- 630 630
Adjustment to fair value of restricted stock -- -- 152 -- (152) --
Cancellation of Restricted Stock Awards (7) -- (200) -- 200 --
Repurchase of common stock (882) (9) (24,047) -- -- (24,056)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2001 56,299 $563 $1,494,124 $(51,837) $(5,017) $1,437,833
====================================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
<Page>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
================================================================================
<Table>
<Caption>
Six Months Ended
June 30,
CASH FLOWS FROM OPERATING ACTIVITIES 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 74,411 $ 130,923
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 45,435 45,127
Amortization of stock compensation 630 1,410
Amortization of deferred financing costs and debt discount 2,513 1,802
Stock options charge -- 1,550
Equity in earnings of unconsolidated joint ventures (5,446) (2,207)
Realized gains and unrealized losses on disposition of rental property (1,947) (76,169)
Minority interests 18,222 30,832
Changes in operating assets and liabilities:
Increase in unbilled rents receivable, net (7,737) (5,537)
Increase in deferred charges and other assets, net (1,454) (15,697)
Decrease (increase) in accounts receivable, net 125 (140)
(Decrease) increase in accounts payable and accrued expenses (1,896) 10,982
Increase (decrease) in rents received in advance and security deposits 829 (1,937)
Increase (decrease) in accrued interest payable 9,337 (363)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 133,022 $ 120,576
====================================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Additions to rental property $(148,144) $(170,062)
Repayment of mortgage note receivable 5,983 --
Investments in unconsolidated joint ventures (24,462) (11,081)
Distributions from unconsolidated joint ventures 19,056 7,040
Proceeds from sales of rental property 44,787 235,849
(Increase) decrease in restricted cash (935) 583
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities $(103,715) $ 62,329
====================================================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Proceeds from senior unsecured notes $ 298,269 $ --
Proceeds from revolving credit facilities 218,484 435,030
Proceeds from mortgages and loans payable 70,000 --
Repayments of revolving credit facilities (490,825) (396,300)
Repayments of mortgages and loans payable (3,871) (41,785)
Distributions to minority interest in partially-owned properties -- (88,672)
Repurchase of common stock (24,055) --
Payment of financing costs (3,159) (5,979)
Proceeds from stock options exercised 2,389 1,665
Payment of dividends and distributions (86,980) (85,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities $ (19,748) $(181,041)
====================================================================================================================================
Net increase in cash and cash equivalents $ 9,559 $ 1,864
Cash and cash equivalents, beginning of period 13,179 8,671
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 22,738 $ 10,535
====================================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
7
<Page>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER
SHARE/UNIT AMOUNTS)
================================================================================
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Mack-Cali Realty Corporation, a Maryland corporation, and subsidiaries (the
"Company") is a fully-integrated, self-administered, self-managed real estate
investment trust ("REIT") providing leasing, management, acquisition,
development, construction and tenant-related services for its properties. As of
June 30, 2001, the Company owned or had interests in 269 properties, plus
developable land (collectively, the "Properties"). The Properties aggregate
approximately 28.5 million square feet, and are comprised of 164 office
buildings and 93 office/flex buildings totaling approximately 28.1 million
square feet (which includes seven office buildings and one office/flex building
aggregating 1.2 million square feet, owned by unconsolidated joint ventures in
which the Company has investment interests), six industrial/warehouse buildings
totaling approximately 387,400 square feet, one multi-family residential complex
consisting of 124 units, two stand-alone retail properties and three land
leases. The Properties are located in 11 states, primarily in the Northeast,
plus the District of Columbia.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include all accounts of the
Company, its majority-owned and/or controlled subsidiaries, which consist
principally of Mack-Cali Realty, L.P. ("Operating Partnership"). See Investments
in Unconsolidated Joint Ventures in Note 2 for the Company's treatment of
unconsolidated joint venture interests. All significant 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.
2. SIGNIFICANT ACCOUNTING POLICIES
RENTAL PROPERTY
Rental properties are stated at cost less accumulated depreciation and
amortization. Costs directly related to the acquisition and development of
rental properties are capitalized. Capitalized development costs include
interest, property taxes, insurance and other project costs incurred during the
period of development. Included in total rental property is
construction-in-progress of $141,623 and $188,077 as of June 30, 2001 and
December 31, 2000, 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.
Properties are depreciated using the straight-line method over the estimated
useful lives of the assets. The estimated useful lives are as follows:
<Table>
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
- --------------------------------------------------------------------------------
</Table>
8
<Page>
On a periodic basis, management assesses whether there are any indicators that
the value of the real estate 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 are
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. Management does not believe that
the value of any of its rental properties is impaired.
When assets are identified by management as held for sale, the Company
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 for sale is less than the net book
value of the assets, a valuation allowance is established. See Note 7.
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The Company accounts for its investments in unconsolidated joint ventures under
the equity method of accounting as the Company 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. Any difference
between the carrying amount of these investments on the balance sheet of the
Company and the underlying equity in net assets is amortized as an adjustment to
equity in earnings of unconsolidated joint ventures over 40 years. See Note 4.
PARTIALLY-OWNED PROPERTIES
The Company controlled operations of the partially-owned properties and has
consolidated the financial position and results of operations of partially-owned
properties in the financial statements of the Company. The equity interests of
the other members are reflected as minority interests: partially-owned
properties in the consolidated financial statements of the Company.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.
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 $1,161 and $901 for the three months ended June 30,
2001 and 2000, respectively, and $2,282 and $1,802 for the six months ended June
30, 2001 and 2000, 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 Company provide leasing services to the Properties and receive compensation
based on space leased. The portion of such compensation, which is capitalized
and amortized, approximated $863 and $896 for the three months ended June 30,
2001 and 2000, respectively, and $1,603 and $1,589 for the six months ended June
30, 2001 and 2000, respectively.
9
<Page>
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. Parking and other revenue includes income from parking
spaces leased to tenants, income from tenants for additional services provided
by the Company, income from tenants for early lease terminations and income from
managing properties for third parties. Rental income on residential property
under operating leases having terms generally of one year or less is recognized
when earned.
Reimbursements 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 14.
INCOME AND OTHER TAXES
The Company has elected to be taxed as a REIT under Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the
Company generally will not be subject to corporate federal income tax on net
income that it currently distributes to its shareholders, provided that the
Company, for its taxable years beginning prior to January 1, 2001, satisfies
certain organizational and operational requirements including the requirement to
distribute at least 95 percent of its REIT taxable income to its shareholders.
For its taxable years beginning after December 31, 2000, as a result of recent
amendments to the Code, the Company is required to distribute at least 90
percent of its REIT taxable income to its shareholders. Effective January 1,
2001, the Company has elected to treat certain of its corporate subsidiaries as
taxable REIT subsidiaries ("TRS"). In general, a TRS of the Company may perform
additional services for tenants of the Company and generally may engage in any
real estate or non-real estate related business (except for the operation or
management of health care facilities or lodging facilities or the providing to
any person, under a franchise, license or otherwise, rights to any brand name
under which any lodging facility or health care facility is operated). A TRS is
subject to corporate federal income tax. If the Company fails to qualify as a
REIT in any taxable year, the Company will be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate tax rates. The Company is subject to certain state and local
taxes.
DERIVATIVE INSTRUMENTS
The Company has adopted Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("FASB No. 133") as
of January 1, 2001. Due to its limited use of derivative instruments, adoption
of FASB No. 133 did not have a material impact on the Company's financial
statements.
Interest rate contracts are utilized by the Company to reduce interest rate
risks. The Company does not hold or issue derivative financial instruments for
trading purposes. The differentials to be received or paid under contracts
designated as hedges are recognized over the life of the contracts as
adjustments to interest expense.
In certain situations, the Company uses forward treasury lock agreements to
mitigate the potential effects of changes in interest rates for prospective
transactions. Gains and losses are deferred and amortized as adjustments to
interest expense over the remaining life of the associated debt to the extent
that such debt remains outstanding.
EARNINGS PER SHARE
In accordance with the Statement of Financial Accounting Standards No. 128
("FASB No. 128"), the Company presents both basic and diluted earnings per share
("EPS"). Basic EPS excludes dilution and is computed by dividing net income
available to common stockholders by the weighted average number of shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock, where such exercise or conversion
would result in a lower EPS amount.
10
<Page>
DIVIDENDS AND DISTRIBUTIONS PAYABLE
The dividends and distributions payable at June 30, 2001 represents dividends
payable to shareholders of record as of July 5, 2001 (56,308,064 shares),
distributions payable to minority interest common unitholders (7,955,525 common
units) on that same date and preferred distributions payable to preferred
unitholders (220,340 preferred units) for the second quarter 2001. The second
quarter 2001 dividends and common unit distributions of $0.61 per share and per
common unit, as well as the second quarter preferred unit distribution of
$17.6046 per preferred unit, were approved by the Board of Directors on June 21,
2001 and paid on July 23, 2001.
The dividends and distributions payable at December 31, 2000 represents
dividends payable to shareholders of record as of January 4, 2001 (56,982,893
shares), distributions payable to minority interest common unitholders
(7,963,725 common units) on that same date and preferred distributions payable
to preferred unitholders (220,340 preferred units) for the fourth quarter 2000.
The fourth quarter 2000 dividends and common unit distributions of $0.61 per
share and per common unit, as well as the fourth quarter preferred unit
distribution of $17.6046 per preferred unit, were approved by the Board of
Directors on December 20, 2000 and paid on January 22, 2001.
UNDERWRITING COMMISSIONS AND COSTS
Underwriting commissions and costs incurred in connection with the Company's
stock offerings are reflected as a reduction of additional paid-in capital.
STOCK OPTIONS
The Company accounts for stock-based compensation 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 is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of grant over the exercise price
of the option granted. Compensation cost for stock options, if any, is
recognized ratably over the vesting period. The Company's policy is to grant
options with an exercise price equal to the quoted closing market price of the
Company's stock on the business day preceding the grant date. Accordingly, no
compensation cost has been recognized under the Company's stock option plans for
the granting of stock options. See Note 15.
11
<Page>
3. ACQUISITIONS, PROPERTY SALES AND OTHER TRANSACTIONS
OPERATING PROPERTY ACQUISITIONS
The Company acquired the following operating properties during the six months
ended June 30, 2001:
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Acquisition # of Rentable Investment by
Date Property/Portfolio Name Location Bldgs. Square Feet Company
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE:
- -------
4/6/01 4 & 6 Campus Drive (a) Parsippany, Morris County, NJ 2 295,766 $48,404
- ------------------------------------------------------------------------------------------------------------------------------------
<Caption>
Total Office Property Acquisitions: 2 295,766 $48,404
====================================================================================================================================
OFFICE/FLEX:
- ------------
2/14/01 31 & 41 Twosome Drive (b)(c) Moorestown, Burlington County, NJ 2 127,250 $7,155
4/27/01 1245 & 1247 N. Church St,
2 Twosome Drive (b)(c) Moorestown, Burlington County, NJ 3 154,200 11,083
- ------------------------------------------------------------------------------------------------------------------------------------
Total Office/Flex Property Acquisitions: 5 281,450 $18,238
====================================================================================================================================
Total Operating Property Acquisitions: 7 577,216 $66,642
====================================================================================================================================
</Table>
(a) Transaction was funded primarily through borrowing on the Company's
revolving credit facility.
(b) Transactions were funded primarily from net proceeds received in the sale
of a rental property as well as the Company's cash reserves.
(c) The properties were acquired through the exercise of a purchase option
obtained in the initial acquisition of the McGarvey portfolio in January
1998.
