<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 September 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 October 31, 2001, there were 56,988,405 shares of $0.01 par value common
stock outstanding.
<Page>
MACK-CALI REALTY CORPORATION
FORM 10-Q
INDEX
<Table>
<Caption>
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 2001
and December 31, 2000....................................................... 4
Consolidated Statements of Operations for the three and nine month
periods ended September 30, 2001 and 2000................................... 5
Consolidated Statement of Changes in Stockholders' Equity
for the nine months ended September 30, 2001................................ 6
Consolidated Statements of Cash Flows for the nine months
ended September 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 nine month periods ended
September 30, 2001 are not necessarily indicative of the results to
be expected for the entire fiscal year or any other period.
3
<Page>
<Table>
<Caption>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
==================================================================================================================
September 30,
2001 December 31,
(UNAUDITED) 2000
ASSETS
- ------------------------------------------------------------------------------------------------------------------
Rental property
Land and leasehold interests $ 473,363 $ 542,841
Buildings and improvements 2,676,999 2,934,383
Tenant improvements 124,769 106,208
Furniture, fixtures and equipment 7,060 6,445
- ------------------------------------------------------------------------------------------------------------------
3,282,191 3,589,877
Less - accumulated depreciation and amortization (330,027) (302,932)
- ------------------------------------------------------------------------------------------------------------------
2,952,164 3,286,945
Rental property held for sale, net 422,735 107,458
- ------------------------------------------------------------------------------------------------------------------
Net investment in rental property 3,374,899 3,394,403
Cash and cash equivalents 44,966 13,179
Investments in unconsolidated joint ventures 135,416 101,438
Unbilled rents receivable, net 59,294 50,499
Deferred charges and other assets, net 100,678 102,655
Restricted cash 7,543 6,557
Accounts receivable, net of allowance for doubtful accounts
of $953 and $552 6,043 8,246
- ------------------------------------------------------------------------------------------------------------------
Total assets $ 3,728,839 $ 3,676,977
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------
Senior unsecured notes $ 1,096,721 $ 798,099
Revolving credit facilities 73,000 348,840
Mortgages and loans payable 544,697 481,573
Dividends and distributions payable 43,998 43,496
Accounts payable and accrued expenses 55,439 53,608
Rents received in advance and security deposits 30,922 31,146
Accrued interest payable 9,664 17,477
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 1,854,441 1,774,239
- ------------------------------------------------------------------------------------------------------------------
MINORITY INTERESTS:
Operating Partnership 446,532 447,523
Partially-owned properties -- 1,925
- ------------------------------------------------------------------------------------------------------------------
Total minority interests 446,532 449,448
- ------------------------------------------------------------------------------------------------------------------
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,
56,333,692 and 56,980,893 shares outstanding 564 570
Additional paid-in capital 1,495,369 1,513,037
Dividends in excess of net earnings (62,951) (57,149)
Unamortized stock compensation (5,116) (3,168)
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,427,866 1,453,290
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 3,728,839 $ 3,676,977
==================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<Page>
<Table>
<Caption>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
=======================================================================================================================
Three Months Ended Nine Months Ended
September 30, September 30,
REVENUES 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------
Base rents $ 126,789 $ 123,600 $ 381,584 $ 367,270
Escalations and recoveries from tenants 13,944 13,763 42,136 45,058
Parking and other 2,610 3,534 8,016 12,984
Equity in earnings of unconsolidated joint ventures 1,884 2,194 7,330 4,401
Interest income 685 291 1,770 2,537
- -----------------------------------------------------------------------------------------------------------------------
Total revenues 145,912 143,382 440,836 432,250
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------------------------
Real estate taxes 16,012 15,732 46,809 45,169
Utilities 11,517 11,604 34,172 31,997
Operating services 16,336 16,855 51,901 51,419
General and administrative 8,767 5,461 21,633 16,733
Depreciation and amortization 22,529 23,320 67,964 68,447
Interest expense 27,772 25,862 84,692 79,123
Non-recurring charges -- 27,911 -- 37,139
- -----------------------------------------------------------------------------------------------------------------------
Total expenses 102,933 126,745 307,171 330,027
- -----------------------------------------------------------------------------------------------------------------------
Income before realized gains and unrealized losses
on disposition of rental property and minority interests 42,979 16,637 133,665 102,223
Realized gains and unrealized losses on disposition of
rental property, net (11,624) 10,036 (9,677) 86,205
- -----------------------------------------------------------------------------------------------------------------------
Income before minority interests 31,355 26,673 123,988 188,428
MINORITY INTERESTS:
Operating partnership 7,346 6,661 25,568 32,421
Partially-owned properties -- -- -- 5,072
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 24,009 $ 20,012 $ 98,420 $ 150,935
=======================================================================================================================
Basic earnings per share $ 0.43 $ 0.34 $ 1.74 $ 2.58
Diluted earnings per share $ 0.43 $ 0.34 $ 1.74 $ 2.50
- -----------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $ 0.62 $ 0.61 $ 1.84 $ 1.77
- -----------------------------------------------------------------------------------------------------------------------
Basic weighted average shares outstanding 56,129 58,711 56,482 58,518
Diluted weighted average shares outstanding 64,403 66,914 64,691 73,276
- -----------------------------------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<Page>
<Table>