PROPERTIES PLACED IN SERVICE
The Company placed in service the following properties during the six months
ended June 30, 2001:
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Placed # of Rentable Investment by
in Service Property/Portfolio Name Location Bldgs. Square Feet Company (a)
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE:
1/15/01 105 Eisenhower Parkway Roseland, Essex County, NJ 1 220,000 $43,300
3/1/01 8181 East Tufts Avenue Denver, Denver County, CO 1 185,254 34,371
- ------------------------------------------------------------------------------------------------------------------------------------
Total Properties Placed in Service 2 405,254 $77,671
====================================================================================================================================
</Table>
(a) Transactions were funded primarily through draws on the Company's
revolving credit facilities and amounts presented are as of June 30, 2001.
LAND ACQUISITIONS
On January 5, 2001, the Company acquired approximately 7.1 acres of developable
land located in Littleton, Arapahoe County, Colorado. The land was acquired for
approximately $2,711. When the Company had committed itself to acquire the land,
the Company had intended to develop the site consistent with its then business
strategy. Due to a change in the Company's strategy, this land is now being held
for sale (see Note 7).
12
<Page>
PROPERTY SALES
The Company sold the following properties during the six months ended June 30,
2001:
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Sale # of Rentable Net Sales Net Book Realized
Date Property Name Location Bldgs. Square Feet Proceeds Value Gain
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE:
- -------
6/1/01 1777 N.E. Loop 410 San Antonio, Bexar County, TX 1 256,137 $21,313 $16,703 $ 4,610
6/15/01 14511 Falling Creek Houston, Harris County, TX 1 70,999 2,982 2,458 524
RESIDENTIAL:
- ------------
6/21/01 Tenby Chase Apartments Delran, Burlington County, NJ 1 327 units 19,336 2,399 16,937
OTHER:
- ------
4/3/01 North Pier-Harborside Jersey City, Hudson County, NJ -- n/a 3,357 2,918 439
- ------------------------------------------------------------------------------------------------------------------------------------
Totals: 3 327,136 $46,988 $24,478 $22,510
====================================================================================================================================
</Table>
4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
PRU-BETA 3 (NINE CAMPUS DRIVE)
On March 27, 1998, the Company acquired a 50 percent interest in an existing
joint venture with The Prudential Insurance Company of America ("Prudential"),
known as Pru-Beta 3, which owns and operates Nine Campus Drive, a 156,495
square-foot office building, located in the Mack-Cali Business Campus office
complex in Parsippany, Morris County, New Jersey. The Company performs
management and leasing services for the property owned by the joint venture and
recognized $75 and $75 in fees for such services in the six months ended June
30, 2001 and 2000, respectively.
HPMC
On April 23, 1998, the Company entered into a joint venture agreement with HCG
Development, L.L.C. and Summit Partners I, L.L.C. to form HPMC Development
Partners, L.P. and, on July 21, 1998, entered into a second joint venture, HPMC
Development Partners II, L.P. (formerly known as HPMC Lava Ridge Partners,
L.P.), with these same parties. HPMC Development Partners, L.P.'s efforts have
focused on two development projects, commonly referred to as Continental Grand
II and Summit Ridge. HPMC Development Partners II, L.P.'s efforts have focused
on three development projects, commonly referred to as Lava Ridge, Pacific Plaza
I & II and Stadium Gateway. Among other things, the partnership agreements
provide for a preferred return on the Company's invested capital in each
venture, in addition to 50 percent of such venture's profit above the preferred
returns, as defined in each agreement.
CONTINENTAL GRAND II
Continental Grand II is a 239,085 square-foot office building located in El
Segundo, Los Angeles County, California, which was constructed and placed in
service by the venture. On June 29, 2001, the venture sold the office
property for approximately $67,000.
SUMMIT RIDGE
Summit Ridge is an office complex of three one-story buildings aggregating
133,841 square feet located in San Diego, San Diego County, California, which
was constructed and placed in service by the venture. On January 29, 2001,
the venture sold the office complex for approximately $17,450.
LAVA RIDGE
Lava Ridge is an office complex of three two-story buildings aggregating
183,200 square feet located in Roseville, Placer County, California, which
was constructed and placed in service by the venture.
PACIFIC PLAZA I & II
Pacific Plaza I & II is a parcel of land purchased from the city of Daly
City, located in San Mateo County, California, upon which the venture has
commenced construction of an office building and theater and retail complex
aggregating 471,379 square feet.
13
<Page>
STADIUM GATEWAY
Stadium Gateway is a 1.5 acre site located in Anaheim, Orange County,
California, acquired by the venture upon which it has commenced construction
of a six-story 261,554 square-foot office building.
G&G MARTCO (CONVENTION PLAZA)
On April 30, 1998, the Company acquired a 49.9 percent interest in an existing
joint venture, known as G&G Martco, which owns Convention Plaza, a 305,618
square-foot office building, located in San Francisco, San Francisco County,
California. A portion of its initial investment was financed through the
issuance of common units, as well as funds drawn from the Company's credit
facilities. Subsequently, on June 4, 1999, the Company acquired an additional
0.1 percent interest in G&G Martco through the issuance of common units. The
Company performs management and leasing services for the property owned by the
joint venture and recognized $110 and $104 in fees for such services in the six
months ended June 30, 2001 and 2000, respectively.
AMERICAN FINANCIAL EXCHANGE L.L.C.
On May 20, 1998, the Company entered into a joint venture agreement with
Columbia Development Company, L.L.C. to form American Financial Exchange L.L.C.
The venture was initially formed to acquire land for future development, located
on the Hudson River waterfront in Jersey City, Hudson County, New Jersey,
adjacent to the Company's Harborside Financial Center office complex. The
Company holds a 50 percent interest in the joint venture. Among other things,
the partnership agreement provides for a preferred return on the Company's
invested capital in the venture, in addition to the Company's proportionate
share of the venture's profit, as defined in the agreement. The joint venture
acquired land on which it constructed a parking facility, which is currently
leased to a parking operator under a 10-year agreement. Such parking facility
serves a ferry service between the Company's Harborside property and Manhattan.
In the fourth quarter 2000, the Company started construction of a 575,000
square-foot office building and terminated the parking agreement on certain of
the land owned by the venture. The total costs of the project are currently
projected to be approximately $140,000. The project, which is currently 100
percent pre-leased, is anticipated to be completed in the third quarter of 2002.
RAMLAND REALTY ASSOCIATES L.L.C. (ONE RAMLAND ROAD)
On August 20, 1998, the Company entered into a joint venture agreement 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 plus adjacent developable land, located in Orangeburg,
Rockland County, New York. In August 1999, the joint venture completed
redevelopment of the property and placed the office/flex building in service.
The Company holds a 50 percent interest in the joint venture. The Company
performs management, leasing and other services for the property owned by the
joint venture and recognized $58 and $147 in fees for such services in the six
months ended June 30, 2001 and 2000, respectively.
ASHFORD LOOP ASSOCIATES L.P. (1001 SOUTH DAIRY ASHFORD/2100 WEST LOOP SOUTH)
On September 18, 1998, the Company entered into a joint venture agreement
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, Harris County, Texas. The Company holds a 20 percent
interest in the joint venture. Subsequently, through June 30, 2001, the
venture paid $19,907 ($3,943 representing the Company's share) in accordance
with earn-out provisions in the acquisition contracts. The Company performs
management and leasing services for the properties owned by the joint venture
and recognized $94 and $59 in fees for such services in the six months ended
June 30, 2001 and 2000, respectively.
ARCAP INVESTORS, L.L.C.
On March 18, 1999, the Company invested in ARCap Investors, L.L.C., a joint
venture with several participants, which was formed to invest in sub-investment
grade tranches of commercial mortgage-backed securities ("CMBS"). The Company
has invested $20,000 in the venture. William L. Mack, Chairman of the Board of
Directors of the Company and an equity holder in the Operating Partnership, is a
principal of the managing member of the venture. At June 30, 2001, the venture
held approximately $859,448 face value of CMBS bonds at an aggregate cost of
approximately $440,951.
14
<Page>
SOUTH PIER AT HARBORSIDE - HOTEL DEVELOPMENT
On November 17, 1999, the Company entered into an agreement with Hyatt
Corporation to develop a 350-room hotel on the Company's South Pier at
Harborside Financial Center, Jersey City, Hudson County, New Jersey. In July
2000, the joint venture began development of the hotel project.
NORTH PIER AT HARBORSIDE - RESIDENTIAL DEVELOPMENT
On August 5, 1999, the Company entered into an agreement which provided for the
sale of its North Pier at Harborside Financial Center, Jersey City, Hudson
County, New Jersey to a joint venture with Lincoln Property Company Southwest,
Inc., in exchange for cash and an equity interest in the venture. In April 2001,
the Company sold the North Pier to the venture for net sales proceeds of
approximately $3,357 and retained an equity interest. The venture intends to
develop residential housing on the property for rental.
MC-SJP MORRIS V REALTY, LLC AND MC-SJP MORRIS VI REALTY, LLC
On August 24, 2000, the Company entered into a joint venture with SJP Properties
Company ("SJP Properties") to form MC-SJP Morris V Realty, LLC and MC-SJP Morris
VI Realty, LLC, which acquired approximately 47.5 acres of developable land
located in Parsippany, Morris County, New Jersey. The land was acquired for
approximately $16,193.
15
<Page>
SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the financial position of the unconsolidated joint
ventures in which the Company had investment interests as of June 30, 2001 and
December 31, 2000:
<Table>
<Caption>
June 30, 2001
- --------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop
- --------------------------------------------------------------------------------------------------------------------------
ASSETS:
Rental property, net $20,330 $ 92,224 $ 10,027 $42,446 $18,491 $37,637
Other assets 2,540 33,240 3,098 694 4,686 560
- --------------------------------------------------------------------------------------------------------------------------
Total assets $22,870 $125,464 $ 13,125 $43,140 $23,177 $38,197
==========================================================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ 67,782 $ 50,000 $ -- $16,319 $ --
Other liabilities 101 3,124 1,642 10,980 130 538
Partners'/members' capital 22,769 54,558 (38,517) 32,160 6,728 37,659
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $22,870 $125,464 $ 13,125 $43,140 $23,177 $38,197
==========================================================================================================================
Company's net investment
in unconsolidated
joint ventures $15,747 $ 37,647 $ 3,549 $33,405 $ 2,936 $ 7,880
- --------------------------------------------------------------------------------------------------------------------------
<Caption>
June 30, 2001
- -----------------------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
ARCap Realty South Pier Total
- -----------------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ -- $17,271 $33,441 $271,867
Other assets 482,329 96 -- 527,243
- -----------------------------------------------------------------------------------------------
Total assets $482,329 $17,367 $33,441 $799,110
===============================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $266,030 $16,028 $10,000 $426,159
Other liabilities 5,111 -- 4,425 26,051
Partners'/members' capital 211,188 1,339 19,016 346,900
- -----------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $482,329 $17,367 $33,441 $799,110
===============================================================================================
Company's net investment
in unconsolidated
joint ventures $ 19,745 $ 176 $ 9,859 $130,944
- -----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
December 31, 2000
- -------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop
- -------------------------------------------------------------------------------------------------------------------------
ASSETS:
Rental property, net $20,810 $ 78,119 $ 10,589 $12,546 $18,947 $37,665
Other assets 2,737 27,082 2,508 11,851 4,755 849
- -------------------------------------------------------------------------------------------------------------------------
Total assets $23,547 $105,201 $ 13,097 $24,397 $23,702 $38,514
=========================================================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ 63,486 $ 50,000 $ -- $16,666 $ --
Other liabilities 160 5,035 1,368 9,400 522 1,005
Partners'/members' capital 23,387 36,680 (38,271) 14,997 6,514 37,509
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $23,547 $105,201 $ 13,097 $24,397 $23,702 $38,514
=========================================================================================================================
Company's net investment
in unconsolidated
joint ventures $16,110 $ 35,079 $ 3,973 $15,809 $ 2,782 $ 7,874
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
December 31, 2000
- -----------------------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
ARCap Realty South Pier Total
- -----------------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ -- -- -- $178,676
Other assets 310,342 -- -- 360,124
- -----------------------------------------------------------------------------------------------
Total assets $310,342 -- -- $538,800
===============================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $129,562 -- -- $259,714
Other liabilities 3,750 -- -- 21,240
Partners'/members' capital 177,030 -- -- 257,846
- -----------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $310,342 -- -- $538,800
===============================================================================================
Company's net investment
in unconsolidated
joint ventures $ 19,811 -- -- $101,438
- -----------------------------------------------------------------------------------------------
</Table>
16
<Page>
The following is a summary of the results of operations of the unconsolidated
joint ventures for the period in which the Company had investment interests
during the three and six month periods ended June 30, 2001 and 2000:
<Table>
<Caption>
Three Months Ended June 30, 2001
- ----------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop
- ----------------------------------------------------------------------------------------------------------------------------
Total revenues $1,235 $13,936 $3,084 $ 158 $ 989 $1,491
Operating and other expenses (369) (774) (845) (7) (264) (699)
Depreciation and amortization (299) (592) (387) (5) (236) (232)
Interest expense -- (929) (808) -- (299) --
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 567 $11,641 $1,044 $ 146 $ 190 $ 560
============================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 245 $ 1,311 $ 366 $(617) $ 95 $ 112
- ----------------------------------------------------------------------------------------------------------------------------
<Caption>
Three Months Ended June 30, 2001
- -------------------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
ARCap Realty South Pier Total
- -------------------------------------------------------------------------------------------
Total revenues $ 8,504 -- -- $29,397
Operating and other expenses (2,179) -- -- (5,137)
Depreciation and amortization -- -- -- (1,751)
Interest expense (4,903) -- -- (6,939)
- -------------------------------------------------------------------------------------------
Net income $ 1,422 -- -- $15,570
===========================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 525 -- -- $ 2,037
- -------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
Three Months Ended June 30, 2000
- ----------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop
- ----------------------------------------------------------------------------------------------------------------------------
Total revenues $1,234 $ 2,504 $ 2,569 $254 $ 969 $1,469
Operating and other expenses (401) (813) (793) (51) (273) (641)
Depreciation and amortization (305) (1,065) (336) (7) (241) (210)
Interest expense -- (793) (1,039) -- (377) --
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 528 $ (167) $ 401 $196 $ 78 $ 618
============================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 225 $ 102 $ 43 $139 $ 37 $ 124
- ----------------------------------------------------------------------------------------------------------------------------
<Caption>
Three Months Ended June 30, 2000
- ----------------------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
ARCap Realty South Pier Total
- ----------------------------------------------------------------------------------------------
Total revenues $4,606 -- -- $13,605
Operating and other expenses (721) -- -- (3,693)
Depreciation and amortization -- -- -- (2,164)
Interest expense (932) -- -- (3,141)
- ----------------------------------------------------------------------------------------------
Net income $2,953 -- -- $ 4,607
==============================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 400 -- -- $ 1,070
- ----------------------------------------------------------------------------------------------
</Table>
17
<Page>
<Table>
<Caption>
Six Months Ended June 30, 2001
- ---------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop
- ---------------------------------------------------------------------------------------------------------------------------
Total revenues $2,488 $14,992 $ 5,807 $ 379 $1,958 $ 3,064
Operating and other expenses (782) (948) (1,650) (41) (607) (1,416)
Depreciation and amortization (592) (933) (777) (20) (483) (462)
Interest expense -- (1,256) (1,793) -- (654) --
- ---------------------------------------------------------------------------------------------------------------------------
Net income $1,114 $11,855 $ 1,587 $ 318 $ 214 $ 1,186
===========================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 503 $ 3,464 $ 536 $(445) $ 154 $ 209
- ---------------------------------------------------------------------------------------------------------------------------
<Caption>
Six Months Ended June 30, 2001
- -----------------------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
ARCap Realty South Pier Total
- -----------------------------------------------------------------------------------------------
Total revenues $27,830 -- -- $ 56,518
Operating and other expenses (4,003) -- -- (9,447)
Depreciation and amortization -- -- -- (3,267)
Interest expense (7,890) -- -- (11,593)
- -----------------------------------------------------------------------------------------------
Net income $15,937 -- -- $ 32,211
===============================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 1,025 -- -- $ 5,446
- -----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
Six Months Ended June 30, 2000
- ----------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop
- ----------------------------------------------------------------------------------------------------------------------------
Total revenues $2,468 $ 3,560 $ 5,281 $504 $1,947 $ 2,832
Operating and other expenses (819) (987) (1,553) (82) (590) (1,271)
Depreciation and amortization (611) (1,406) (762) (20) (482) (403)
Interest expense -- (1,120) (1,914) -- (746) --
- ----------------------------------------------------------------------------------------------------------------------------
Net income $1,038 $ 47 $ 1,052 $402 $ 129 $ 1,158
============================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 441 $ 102 $ 212 $345 $ 62 $ 245
- ----------------------------------------------------------------------------------------------------------------------------
<Caption>
Six Months Ended June 30, 2000
- -----------------------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
ARCap Realty South Pier Total
- -----------------------------------------------------------------------------------------------
Total revenues $11,150 -- -- $27,742
Operating and other expenses (1,292) -- -- (6,594)
Depreciation and amortization -- -- -- (3,684)
Interest expense (1,701) -- -- (5,481)
- -----------------------------------------------------------------------------------------------
Net income $ 8,157 -- -- $11,983
===============================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 800 -- -- $ 2,207
- -----------------------------------------------------------------------------------------------
</Table>
18
<Page>
5. DEFERRED CHARGES AND OTHER ASSETS
<Table>
<Caption>
June 30, December 31,
2001 2000
- --------------------------------------------------------------------------------
Deferred leasing costs $ 84,963 $ 80,667
Deferred financing costs 26,443 23,085
- --------------------------------------------------------------------------------
111,406 103,752
Accumulated amortization (29,673) (26,303)
- --------------------------------------------------------------------------------
Deferred charges, net 81,733 77,449
Prepaid expenses and other assets 18,604 25,206
- --------------------------------------------------------------------------------
Total deferred charges and other assets, net $100,337 $102,655
================================================================================
</Table>
6. RESTRICTED CASH
Restricted cash includes security deposits for the Company's residential
properties and certain commercial 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:
<Table>
<Caption>
June 30, December 31,
2001 2000
- --------------------------------------------------------------------------------
Security deposits $7,409 $6,477
Escrow and other reserve funds 83 80
- --------------------------------------------------------------------------------
Total restricted cash $7,492 $6,557
================================================================================
</Table>
7. RENTAL PROPERTY HELD FOR SALE
As of June 30, 2001, the Company has identified 41 office properties,
aggregating approximately 4.8 million square feet, and two land parcels as held
for sale. These properties are located in Texas, Arizona, Colorado, Iowa and
Florida. Such properties carried an aggregate book value of $450,932, net of
accumulated depreciation of $34,926 and a valuation allowance of $20,563.
As of December 31, 2000, the Company had identified 10 office properties,
aggregating approximately 1.6 million square feet, and a land parcel as held for
sale, all located in San Antonio and Houston, Texas. Such properties carried an
aggregate book value of $107,458, net of accumulated depreciation of $7,019.
The following is a summary of the condensed results of operations of the rental
properties held for sale at June 30, 2001 for the six month periods ended June
30, 2001 and 2000:
<Table>
<Caption>
Six Months Ended June 30,
2001 2000
- -------------------------------------------------------------------------------
Total revenues $ 41,528 $ 40,125
Operating and other expenses (16,939) (15,838)
Depreciation (2,474) (5,781)
- -------------------------------------------------------------------------------
Net income $ 22,115 $ 18,506
===============================================================================
</Table>
There can be no assurance if and when sales of the Company's rental properties
held for sale will occur.
19
<Page>
During the six months ended June 30, 2001, the Company determined that the
carrying amounts of certain properties identified as held for sale are not
expected to be recovered from estimated net sale proceeds from these property
sales and, accordingly, recognized a valuation allowance of $20,563.
The following table summarizes realized gains and unrealized losses on
disposition of rental property:
<Table>
<Caption>
Six Months Ended June 30,
2001 2000
- -------------------------------------------------------------------------------
Realized gain on sale of rental property and land $ 22,510 $76,169
Valuation allowance on rental property held for sale (20,563) --
- -------------------------------------------------------------------------------
Total realized gains and unrealized losses $ 1,947 $76,169
===============================================================================
</Table>
8. SENIOR UNSECURED NOTES
On January 29, 2001, the Operating Partnership issued $300,000 face amount of
7.75 percent senior unsecured notes with interest payable semi-annually in
arrears. The total proceeds from the issuance (net of selling commissions and
discount) of approximately $296,300 were used primarily to pay down outstanding
borrowings under the 2000 Unsecured Facility, as defined in Note 9. The senior
unsecured notes were issued at a discount of approximately $1,731, which is
being amortized over the term as an adjustment to interest expense.
The Operating Partnership's senior unsecured notes are redeemable at any time at
the option of the Company, subject to certain conditions including yield
maintenance.
A summary of the terms of the senior unsecured notes (collectively, "Senior
Unsecured Notes") outstanding as of June 30, 2001 and December 31, 2000 is as
follows:
<Table>
<Caption>
June 30, December 31, Effective
2001 2000 Rate (1)
- ------------------------------------------------------------------------------------------------
7.180% Senior Unsecured Notes, due December 31, 2003 $ 185,283 $185,283 7.23%
7.000% Senior Unsecured Notes, due March 15, 2004 299,784 299,744 7.27%
7.250% Senior Unsecured Notes, due March 15, 2009 298,189 298,072 7.49%
7.835% Senior Unsecured Notes, due December 15, 2010 15,000 15,000 7.95%
7.750% Senior Unsecured Notes, due February 15, 2011 298,343 -- 7.93%
- ------------------------------------------------------------------------------------------------
Total Senior Unsecured Notes $1,096,599 $798,099 7.51%
================================================================================================
</Table>
(1) Includes the cost of terminated treasury lock agreements (if any),
offering and other transaction costs and the discount on the notes, as
applicable.
The terms of the Senior Unsecured Notes 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.
9. REVOLVING CREDIT FACILITIES
2000 UNSECURED FACILITY
On June 22, 2000, the Company obtained an unsecured revolving credit facility
("2000 Unsecured Facility") with a current borrowing capacity of $800,000 from a
group of 24 lenders. The interest rate on outstanding borrowings under the
credit line is currently the London Inter-Bank Offered Rate ("LIBOR") (3.86
percent at June 30, 2001) plus 80 basis points. The Company may instead elect an
interest rate representing the higher of the lender's prime rate or the Federal
Funds rate plus 50 basis points. The 2000 Unsecured Facility also requires a 20
basis point facility fee on the current
20
<Page>
borrowing capacity payable quarterly in arrears. In the event of a change in the
Company's unsecured debt rating, the interest rate and facility fee will be
changed on a sliding scale. Subject to certain conditions, the Company has the
ability to increase the borrowing capacity of the credit line up to $1,000,000.
The 2000 Unsecured Facility matures in June 2003, with an extension option of
one year, which would require a payment of 25 basis points of the then borrowing
capacity of the credit line upon exercise.
The terms of the 2000 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 assets, 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
debt service coverage, the minimum amount of fixed charge coverage, the maximum
amount of unsecured indebtedness, the minimum amount of unencumbered property
debt service coverage and certain investment limitations. The dividend
restriction referred to above provides that, except to enable the Company to
continue to qualify as a REIT under the Code, the Company will not during any
four consecutive fiscal quarters make distributions with respect to common stock
or other equity interests in an aggregate amount in excess of 90 percent of
funds from operations (as defined) for such period, subject to certain other
adjustments.