<Caption>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS" EQUITY (IN THOUSANDS) (UNAUDITED)
====================================================================================================================================
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 -- -- -- 98,420 -- 98,420
Dividends -- -- -- (104,222) -- (104,222)
Redemption of common units for
shares of common stock 8 -- 219 -- -- 219
Proceeds from stock options exercised 173 2 4,018 -- -- 4,020
Deferred compensation plan for directors -- -- 116 -- -- 116
Issuance of Restricted Stock Awards 94 1 2,526 -- (2,527) --
Amortization of stock compensation -- -- -- -- 1,031 1,031
Adjustment to fair value of restricted stock -- -- 652 -- (652) --
Cancellation of Restricted Stock Awards (7) -- (200) -- 200 --
Repurchase of common stock (915) (9) (24,999) -- -- (25,008)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2001 56,334 $564 $ 1,495,369 $ (62,951) $ (5,116) $ 1,427,866
====================================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
<Page>
<Table>
<Caption>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
===================================================================================================================
Nine Months Ended
September 30,
CASH FLOWS FROM OPERATING ACTIVITIES 2001 2000
- -------------------------------------------------------------------------------------------------------------------
Net income $ 98,420 $ 150,935
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 67,964 68,447
Amortization of stock compensation 1,031 1,598
Amortization of deferred financing costs and debt discount 3,815 2,857
Stock options charge -- 1,550
Equity in earnings of unconsolidated joint ventures (7,330) (4,401)
Realized gains and unrealized losses on disposition of rental property, net 9,677 (86,205)
Minority interests 25,568 37,493
Changes in operating assets and liabilities:
Increase in unbilled rents receivable, net (9,705) (9,056)
Increase in deferred charges and other assets, net 2,711 (33,840)
Decrease (increase) in accounts receivable, net 2,203 (960)
Increase in accounts payable and accrued expenses 1,831 11,067
Decrease in rents received in advance and security deposits (224) (1,131)
Decrease in accrued interest payable (7,813) (10,121)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 188,148 $ 128,233
===================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES
- -------------------------------------------------------------------------------------------------------------------
Additions to rental property $(189,945) $(224,797)
Repayment of mortgage note receivable 5,983 --
Investments in unconsolidated joint ventures (64,191) (12,687)
Distributions from unconsolidated joint ventures 37,544 10,782
Proceeds from sales of rental property 124,069 281,225
(Increase) decrease in restricted cash (986) 634
- -------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities $ (87,526) $ 55,157
===================================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES
- -------------------------------------------------------------------------------------------------------------------
Proceeds from senior unsecured notes $ 298,269 $ --
Proceeds from revolving credit facilities 327,367 551,618
Proceeds from mortgages and loans payable 70,000 --
Repayments of revolving credit facilities (603,208) (464,135)
Repayments of mortgages and loans payable (6,876) (43,567)
Distributions to minority interest in partially-owned properties -- (88,672)
Repurchase of common stock (25,008) (5,237)
Payment of financing costs (3,339) (6,090)
Proceeds from stock options exercised 4,020 2,155
Payment of dividends and distributions (130,060) (127,543)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities $ (68,835) $(181,471)
===================================================================================================================
Net increase in cash and cash equivalents $ 31,787 $ 1,919
Cash and cash equivalents, beginning of period 13,179 8,671
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 44,966 $ 10,590
===================================================================================================================
</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
September 30, 2001, the Company owned or had interests in 269 properties, plus
developable land (collectively, the "Properties"). The Properties aggregate
approximately 28.7 million square feet, and are comprised of 162 office
buildings and 95 office/flex buildings totaling approximately 28.3 million
square feet (which includes eight office buildings and one office/flex building
aggregating 1.5 million square feet, owned by unconsolidated joint ventures in
which the Company has investment interests), nine 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 10 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 $164,908 and $188,077 as of
September 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 estimated 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 $1,180 and
$1,055 for the three months ended September 30, 2001 and
2000, respectively, and $3,462 and $2,857 for the nine
months ended September 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 $899 and $794 for the three months ended
September 30, 2001 and 2000, respectively, and $2,501
and $2,383 for the nine months ended September 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 September 30,
2001 represents dividends payable to shareholders of
record as of October 3, 2001 (56,649,469 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 third
quarter 2001. The third quarter 2001 dividends and
common unit distributions of $0.62 per share and per
common unit, as well as the third quarter preferred unit
distribution of $17.8932 per preferred unit, were
approved by the Board of Directors on September 20, 2001
and paid on October 22, 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 nine months
ended September 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
- --------------- ------------------------------- ----------------------------------- -------- ------------ --------------
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
8/3/01 5 & 6 Skyline Drive (a) (d) Hawthorne, Westchester County, NY 2 168,177 14,846
- ---------------- ------------------------------ ----------------------------------- -------- ------------ --------------
Total Office/Flex Property Acquisitions: 7 449,627 $33,084
=============================================== =================================== ======== ============ ==============
Total Operating Property Acquisitions: 9 745,393 $81,488
=================================================================================== ======== ============ ==============
</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.