PRUDENTIAL FACILITY
The Company had a revolving credit facility ("Prudential Facility") with
Prudential Securities Corp. ("PSC") in the amount of $100,000, which bore
interest at 110 basis points over one-month LIBOR, with a maturity date of
June 29, 2001. The Prudential Facility was a recourse liability of the
Operating Partnership and was secured by the Company's equity interest in
Harborside Plazas 2 and 3. The Prudential Facility limited the ability of the
Operating Partnership to make any distributions during any fiscal quarter in
an amount in excess of 100 percent of the Operating Partnership's available
funds from operations (as defined) for the immediately preceding fiscal
quarter (except to the extent such excess distributions or dividends are
attributable to gains from the sale of the Operating Partnership's assets or
are required for the Company to maintain its status as a REIT under the
Code); provided, however, that the Operating Partnership may make
distributions and pay dividends in excess of 100 percent of available funds
from operations (as defined) for the preceding fiscal quarter for not more
than three consecutive quarters. In addition to the foregoing, the Prudential
Facility limited the liens placed upon the subject property and certain
collateral, the use of proceeds from the Prudential Facility, and the
maintenance of ownership of the subject property and assets derived from said
ownership. The Company repaid in full and terminated the Prudential Facility
on June 29, 2001.
SUMMARY
As of June 30, 2001 and December 31, 2000, the Company had outstanding
borrowings of $76,500 and $348,840, respectively, under its revolving credit
facilities. The total outstanding borrowings were from the 2000 Unsecured
Facility, with no outstanding borrowings under the Prudential Facility.
21
<Page>
10. MORTGAGES AND LOANS PAYABLE
The Company has mortgages and loans payable which are comprised of various loans
collateralized by certain of the Company's rental properties. Payments on
mortgages and loans payable are generally due in monthly installments of
principal and interest, or interest only.
A summary of the Company's mortgages and loans payable as of June 30, 2001 and
December 31, 2000 is as follows:
<Table>
<Caption>
EFFECTIVE PRINCIPAL BALANCE AT
INTEREST JUNE 30, DECEMBER 31,
PROPERTY NAME LENDER RATE 2001 2000 MATURITY
- ------------------------------------------------------------------------------------------------------------------------------------
101 & 225 Executive Drive Sun Life Assurance Co. 6.27% $ -- $ 2,198 06/01/01
Mack-Cali Morris Plains Corestates Bank 7.51% 2,133 2,169 12/31/01
Mack-Cali Willowbrook CIGNA 8.67% 9,038 9,460 10/01/03
400 Chestnut Ridge Prudential Insurance Co. 9.44% 13,128 13,588 07/01/04
Mack-Cali Centre VI Principal Life Insurance Co. 6.87% 35,000 35,000 04/01/05
Various (a) Prudential Insurance Co. 7.10% 150,000 150,000 05/15/05
Mack-Cali Bridgewater I New York Life Ins. Co. 7.00% 23,000 23,000 09/10/05
Mack-Cali Woodbridge II New York Life Ins. Co. 7.50% 17,500 17,500 09/10/05
Mack-Cali Short Hills Prudential Insurance Co. 7.74% 25,571 25,911 10/01/05
500 West Putnam Avenue New York Life Ins. Co. 6.52% 9,679 10,069 10/10/05
Harborside - Plaza 1 U.S. West Pension Trust 5.61% 56,141 54,370 01/01/06
Harborside - Plazas 2 and 3 Northwestern/Principal 7.36% 163,859 95,630 01/01/06
Mack-Cali Airport Allstate Life Insurance Co. 7.05% 10,474 10,500 04/01/07
Kemble Plaza I Mitsubishi Tr & Bk Co. LIBOR+0.65% 32,178 32,178 01/31/09
- -----------------------------------------------------------------------------------------------------------------------------------
Total Property Mortgages $547,701 $481,573
====================================================================================================================================
</Table>
(a) The Company has the option to convert the mortgage loan, which is secured
by 12 properties, to unsecured debt.
SCHEDULED PRINCIPAL PAYMENTS
Scheduled principal payments and related weighted average annual interest
rates for the Company's Senior Unsecured Notes (see Note 8), revolving credit
facilities (see Note 9) and mortgages and loans payable as of June 30, 2001
are as follows:
<Table>
<Caption>
WEIGHTED AVG.
SCHEDULED PRINCIPAL INTEREST RATE OF
PERIOD AMORTIZATION MATURITIES TOTAL FUTURE REPAYMENTS (A)
- ------------------------------------------------------------------------------------------------------------------------------------
July through December 2001 $ 1,554 $ 2,096 $ 3,650 9.08%
2002 3,260 -- 3,260 10.25%
2003 3,407 268,594 272,001 6.61%
2004 2,247 309,863 312,110 7.34%
2005 1,420 253,178 254,598 7.14%
Thereafter (1,361) 876,542 875,181 7.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Average $10,527 $1,710,273 $1,720,800 7.27%
====================================================================================================================================
</Table>
(a) Assumes weighted average LIBOR at June 30, 2001 of 4.04 percent 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 six months ended June 30, 2001 and 2000 was
$52,530 and $56,035, respectively. Interest capitalized by the Company for the
six months ended June 30, 2001 and 2000 was $7,315 and $4,189, respectively.
22
<Page>
SUMMARY OF INDEBTEDNESS
As of June 30, 2001, the Company's total indebtedness of $1,720,800 (weighted
average interest rate of 7.27 percent) was comprised of $108,678 of revolving
credit facility borrowings and other variable rate mortgage debt (weighted
average rate of 5.07 percent) and fixed rate debt of $1,612,122 (weighted
average rate of 7.42 percent).
As of December 31, 2000, the Company's total indebtedness of $1,628,512
(weighted average interest rate of 7.29 percent) was comprised of $381,018 of
revolving credit facility borrowings and other variable rate mortgage debt
(weighted average rate of 7.53 percent) and fixed rate debt of $1,247,494
(weighted average rate of 7.25 percent).
11. MINORITY INTERESTS
Minority interests in the accompanying consolidated financial statements relate
to (i) preferred units in the Operating Partnership ("Preferred Units"), common
units in the Operating Partnership and warrants to purchase common units ("Unit
Warrants"), held by parties other than the Company, and (ii) interests in
consolidated partially-owned properties for the portion of such properties not
owned by the Company.
The following table sets forth the changes in minority interests which relate to
Preferred Units, common units and Unit Warrants in the Operating Partnership for
the six months ended June 30, 2001:
<Table>
<Caption>
Preferred Common Unit Preferred Common Unit
Units Units Warrants Unitholders Unitholders Warrants Total
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2001 220,340 7,963,725 2,000,000 $226,005 $212,994 $8,524 $447,523
Net income -- -- -- 7,758 10,464 -- 18,222
Distributions -- -- -- (7,758) (9,707) -- (17,465)
Redemption of common
units for shares of
common stock -- (7,200) -- -- (192) -- (192)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2001 220,340 7,956,525 2,000,000 $226,005 $213,559 $8,524 $448,088
====================================================================================================================================
</Table>
MINORITY INTEREST OWNERSHIP
As of June 30, 2001 and December 31, 2000, the minority interest common
unitholders owned 12.3 percent (20.1 percent, including the effect of the
conversion of Preferred Units into common units) and 12.3 percent (20.1 percent
including the effect of the conversion of Preferred Units into common units) of
the Operating Partnership, respectively (excluding any effect for the exercise
of Unit Warrants).
12. EMPLOYEE BENEFIT PLAN
All employees of the Company 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 up to 15
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 Company, at management's discretion, may match employee
contributions and/or make discretionary contributions. Management has approved,
for the year ended December 31, 2001, a Company matching contribution to be paid
under the 401(k) Plan equal to 50 percent of the first 3.5 percent of annual
salary, as defined in the 401(k) Plan, contributed to the plan for 2001. Total
expense recognized by the Company for both the six month periods ended June 30,
2001 and 2000 was $200.
23
<Page>
13. COMMITMENTS AND CONTINGENCIES
GROUND LEASE AGREEMENTS
Future minimum rental payments under the terms of all non-cancelable ground
leases under which the Company is the lessee, as of June 30, 2001, are as
follows:
<Table>
<Caption>
Period Amount
- --------------------------------------------------------------------------------
July through December 2001 $ 266
2002 531
2003 531
2004 534
2005 534
Thereafter 21,997
- --------------------------------------------------------------------------------
Total $24,393
================================================================================
</Table>
Ground lease expense incurred during the six months ended June 30, 2001 and 2000
amounted to $284 and $285, respectively.
OTHER
On June 27, 2000, both Brant Cali and John R. Cali resigned their positions
as officers of the Company and Brant Cali resigned as a director of the
Company. John R. Cali was appointed to the Board of Directors of the Company
to take the seat previously held by Brant Cali. As required by Brant Cali and
John R. Cali's employment agreements with the Company: (i) the Company paid
$2,820 and $2,806 (less applicable withholding) to Brant Cali and John R.
Cali, respectively; (ii) all options to acquire shares of the Company's
common stock and Restricted Stock Awards (as hereinafter defined) held by
Brant Cali and John R. Cali became fully vested on the effective date of
their resignations from the Company. All costs associated with Brant Cali and
John R. Cali's resignations, which totaled approximately $9,228, are included
in non-recurring charges for the six months ended June 30, 2000.
The Company is a defendant in certain litigation arising in the normal course of
business activities. Management does not believe that the resolution of these
matters will have a materially adverse effect upon the Company.
14. TENANT LEASES
The Properties are leased to tenants under operating leases with various
expiration dates through 2016. 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.
15. STOCKHOLDERS' EQUITY
To maintain its qualification as a REIT, not more than 50 percent in value of
the outstanding shares of the Company may be owned, directly or indirectly, by
five or fewer individuals at any time during the last half of any taxable year
of the Company, other than its initial taxable year (defined to include certain
entities), applying certain constructive ownership rules. To help ensure that
the Company will not fail this test, the Company's Articles of Incorporation
provide for, among other things, certain restrictions on the transfer of the
common stock to prevent further concentration of stock ownership. Moreover, to
evidence compliance with these requirements, the Company must maintain records
that disclose the actual ownership of its outstanding common stock and will
demand written statements each year from the holders of record of designated
percentages of its common stock requesting the disclosure of the beneficial
owners of such common stock.
COMMON STOCK REPURCHASES
On September 13, 2000, the Board of Directors authorized the Company to purchase
up to $150,000 of the Company's outstanding common stock ("Repurchase Program").
The Company purchased for constructive retirement 2,026,300 shares of its
outstanding common stock for an aggregate cost of approximately $55,514 from
September 13, 2000 through December 31, 2000.
Under the Repurchase Program, the Company purchased for constructive retirement
881,500 shares of its outstanding common stock for an aggregate cost of
approximately $24,056 for the six months ended June 30, 2001.
24
<Page>
STOCK OPTION PLANS
In September 2000, the Company established the 2000 Employee Stock Option Plan
("2000 Employee Plan") and the 2000 Director Stock Option Plan ("2000 Director
Plan") under which a total of 2,700,000 shares (subject to adjustment) of the
Company's common stock have been reserved for issuance (2,500,000 shares under
the 2000 Employee Plan and 200,000 shares under the 2000 Director Plan). In
1994, and as subsequently amended, the Company 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 Company's common stock have been reserved for issuance
(4,980,188 shares under the Employee Plan and 400,000 shares under the Director
Plan). Stock options granted under the Employee Plan in 1994 and 1995 have
become exercisable over a three-year period and those options granted under both
the 2000 Employee Plan and Employee Plan in 1996, 1997, 1998, 1999 and 2000
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. There were 60,000 stock options granted for the six months
ended June 30, 2001. As of June 30, 2001, stock options outstanding had a
weighted average remaining contractual life of approximately 6.9 years.
Information regarding the Company's stock option plans is summarized below:
<Table>
<Caption>
Weighted
Shares Average
Under Exercise
Options Price
- --------------------------------------------------------------------------------
Outstanding at January 1, 2001 4,633,319 $30.14
Granted 60,000 $26.31
Exercised (106,340) $22.51
Lapsed or canceled (122,412) $29.81
- --------------------------------------------------------------------------------
Outstanding at June 30, 2001 4,464,567 $30.28
================================================================================
Options exercisable at June 30, 2001 2,630,748 $31.28
Available for grant at June 30, 2001 2,320,978
- --------------------------------------------------------------------------------
</Table>
STOCK WARRANTS
The Company has 360,000 warrants outstanding which enable the holders to
purchase an equal number of shares of its common stock ("Stock Warrants") at $33
per share (the market price at date of grant). Such warrants are all currently
exercisable and expire on January 31, 2007.
The Company also has 389,976 Stock Warrants outstanding which enable the holders
to purchase an equal number of its shares of common stock at $38.75 per share
(the market price at date of grant). Such warrants vest equally over a five-year
period through December 31, 2001 and expire on December 12, 2007.
As of June 30, 2001, there were a total of 749,976 Stock Warrants outstanding.
As of June 30, 2001, there were 671,980 Stock Warrants exercisable. For the six
months ended June 30, 2001, no Stock Warrants were canceled. No Stock Warrants
have been exercised through June 30, 2001.
STOCK COMPENSATION
In connection with stock awards granted to officers and certain other employees
of the Company (collectively, "Restricted Stock Awards"), officers and certain
other employees are to receive up to a total of 198,279 shares of the Company's
common stock generally vesting over a three or five-year period. Certain
Restricted Stock Awards are contingent upon the Company meeting certain
performance and/or stock price appreciation objectives. The Restricted Stock
Awards provided to the officers and certain other employees were granted under
the 2000 Employee Plan and Employee Plan.
Effective January 1, 2001, 24,019 Restricted Stock Awards vested and therefore
were released to the officers and certain other employees. For the six months
ended June 30, 2001, 7,408 unvested Restricted Stock Awards were canceled.
25
<Page>
EARNINGS PER SHARE
FASB No. 128 requires a dual presentation of basic and diluted EPS on the face
of the income statement for all companies with complex capital structures even
where the effect of such dilution is not material. Basic EPS excludes dilution
and is computed by dividing net income available to common stockholders by the
weighted average number of shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
The following information presents the Company's results for the three and six
month periods ended June 30, 2001 and 2000 in accordance with FASB No. 128:
<Table>
<Caption>
Three Months Ended June 30,
2001 2000
-------------------------------------------------------------------
Basic EPS Diluted EPS Basic EPS Diluted EPS
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $57,673 $57,673 $94,308 $ 94,308
Add: Net income attributable to
Operating Partnership - common units -- 8,119 -- 13,019
Net income attributable to
Operating Partnership - preferred units -- 3,879 -- 3,765
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted net income $57,673 $69,671 $94,308 $111,092
====================================================================================================================================
Weighted average shares 56,519 71,044 58,545 73,284
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share $ 1.02 $ $ 0.98 $ 1.61 $ 1.52
====================================================================================================================================
</Table>
<Table>
<Caption>
Six Months Ended June 30,
2001 2000
-------------------------------------------------------------------
Basic EPS Diluted EPS Basic EPS Diluted EPS
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $74,411 $74,411 $130,923 $130,923
Add: Net income attributable to
Operating Partnership - common units -- 10,464 -- 18,126
Net income attributable to
Operating Partnership - preferred units -- 7,758 -- 7,634
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted net income $74,411 $92,633 $130,923 $156,683
====================================================================================================================================
Weighted average shares 56,662 71,198 58,420 73,237
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share $ 1.31 $ 1.30 $ 2.24 $ 2.14
====================================================================================================================================
</Table>
26
<Page>
The following schedule reconciles the shares used in the basic EPS calculation
to the shares used in the diluted EPS calculation:
<Table>
<Caption>
Three Months Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------
Basic EPS Shares: 56,519 58,545 56,662 58,420
Add: Operating Partnership - common units 7,957 8,082 7,959 8,107
Operating Partnership - preferred units 6,359 6,457 6,359 6,537
(after conversion to common units)
Stock options 209 200 218 173
- -----------------------------------------------------------------------------------------------------
Diluted EPS Shares: 71,044 73,284 71,198 73,237
=====================================================================================================
</Table>
Through June 30, 2001, under the Repurchase Program, the Company purchased for
constructive retirement, a total of 4,777,000 shares of its outstanding common
stock for an aggregate cost of approximately $132,131.
16. SEGMENT REPORTING
The Company operates in one business segment - real estate. The Company provides
leasing, management, acquisition, development, construction and tenant-related
services for its portfolio. The Company does not have any foreign operations.
The accounting policies of the segments are the same as those described in Note
2, excluding straight-line rent adjustments, depreciation and amortization and
non-recurring charges.
The Company evaluates performance based upon net operating income from the
combined properties in the segment.
27
<Page>
Selected results of operations for the three and six month periods ended June
30, 2001 and 2000 and selected asset information as of June 30, 2001 and
December 31, 2000 regarding the Company's operating segment are as follows:
<Table>
<Caption>
Total Corporate & Total
Segment Other (e) Company
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CONTRACT REVENUES (a):
Three months ended:
June 30, 2001 $ 143,252 $ 1,109 $ 144,361 (f)
June 30, 2000 140,117 2,372 142,489 (g)
Six months ended:
June 30, 2001 $ 284,556 $ 2,505 $ 287,061 (h)
June 30, 2000 280,258 3,020 283,278 (i)
TOTAL OPERATING AND INTEREST EXPENSES (b):
Three months ended:
June 30, 2001 $ 43,617 $ 35,689 $ 79,306 (j)
June 30, 2000 42,044 31,519 73,563 (k)
Six months ended:
June 30, 2001 $ 88,893 $ 69,910 $ 158,803 (l)
June 30, 2000 84,808 64,119 148,927 (m)
NET OPERATING INCOME (c):
Three months ended:
June 30, 2001 $ 99,635 $(34,580) $ 65,055 (f) (j)
June 30, 2000 98,073 (29,147) 68,926 (g) (k)
Six months ended:
June 30, 2001 $ 195,663 $(67,405) $ 128,258 (h) (l)
June 30, 2000 195,450 (61,099) 134,351 (i) (m)
TOTAL ASSETS:
June 30, 2001 $3,711,992 $ 47,927 $3,759,919
December 31, 2000 3,623,107 53,870 3,676,977
TOTAL LONG-LIVED ASSETS (d):
June 30, 2001 $3,592,243 $ 28,987 $3,621,230
December 31, 2000 3,522,766 23,574 3,546,340
- ---------------------------------------------------------------------------------------------------------------------
</Table>
(a) Total contract revenues represent all revenues during the period
(including the Company's share of net income from unconsolidated joint
ventures), excluding adjustments for straight-lining of rents and the
Company's share of straight-line rent adjustments from unconsolidated
joint ventures. All interest income is excluded from segment amounts and
is classified in Corporate and Other for all periods.
(b) Total operating and interest expenses represent the sum of real estate
taxes, utilities, operating services, general and administrative and
interest expense. All interest expense (including for property-level
mortgages) is excluded from segment amounts and classified in Corporate
and Other for all periods.
(c) Net operating income represents total contract revenues [as defined in
Note (a)] less total operating and interest expenses [as defined in Note
(b)] for the period.
(d) Long-lived assets are comprised of total rental property, unbilled rents
receivable and investments in unconsolidated joint ventures.
(e) 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 Company totals.
(f) Excludes $3,967 of adjustments for straight-lining of rents and $90 for
the Company's share of straight-line rent adjustments from unconsolidated
joint ventures.
(g) Excludes $3,403 of adjustments for straight-lining of rents and ($3) for
the Company's share of straight-line rent adjustments from unconsolidated
joint ventures.
(h) Excludes $7,737 of adjustments for straight-lining of rents and $126 for
the Company's share of straight-line rent adjustments from unconsolidated
joint ventures.
(i) Excludes $5,536 of adjustments for straight-lining of rents and $54 for
the Company's share of straight-line rent adjustments from unconsolidated
joint ventures.
(j) Excludes $21,951 of depreciation and amortization.
(k) Excludes $22,945 of depreciation and amortization and non-recurring
charges of $9,228.
(l) Excludes $45,435 of depreciation and amortization.
(m) Excludes $45,127 of depreciation and amortization and non-recurring
charges of $9,228.
28
<Page>
ITEM 2. 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 Corporation and the notes thereto.
Certain defined terms used herein have the meaning ascribed to them in the
Consolidated Financial Statements.
The following comparisons for the three and six month periods ended June 30,
2001 ("2001"), as compared to the three and six month periods ended June 30,
2000 ("2000"), make reference to the following: (i) the effect of the
"Same-Store Properties," which represents all in-service properties owned by the
Company at March 31, 2000 (for the three-month period comparisons), and which
represent all in-service properties owned by the Company at December 31, 1999
(for the six-month period comparisons), excluding Dispositions as defined below,
(ii) the effect of the "Acquired Properties," which represent all properties
acquired or placed in service by the Company from April 1, 2000 through June 30,
2001 (for the three-month period comparisons), and which represent all
properties acquired or placed in service by the Company from January 1, 2000
through June 30, 2001 (for the six-month period comparisons), and (iii) the
effect of the "Dispositions", which represent results for each period for those
rental properties sold by the Company during the same periods.
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000
<Table>
<Caption>
Quarter Ended
June 30, Dollar Percent
(DOLLARS IN THOUSANDS) 2001 2000 Change Change
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUE FROM RENTAL OPERATIONS:
Base rents $129,419 $122,072 $ 7,347 6.0%
Escalations and recoveries from tenants 13,430 14,627 (1,197) (8.2)
Parking and other 3,060 6,128 (3,068) (50.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-total 145,909 142,827 3,082 2.2
Equity in earnings of unconsolidated joint ventures 2,037 1,070 967 90.4
Interest income 472 1,992 (1,520) (76.3)
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 148,418 145,889 2,529 1.7
- ------------------------------------------------------------------------------------------------------------------------------------
PROPERTY EXPENSES:
Real estate taxes 15,510 14,733 777 5.3
Utilities 10,699 10,014 685 6.8
Operating services 17,686 16,822 864 5.1
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-total 43,895 41,569 2,326 5.6
General and administrative 6,856 5,159 1,697 32.9
Depreciation and amortization 21,951 22,945 (994) (4.3)
Interest expense 28,555 26,835 1,720 6.4
Non-recurring charges -- 9,228 (9,228) (100.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 101,257 105,736 (4,479) (4.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before realized gains and unrealized losses
on disposition of rental property and
minority interests 47,161 40,153 7,008 17.5
Realized gains and unrealized losses on disposition
of rental property 22,510 73,921 (51,411) (69.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before minority interests 69,671 114,074 (44,403) (38.9)
MINORITY INTERESTS:
Operating partnership 11,998 16,784 (4,786) (28.5)
Partially-owned properties -- 2,982 (2,982) (100.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 57,673 $ 94,308 $(36,635) (38.8)%
====================================================================================================================================
</Table>
29
<Page>
The following is a summary of the changes in revenue from rental operations and
property expenses divided into Same-Store Properties, Acquired Properties and
Dispositions (dollars in thousands):
<Table>
<Caption>
TOTAL COMPANY SAME-STORE PROPERTIES ACQUIRED PROPERTIES DISPOSITIONS
------------- --------------------- ------------------- ------------
Dollar Percent Dollar Percent Dollar Percent Dollar Percent
Change Change Change Change Change Change Change Change
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 7,347 6.0% $ 3,963 3.2% $8,043 6.6% $(4,659) (3.8)%
Escalations and recoveries
from tenants (1,197) (8.2) (1,141) (7.8) 566 3.9 (622) (4.3)
Parking and other (3,068) (50.1) (3,014) (49.2) 142 2.3 (196) (3.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 3,082 2.2% $ (192) (0.1)% $8,751 6.1% $(5,477) (3.8)%
====================================================================================================================================
PROPERTY EXPENSES:
Real estate taxes $ 777 5.3% $ 149 1.0% $1,029 7.0% $ (401) (2.7)%
Utilities 685 6.8 624 6.2 469 4.7 (408) (4.1)
Operating services 864 5.1 453 2.7 1,282 7.6 (871) (5.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,326 5.6% $ 1,226 2.9% $2,780 6.7% $(1,680) (4.0)%
====================================================================================================================================
OTHER DATA:
Number of Consolidated Properties 261 246 15 10
Square feet (in thousands) 27,353 25,358 1,995 2,276
</Table>
Base rents for the Same-Store Properties increased $4.0 million, or 3.2 percent,
for 2001 as compared to 2000, due primarily to rental rate increases in 2001.
Escalations and recoveries from tenants for the Same-Store Properties decreased
$1.1 million, or 7.8 percent, for 2001 over 2000, due to the recovery of a
decreased amount of total property expenses in 2001, as well as increased
settle-up billings during the second quarter 2000. Parking and other income for
the Same-Store Properties decreased $3.0 million, or 49.2 percent, due primarily
to fewer lease termination fees in 2001.
Real estate taxes on the Same-Store Properties increased $0.1 million, or 1.0
percent, for 2001 as compared to 2000, due primarily to property tax rate
increases in certain municipalities in 2001. Utilities for the Same-Store
Properties increased $0.6 million, or 6.2 percent, for 2001 as compared to 2000,
due primarily to increased gas rates. Operating services for the Same-Store
Properties increased $0.5 million, or 2.7 percent, due primarily to an increase
in maintenance costs in 2001.
Equity in earnings of unconsolidated joint ventures increased $1.0 million, or
90.4 percent, for 2001 as compared to 2000. This is due primarily to properties
developed by joint ventures being placed in service during 2000 and higher
occupancies at certain properties in 2001 (see Note 4 to the Financial
Statements).
Interest income decreased $1.5 million, or 76.3 percent, for 2001 as compared to
2000. This decrease was due primarily to additional interest income in 2000 on
investment of proceeds from the Dispositions in cash and cash equivalents.
General and administrative increased by $1.7 million, or 32.9 percent, for 2001
as compared to 2000. This increase is due primarily to increased professional
fees, mostly on account of costs for transactions not consummated, and
increased payroll and related costs in 2001.
Depreciation and amortization decreased by $1.0 million, or 4.3 percent, for
2001 over 2000. Of this decrease, $1.7 million, or 7.4 percent, is attributable
to the Same-Store Properties, and $0.7 million, or 3.1 percent, is due to the
Dispositions, partially offset by an increase of $1.4 million, or 6.2 percent,
due to the Acquired Properties.
Interest expense increased $1.7 million, or 6.4 percent, for 2001 as compared to
2000. This increase is due primarily to the replacement in early 2001 of
short-term credit facility borrowings with higher, long-term fixed rate
unsecured debt.
30
<Page>
Income before realized and unrealized gain on disposition of rental property and
minority interests increased to $47.2 million in 2001 from $40.2 million in
2000. The increase of approximately $7.0 million is due to the factors discussed
above.
Net income decreased by $36.6 million, from $94.3 million in 2000 to $57.7
million in 2001. This decrease was a result of a gain on sale of rental property
in 2000 of $73.9 million, which was partially offset by a gain on sale of rental
property in 2001 of $22.5 million, an increase in income before realized and
unrealized gain on disposition of rental property and minority interests of $7.0
million in 2001 as compared to 2000, and a decrease in minority interests of
$7.8 million in 2001.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
<Table>
<Caption>
Six Months Ended
June 30, Dollar Percent
(DOLLARS IN THOUSANDS) 2001 2000 Change Change
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUE FROM RENTAL OPERATIONS:
Base rents $254,795 $243,670 $ 11,125 4.6%
Escalations and recoveries from tenants 28,192 31,295 (3,103) (9.9)
Parking and other 5,406 9,450 (4,044) (42.8)
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-total 288,393 284,415 3,978 1.4
Equity in earnings of unconsolidated joint ventures 5,446 2,207 3,239 146.8
Interest income 1,085 2,246 (1,161) (51.7)
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 294,924 288,868 6,056 2.1
- ------------------------------------------------------------------------------------------------------------------------------------
PROPERTY EXPENSES:
Real estate taxes 30,797 29,437 1,360 4.6
Utilities 22,655 20,393 2,262 11.1
Operating services 35,565 34,564 1,001 2.9
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-total 89,017 84,394 4,623 5.5
General and administrative 12,866 11,272 1,594 14.1
Depreciation and amortization 45,435 45,127 308 0.7
Interest expense 56,920 53,261 3,659 6.9
Non-recurring charges -- 9,228 (9,228) (100.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 204,238 203,282 956 0.5
- ------------------------------------------------------------------------------------------------------------------------------------
Income before realized gains and unrealized losses
on disposition of rental property and
minority interests 90,686 85,586 5,100 6.0
Realized gains and unrealized losses on disposition
of rental property 1,947 76,169 (74,222) (97.4)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before minority interests 92,633 161,755 (69,122) (42.7)
MINORITY INTERESTS:
Operating partnership 18,222 25,760 (7,538) (29.3)
Partially-owned properties -- 5,072 (5,072) (100.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 74,411 $130,923 $(56,512) (43.2)%
====================================================================================================================================
</Table>
31
<Page>
The following is a summary of the changes in revenue from rental operations and
property expenses divided into Same-Store Properties, Acquired Properties and
Dispositions (dollars in thousands):
<Table>
<Caption>
TOTAL COMPANY SAME-STORE PROPERTIES ACQUIRED PROPERTIES DISPOSITIONS
------------- --------------------- ------------------- ------------
Dollar Percent Dollar Percent Dollar Percent Dollar Percent
Change Change Change Change Change Change Change Change
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 11,125 4.6% $ 9,273 3.8% $14,055 5.8% $(12,203) (5.0)%
Escalations and recoveries
from tenants (3,103) (9.9) (1,835) (5.9) 1,081 3.5 (2,349) (7.5)
Parking and other (4,044) (42.8) (3,683) (39.0) 171 1.8 (532) (5.6)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 3,978 1.4% $ 3,755 1.3% $15,307 5.4% $(15,084) (5.3)%
====================================================================================================================================
PROPERTY EXPENSES:
Real estate taxes $ 1,360 4.6% $ 461 1.6% $ 1,952 6.6% $ (1,053) (3.6)%
Utilities 2,262 11.1 1,910 9.4 1,236 6.1 (884) (4.4)
Operating services 1,001 2.9 1,024 3.0 2,140 6.2 (2,163) (6.3)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 4,623 5.5% $ 3,395 4.0% $ 5,328 6.3% $ (4,100) (4.8)
====================================================================================================================================
OTHER DATA:
Number of Consolidated Properties 261 245 16 10
Square feet (in thousands) 27,353 25,297 2,056 2,276
</Table>
Base rents for the Same-Store Properties increased $9.3 million, or 3.8 percent,
for 2001 as compared to 2000, due primarily to rental rate increases in 2001.
Escalations and recoveries from tenants for the Same-Store Properties decreased
$1.8 million, or 5.9 percent, for 2001 over 2000, due to the recovery of a
decreased amount of total property expenses in 2001, as well as increased
settle-up billings in 2000. Parking and other income for the Same-Store
Properties decreased $3.7 million, or 39.0 percent, due primarily to fewer lease
termination fees in 2001.
Real estate taxes on the Same-Store Properties increased $0.5 million, or 1.6
percent, for 2001 as compared to 2000, due primarily to property tax rate
increases in certain municipalities in 2001. Utilities for the Same-Store
Properties increased $1.9 million, or 9.4 percent, for 2001 as compared to 2000,
due primarily to increased gas rates. Operating services for the Same-Store
Properties increased $1.0 million, or 3.0 percent, due primarily to an increase
in maintenance costs in 2001.
Equity in earnings of unconsolidated joint ventures increased $3.2 million, or
146.8 percent, for 2001 as compared to 2000. This is due primarily to properties
developed by joint ventures being placed in service during 2000 and higher
occupancies at certain properties (see Note 4 to the Financial Statements).
Interest income decreased $1.2 million, or 51.7 percent, for 2001 as compared to
2000. This decrease was due primarily to additional interest income in 2000 on
investment of proceeds from the Dispositions in cash and cash equivalents.
General and administrative increased by $1.6 million, or 14.1 percent, for
2001 as compared to 2000. This increase is due primarily to increased
professional fees, mostly on account of costs for transactions not
consummated, and increased payroll and related costs in 2001.
Depreciation and amortization decreased by $0.3 million, or 0.7 percent, for
2001 over 2000. Of this increase, $2.6 million, or 5.9 percent, is due to the
Acquired Properties, partially offset by a decrease of $1.4 million, or 3.2
percent, due to the Dispositions and $0.9 million, or 2.0 percent, attributable
to the Same-Store Properties.
Interest expense increased $3.7 million, or 6.9 percent, for 2001 as compared to
2000. This increase is due primarily to the replacement in 2001 of short-term
credit facility borrowings with higher, long-term fixed rate unsecured debt.
32
<Page>
Income before realized gains and unrealized losses on disposition of rental
property and minority interests increased to $90.7 million in 2001 from $85.6
million in 2000. The increase of approximately $5.1 million is due to the
factors discussed above.
Net income decreased by $56.5 million, from $130.9 million in 2000 to $74.4
million in 2001. This decrease was a result of a gain on sale of rental property
of $76.2 million. This was partially offset by a gain on sale of rental property
of $2.0 million in 2001, an increase in income before realized gains and
unrealized losses on disposition of rental property and minority interests of
$5.1 million, and a decrease in minority interests of $12.6 million in 2001.
LIQUIDITY AND CAPITAL RESOURCES
STATEMENT OF CASH FLOWS
During the six months ended June 30, 2001, the Company generated $133.0 million
in cash flows from operating activities, and together with $586.8 million in
borrowings from the Company's senior unsecured notes, revolving credit
facilities and additional mortgage financing, $44.8 million in proceeds from
sales of rental property, $19.1 million in distributions received from
unconsolidated joint ventures, $6.0 million in proceeds from repayment of a
mortgage note receivable and $2.4 million in proceeds from stock options
exercised used an aggregate of approximately $792.1 million to acquire
properties and land parcels and pay for other tenant and building improvements
totaling $148.1 million, repay outstanding borrowings on its revolving credit
facilities and other mortgage debt of $494.7 million, pay quarterly dividends
and distributions of $87.0 million, invest $24.5 million in unconsolidated joint
ventures, pay financing costs of $3.2 million, repurchase 881,500 shares of its
outstanding common stock for $24.1 million, add $0.9 million to restricted cash
and add $9.6 million to cash and cash equivalents.
CAPITALIZATION
The Company has a focused strategy geared to attractive opportunities in
high-barrier-to-entry markets, primarily predicated on the Company's strong
presence in the Northeast region and, to a lesser extent, certain markets in
California. The Company plans to sell substantially all of its properties
located in the Southwestern and Western regions, using such proceeds to invest
in property acquisitions and development projects in its core Northeast markets,
as well as to repay debt and fund stock repurchases.
Consistent with its strategy, in the fourth quarter 2000, the Company started
construction of a 980,000 square-foot office property, to be known as Plaza 5,
at its Harborside Financial Center office complex in Jersey City, Hudson County,
New Jersey. The total cost of the project is currently projected to be
approximately $260 million and is anticipated to be completed in late 2002.
Additionally, in the fourth quarter 2000, the Company, through a joint venture,
started construction of a 575,000 square-foot office property, to be known as
Plaza 10, on land owned by the joint venture located adjacent to the Company's
Harborside complex. The total cost of this project is currently projected to be
approximately $140 million and is anticipated to be completed in late 2002.
Plaza 10 is 100 percent pre-leased to Charles Schwab & Co. Inc. for a 15-year
term. The lease agreement obligates the Company, among other things, to deliver
space to the tenant by required timelines and offers expansion options, at the
tenant's election, to additional space in any adjacent Harborside projects. Such
options may obligate the Company to construct an additional building at
Harborside if vacant space is not available in any of its existing Harborside
properties. Should the Company be unable to or choose not to provide such
expansion space, the Company could be liable to Schwab for its actual damages,
in no event to exceed $15.0 million. The Company expects to finance its funding
requirements under both Plazas 5 and 10 projects through drawing on its
revolving credit facilities, construction financing, or through joint venture
arrangements.
On August 6, 1998, the Board of Directors of the Company authorized a Repurchase
Program under which the Company was permitted to purchase up to $100.0 million
of the Company's outstanding common stock. Under the Repurchase Program, the
Company purchased for constructive retirement 1,869,200 shares of its
outstanding common stock for an aggregate cost of approximately $52.6 million
through September 12, 2000.
On September 13, 2000, the Board of Directors authorized an increase to the
Repurchase Program under which the Company is permitted to purchase up to an
additional $150.0 million of the Company's outstanding common stock above the
$52.6 million that had previously been purchased. From that date through July
31, 2001, the Company purchased for constructive retirement 2.9 million shares
of its outstanding common stock for an aggregate cost of approximately $79.7
million under the Repurchase Program. The Company has authorization to
repurchase up to an additional $70.3
33
<Page>
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.
As of June 30, 2001, the Company's total indebtedness of $1.7 billion (weighted
average interest rate of 7.27 percent) was comprised of $108.7 million of
revolving credit facility borrowings and other variable rate mortgage debt
(weighted average rate of 5.07 percent) and fixed rate debt of $1.6 billion
(weighted average rate of 7.42 percent).
As of June 30, 2001, the Company had outstanding borrowings of $76.5 million
under its 2000 Unsecured Facility (with aggregate borrowing capacity of $800.0
million). The interest rate on outstanding borrowings under the 2000 Unsecured
Facility is currently LIBOR plus 80 basis points. The Company may instead elect
an interest rate representing the higher of the lender's prime rate or the
Federal Funds rate plus 50 basis points. The 2000 Unsecured Facility also
requires a 20 basis point facility fee on the current borrowing capacity payable
quarterly in arrears. In the event of a change in the Company's unsecured debt
rating, the interest and facility fee rate will be changed on a sliding scale.
Subject to certain conditions, the Company has the ability to increase the
borrowing capacity of the 2000 Unsecured Facility up to $1.0 billion. The 2000
Unsecured Facility matures in June 2003, with an extension option of one year,
which would require a payment of 25 basis points of the then borrowing capacity
of the credit line upon exercise. The Company believes that the 2000 Unsecured
Facility is sufficient to meet its revolving credit facility needs.
The terms of the 2000 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 assets, 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
debt service coverage, the minimum amount of fixed charge coverage, the maximum
amount of unsecured indebtedness, the minimum amount of unencumbered property
debt service coverage and certain investment limitations. The dividend
restriction referred to above provides that, except to enable the Company to
continue to qualify as a REIT under the Code, the Company will not during any
four consecutive fiscal quarters make distributions with respect to common stock
or other equity interests in an aggregate amount in excess of 90 percent of
funds from operations (as defined) for such period, subject to certain other
adjustments.
On January 29, 2001, the Operating Partnership issued $300.0 million face amount
of 7.75 percent senior unsecured notes due February 15, 2011 with interest
payable semi-annually in arrears. The total proceeds from the issuance (net of
selling commissions and discount) of approximately $296.3 million were used to
pay down outstanding borrowings under the 2000 Unsecured Facility, as defined in
Note 9 to the Financial Statements. The senior unsecured notes were issued at a
discount of approximately $1.7 million.
The terms of the Operating Partnership's unsecured debt 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.
The Company 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 prospective preferred
stock offerings of the Company. Moody's Investors Service has assigned its Baa3
rating to the existing and prospective senior unsecured debt of the Operating
Partnership and its Ba1 rating to prospective preferred stock offerings of the
Company.
On May 18, 2001, the Company obtained $70.0 million in additional mortgage
financing secured by Harborside Financial Center Plazas II and III from the
existing lender. The 7.42 percent interest only financing matures concurrent
with the existing financing on January 1, 2006. The total financing secured by
Harborside Financial Center Plazas II and III of $163.9 million at June 30,
2001, has a weighted average interest rate of 7.36 percent. Proceeds from the
financing were used to pay down the outstanding borrowings on the 2000 Unsecured
Facility.
As of June 30, 2001, the Company had 236 unencumbered properties, totaling 21.3
million square feet, representing 77.3 percent of the Company's total portfolio
on a square footage basis.
34
<Page>
The Company has an effective shelf registration statement with the SEC for an
aggregate amount of $2.0 billion in equity securities of the Company. The
Company and Operating Partnership also have an effective shelf registration
statement with the SEC for an aggregate of $2.0 billion in debt securities,
preferred stock and preferred stock represented by depositary shares, under
which the Operating Partnership has issued an aggregate of $1.1 billion of
unsecured debt.
Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures. Management believes that the Company will
have access to the capital resources necessary to expand and develop its
business. To the extent that the Company's cash flow from operating activities
is insufficient to finance its non-recurring capital expenditures such as
property acquisition and construction project costs and other capital
expenditures, the Company expects to finance such activities through borrowings
under its revolving credit facilities and other debt and equity financing.
The Company expects to meet its short-term liquidity requirements generally
through its working capital, net cash provided by operating activities and from
the 2000 Unsecured Facility. The Company is frequently examining potential
property acquisitions and construction projects and, at any given time, one or
more of such acquisitions or construction projects may be under consideration.
Accordingly, the ability to fund property acquisitions and construction projects
is a major part of the Company's financing requirements. The Company expects to
meet its financing requirements through funds generated from operating
activities, proceeds from property sales, long-term or short-term borrowings
(including draws on the Company's revolving credit facilities) and the issuance
of additional debt or equity securities.
As of June 30, 2001, the Company's total debt had a weighted average term to
maturity of approximately 5.3 years. The Company does not intend to reserve
funds to retire the Company's unsecured corporate debt or its mortgages and
loans payable upon maturity. Instead, the Company will seek to refinance such
debt at maturity or retire such debt through the issuance of additional equity
or debt securities. The Company is reviewing various refinancing options,
including the issuance of additional unsecured debt, preferred stock, and/or
obtaining additional mortgage debt, some or all of which may be completed during
2001. The Company 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 Company's capital and
liquidity needs both in the short and long-term. However, if these sources of
funds are insufficient or unavailable, the Company's ability to make the
expected distributions discussed below may be adversely affected.
To maintain its qualification as a REIT, the Company 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 Company intends to continue to make
regular quarterly distributions to its stockholders which, based upon current
policy, in the aggregate would equal approximately $139.1 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 after meeting
both operating requirements and scheduled debt service on mortgages and loans
payable.
FUNDS FROM OPERATIONS
The Company considers funds from operations ("FFO"), after adjustment for
straight-lining of rents and non-recurring charges, one measure of REIT
performance. Funds from operations is defined as net income (loss) before
minority interest of unitholders, computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains (or losses) from debt
restructuring, other extraordinary items, and realized gains and unrealized
losses on disposition of depreciable rental property, plus real estate-related
depreciation and amortization. Funds from operations should not be considered as
an alternative to net income as an indication of the Company's performance or to
cash flows as a measure of liquidity. Funds from operations presented herein is
not necessarily comparable to funds from operations presented by other real
estate companies due to the fact that not all real estate companies use the same
definition. However, the Company's funds from operations is comparable to the
funds from operations of real estate companies that use the current definition
of the National Association of Real Estate Investment Trusts ("NAREIT"), after
the adjustment for straight-lining of rents and non-recurring charges.
35
<Page>
Funds from operations for the three and six month periods ended June 30, 2001
and 2000, as calculated in accordance with NAREIT's definition as published in
October 1999, after adjustment for straight-lining of rents and non-recurring
charges, are summarized in the following table (IN THOUSANDS):
<Table>
<Caption>
Three Months Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Income before realized gains and unrealized losses
on disposition of rental property and
minority interests $47,161 $40,153 $ 90,686 $ 85,586
Add: Real estate-related depreciation and
amortization (1) 23,068 23,434 47,071 46,152
Gain on sale of land -- -- -- 2,248
Non-recurring charges -- 9,228 -- 9,228
Deduct: Rental income adjustment for
straight-lining of rents (2) (4,057) (3,400) (7,862) (5,590)
Minority interests:
partially-owned properties -- (2,982) -- (5,072)
- ------------------------------------------------------------------------------------------------------------------------------------
Funds from operations, after adjustment
for straight-lining of rents and non-recurring
charges $66,172 $66,433 $ 129,895 $ 132,552
Deduct: Distributions to preferred unitholders (3,879) (3,765) (7,758) (7,634)
- ------------------------------------------------------------------------------------------------------------------------------------
Funds from operations, after adjustment for
straight-lining of rents and non-recurring
charges, after distributions to preferred
unitholders $62,293 $62,668 $ 122,137 $ 124,918
====================================================================================================================================
Cash flows provided by operating activities $ 133,022 $ 120,576
Cash flows used in investing activities $(103,715) $ 62,329
Cash flows used in financing activities $ (19,748) $(181,041)
- ------------------------------------------------------------------------------------------------------------------------------------
Basic weighted averages shares/units
outstanding (3) 64,476 66,627 64,621 66,527
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted weighted average shares/units
outstanding (3) 71,044 73,284 71,198 73,237
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Includes the Company's share from unconsolidated joint ventures of $1,471
and $686 for the three months ended June 30, 2001 and 2000, respectively,
and $2,193 and $1,420 for the six months ended June 30, 2001 and 2000,
respectively.
(2) Includes the Company's share from unconsolidated joint ventures of $90 and
$(3) for the three months ended June 30, 2001 and 2000, respectively, and
$126 and $54 for six months ended June 30, 2001 and 2000, respectively.
(3) See calculations for the amounts presented in the following
reconciliation.
36
<Page>
The following schedule reconciles the Company's basic weighted average shares to
the basic and diluted weighted average shares/units presented above:
<Table>
<Caption>
Three Months Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
- --------------------------------------------------------------------------------
Basic weighted average shares: 56,519 58,545 56,662 58,420
Add: Weighted average common units 7,957 8,082 7,959 8,107
- --------------------------------------------------------------------------------
Basic weighted average shares/units: 64,476 66,627 64,621 66,527
Add: Weighted average preferred units
(after conversion to common units) 6,359 6,457 6,359 6,537
Stock options 209 200 218 173
- --------------------------------------------------------------------------------
Diluted weighted average shares/units: 71,044 73,284 71,198 73,237
================================================================================
</Table>
INFLATION
The Company'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
Company's exposure to increases in operating costs resulting from inflation.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The Company considers portions of this information to be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such forward-looking
statements relate to, without limitation, the Company's 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," "should," "expect," "anticipate,"
"estimate" or "continue" or comparable terminology. Forward-looking statements
are inherently subject to risks and uncertainties, many of which the Company
cannot predict with accuracy and some of which the Company might not even
anticipate. Although the Company believes that the expectations reflected in
such forward-looking statements are based upon reasonable assumptions, it can
give no assurance that its expectations will be achieved. Future events and
actual results, financial and otherwise, may differ materially from the results
discussed in the forward-looking statements.
37
<Page>
ITEM 3. 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 Company 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 Company's yield on
invested assets and cost of funds and, in turn, our ability to make
distributions or payments to our investors.
Approximately $1.6 billion of the Company'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 interest rate on the variable rate debt as of June 30, 2001
ranged from LIBOR plus 65 basis points to LIBOR plus 80 basis points.
JUNE 30, 2001
<Table>
<Caption>
DEBT, 7/1/01 -
INCLUDING CURRENT PORTION 12/31/01 2002 2003 2004 2005 THEREAFTER TOTAL FAIR VALUE
- ------------------------- -------- ---- ---- ---- ---- ---------- ----- ----------
Fixed Rate $3,650 $3,260 $195,500 $312,110 $254,598 $843,004 $1,612,122 $1,619,032
Average Interest Rate 9.08% 10.25% 7.31% 7.34% 7.14% 7.53% 7.42%
Variable Rate $ 76,500 $ 32,178 $ 108,678 $ 108,678
</Table>
While the Company 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 Company which
adversely affect its operating results and liquidity.
38
<Page>
MACK-CALI REALTY CORPORATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to "Other" in Note 13 (Commitments and
Contingencies) to the Consolidated Financial Statements, which is
specifically incorporated by reference herein.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 15, 2000, the Company held its Annual Meeting of Stockholders
to elect five directors to the Board of Directors of the Company,
among other things. At the Annual Meeting, the Company's
stockholders elected the following Class I directors to serve until
the Annual Meeting of Stockholders to be held in 2004: Brendan T.
Byrne (Number of shares for: 47,392,598, Number of shares against:
1,143,853), Martin D. Gruss (Number of shares for: 47,422,540,
Number of shares against: 1,113,911), Vincent Tese (Number of shares
for: 47,426,848, Number of shares against: 1,109,603), and Roy J.
Zuckerberg (Number of shares for: 47,425,081, Number of shares
against: 1,111,370). The remaining members of the 13 member Board of
Directors and their respective terms of offices are as follows:
Class II directors, Nathan Gantcher, Earle I. Mack, William L. Mack
and Alan G. Philibosian, whose terms expire at the Annual Meeting of
Stockholders to be held in 2002 and Class III directors, John J.
Cali, John R. Cali, Mitchell E. Hersh, Irvin D. Reid and Robert F.
Weinberg, whose terms expire at the Annual Meeting of Stockholders
to be held in 2003.
At the Annual Meeting, the Company's stockholders also voted upon
and approved the ratification of the appointment of
PricewaterhouseCoopers LLP, independent accountants, as the
Company's independent accountants for the ensuing year (Number of
shares for: 48,335,671, Number of shares against: 68,785, Number of
shares abstained: 131,995, Number of broker non-votes: 0).
In addition, at the Annual Meeting the Company's stockholders voted
upon and approved, by the vote of at least a majority of all
outstanding shares that is required for charter amendments, the
adoption of an amendment to the charter of the Company to decrease
the affirmative stockholder vote required to approve any
extraordinary corporate action, such as a merger, consolidation,
sale of all or substantially all of the assets or dissolution of the
Company, from two-thirds to a majority of all votes entitled to be
cast on the action by the holders of the outstanding shares of stock
of the Company (Number of shares for: 32,458,044, Number of shares
against: 8,972,767, Number of shares abstained: 103,363, Number of
broker non-votes: 7,002,277). Accordingly, the proposal passed by a
vote of 56.98% of the Company's outstanding shares.
ITEM 5. OTHER INFORMATION
Not Applicable.
39
<Page>
MACK-CALI REALTY CORPORATION
PART II - OTHER INFORMATION (CONTINUED)
ITEM 6 - EXHIBITS
(a) Exhibits
The following exhibits are filed herewith or are incorporated by
reference to exhibits previously filed:
<Table>
<Caption>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
*3.1 Restated Charter of Mack-Cali Realty Corporation dated June
11, 2001.
3.2 Amended and Restated Bylaws of Mack-Cali Realty Corporation
dated June 10, 1999 (filed as Exhibit 3.2 to the Company's
Form 8-K dated June 10, 1999 and incorporated herein by
reference).
3.3 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 Company's Form 8-K dated December 11,
1997 and incorporated herein by reference).
3.4 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 Company's and
the Operating Partnership's Registration Statement on Form
S-3, Registration No. 333-57103, and incorporated herein by
reference).
3.5 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 Company's
Form 8-K dated July 6, 1999 and incorporated herein by
reference).
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 Company'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 Company's Form 8-K dated
June 27, 2000).
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).
</Table>
40
<Page>
<Table>
<Caption>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
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).
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 Company'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 Timothy M. Jones and Mack-Cali Realty
Corporation (filed as Exhibit 10.3 to the Company'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 Barry Lefkowitz and Mack-Cali Realty
Corporation (filed as Exhibit 10.6 to the Company's Form
10-Q dated June 30, 1999 and incorporated herein by
reference).
10.4 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 Company's Form
10-Q dated June 30, 1999 and incorporated herein by
reference).
10.5 Employment Agreement dated as of December 5, 2000 between
Michael Grossman and Mack-Cali Realty Corporation (filed as
Exhibit 10.5 to the Company's Form 10-K for the year ended
December 31, 2000 and incorporated herein by reference).
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 Company'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 Timothy M. Jones and Mack-Cali Realty Corporation
(filed as Exhibit 10.9 to the Company'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 Barry Lefkowitz and Mack-Cali Realty Corporation
(filed as Exhibit 10.12 to the Company's Form 10-Q dated
June 30, 1999 and incorporated herein by reference).
</Table>
41
<Page>
<Table>
<Caption>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
10.9 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 Company's Form 10-Q dated
June 30, 1999 and incorporated herein by reference).
10.10 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 Company's Form 10-Q dated
March 31, 2001 and incorporated herein by reference).
10.11 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 Company's Form 10-Q dated
March 31, 2001 and incorporated herein by reference).
10.12 Amendment No. 3 to and Restatement of Revolving Credit
Agreement dated as of June 22, 2000, by and among Mack-Cali
Realty, L.P. and The Chase Manhattan Bank, Fleet National
Bank and Other Lenders Which May Become Parties Thereto with
The Chase Manhattan Bank, as administrative agent, Fleet
National Bank, as syndication agent, Bank of America, N.A.,
as documentation agent, Chase Securities Inc. and
FleetBoston Robertson Stephens Inc., as arrangers, Bank One,
N.A., First Union National Bank and Commerzbank
Aktiengesellschaft, as senior managing agents, PNC Bank
National Association, as managing agent, and Societe
Generale, Dresdner Bank AG, Wells Fargo Bank, National
Association, Bank Austria Creditanstalt Corporate Finance,
Inc., Bayerische Hypo-und Vereinsbank and Summit Bank, as
co-agents (filed as Exhibit 10.10 to the Company's Form 10-K
for the year ended December 31, 2000 and incorporated herein
by reference).
10.13 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 Company's
Form 8-K dated September 19, 1997 and incorporated herein by
reference).
10.14 First Amendment to Contribution and Exchange Agreement,
dated as of December 11, 1997, by and among the Company and
the Mack Group (filed as Exhibit 10.99 to the Company's Form
8-K dated December 11, 1997 and incorporated herein by
reference).
10.15 Employee Stock Option Plan of Mack-Cali Realty Corporation
(filed as Exhibit 10.1 to the Company's Post-Effective
Amendment No. 1 to Form S-8, Registration No. 333-44443, and
incorporated herein by reference).
10.16 Director Stock Option Plan of Mack-Cali Realty Corporation
(filed as Exhibit 10.2 to the Company's Post-Effective
Amendment No. 1 to Form S-8, Registration No. 333-44443, and
incorporated herein by reference).
10.17 2000 Employee Stock Option Plan (filed as Exhibit 10.1 to
the Company's Registration Statement on Form S-8,
Registration No. 333-52478, and incorporated
herein by reference).
10.18 2000 Director Stock Option Plan (filed as Exhibit 10.2 to
the Company's Registration Statement on Form S-8,
Registration No. 333-52478, and incorporated
herein by reference).
</Table>
42
<Page>
<Table>
<Caption>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
*10.19 Amended and Restated Mortgage and Security made as of
May 18, 2001 between Cali Harborside (Fee) Associates L.P.,
a New Jersey limited partnership, Cal-Harbor II & III Urban
Renewal Associates L.P., a New Jersey limited partnership,
Cal-Harbor IV Urban Renewal Associates L.P., a New Jersey
limited partnership and Cal-Harbor VI Urban Renewal
Associates L.P., a New Jersey limited partnership, and The
Northwestern Mutual Life Insurance Company, a Wisconsin
corporation, and Principal Life Insurance Company, an Iowa
corporation, formerly known as Principal Mutual Life
Insurance Company.
*10.20 Promissory Note of Cali Harborside (Fee) Associates L.P., a
New Jersey limited partnership, Cal-Harbor II & III Urban
Renewal Associates L.P., a New Jersey limited partnership,
Cal-Harbor IV Urban Renewal Associates L.P., a New Jersey
limited partnership and Cal-Harbor VI Urban Renewal
Associates L.P., a New Jersey limited partnership, dated as
of May 18, 2001 in the amount of $35,000,000.00 payable to
the order of Principal Life Insurance Company, an Iowa
corporation.
*10.21 Promissory Note of Cali Harborside (Fee) Associates L.P., a
New Jersey limited partnership, Cal-Harbor II & III Urban
Renewal Associates L.P., a New Jersey limited partnership,
Cal-Harbor IV Urban Renewal Associates L.P., a New Jersey
limited partnership and Cal-Harbor VI Urban Renewal
Associates L.P., a New Jersey limited partnership, dated as
of May 18, 2001 in the amount of $35,000,000.00 payable to
the order of The Northwestern Mutual Life Insurance Company,
a Wisconsin corporation.
*10.22 Purchase and Sale Agreement dated August 3, 2001, between Robert
Martin Company, LLC, a New York limited liability company, and
5/6 Skyline Realty L.L.C., a New York limited liability company.
*10.23 Partnership Interest Purchase Agreement dated August 3, 2001, by
and between Madeira-RMC L.P., a New York limited partnership,
Madeira Management Company, Inc., a Delaware corporation, Merlot
Management Company, Inc., a Delaware corporation, Robert Martin
Company, LLC, a New York limited liability company, and Robert
Martin Company, LLC, as agent for 5/6 Skyline Realty L.L.C., a
New York limited liability company.
*10.24 Nominee Agreement dated as of August 3, 2001, by and between
Robert Martin Company, LLC, a New York limited liability
company, and 5/6 Skyline Realty L.L.C., a New York limited
liability company.
</Table>
(b) Reports on Form 8-K
During the second quarter of 2001, the Company filed a report on Form 8-K dated
May 10, 2001, furnishing under Items 7 and 9 certain supplemental data regarding
its operations. The Company also filed a report on Form 8-K dated May 15, 2001,
furnishing under Items 5 and 7 the voting results of the proposals presented to
stockholders at the Company's Annual Meeting of Stockholders held on May 15,
2001, and the Company's charter amendment.
- ----------
*filed herewith
43
<Page>
MACK-CALI REALTY CORPORATION
SIGNATURES
Pursuant to the requirements 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 CORPORATION
----------------------------
(Registrant)
Date: August 8, 2001 By: /s/ MITCHELL E. HERSH
---------------------------
Mitchell E. Hersh
Chief Executive Officer
Date: August 8, 2001 By: /s/ BARRY LEFKOWITZ
---------------------------
Barry Lefkowitz
Executive Vice President &
Chief Financial Officer
44