(d) The property was acquired from an entity whose principals include, among
others, Timothy M. Jones, Martin S. Berger and Robert F. Weinberg, each of
whom are affiliated with the Company as the President of the Company, a
current member of the Board of Directors and a former member of the Board
of Directors of the Company, respectively.
PROPERTIES PLACED IN SERVICE
The Company placed in service the following properties during the nine months
ended September 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.
LAND ACQUISITIONS
On September 13, 2001, the Company acquired approximately 5.0 acres of
developable land located in Elmsford, Westchester County, New York. The land was
acquired for approximately $1,000 from an entity whose principals include
Timothy M. Jones, Martin S. Berger and Robert F. Weinberg, each of whom are
affiliated with the Company as the President of the Company, a current member of
the Board of Directors and a former member of the Board of Directors of the
Company, respectively. The Company has commenced construction of a fully
pre-leased 33,000 square-foot office/flex building on the acquired land.
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 nine months ended September
30, 2001:
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------
Sale # of Rentable Net Sales Net Book Realized
Date Property Name Location Bldgs. Square Feet Proceeds Value Gain (Loss)
- ----------------------------------------------------------------------------------------------------------------------
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
7/17/01 8214 Westchester Dallas, Dallas County, TX 1 95,509 8,966 8,465 501
8/1/01 2600 Westown Parkway West Des Moines, Polk 1 72,265 5,165 5,570 (405)
County, IA
9/26/01 1709 New York Ave, NW Washington, DC 1 166,000 65,151 50,640 14,511
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, -- n/a 3,357 2,918 439
(a) NJ
- ----------------------------------------------------------------------------------------------------------------------
Totals: 6 660,910 $126,270 $89,153 $37,117
======================================================================================================================
</Table>
(a) Net sales proceeds consisted of cash and note receivable. See Note 4 -
North Pier at Harborside-Residential Development.
OTHER EVENTS
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 nine months
ended September 30, 2000.
On September 21, 2000, the Company and Prentiss Properties Trust, a Maryland
REIT ("Prentiss"), mutually agreed to terminate the agreement and plan of merger
("Merger Agreement") dated as of June 27, 2000, among the Company, the Operating
Partnership, Prentiss and Prentiss Properties Acquisition Partners, L.P., a
Delaware limited partnership of which Prentiss (through a wholly-owned direct
subsidiary) is the sole general partner ("Prentiss Partnership"). In connection
with such termination, the Company deposited $25,000 into escrow for the benefit
of Prentiss and Prentiss Partnership. This cost and approximately $2,911 of
other costs associated with the termination of the Merger Agreement are included
in non-recurring charges for the three and nine months ended September 30, 2000.
Simultaneous with the termination, the Company sold to Prentiss its 270,703
square-foot Cielo Center property located in Austin, Travis County, Texas, and
recognized a gain of approximately $10,036.
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 $143 and $112 in fees for such services in the nine months ended
September 30, 2001 and 2000, respectively. On November 5, 2001, the Company
acquired the entire interest in the property for approximately $14,250.
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.
13
<Page>
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 two-phase development joint venture project between
HPMC Development Partners II, L.P. and a third-party entity located in the
city of Daly City, San Mateo County, California. Phase I of the project,
which was placed in service in August 2001, consists of a nine-story office
building, aggregating 369,682 square feet. Phase II, which is currently under
construction, will comprise a three-story retail and theater complex.
STADIUM GATEWAY
Stadium Gateway is a 1.5 acre site located in Anaheim, Orange County,
California, acquired by a joint venture between HPMC Development Partners II,
L.P. and a third-party entity upon which it has commenced construction of a
six-story 261,554 square-foot office building. The property is expected to be
placed in service in November 2001.
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 $172 and $157 in fees for such services in the nine
months ended September 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 cost of the project under construction
is currently projected to be approximately $140,000. The project, which is
currently 100 percent pre-leased, is anticipated to be completed in late 2002.
14
<Page>
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 $75 and $170 in fees for such services in the nine
months ended September 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 September 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
$140 and $89 in fees for such services in the nine months ended September 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 September 30, 2001, the
venture held approximately $913,543 face value of CMBS bonds at an aggregate
cost of approximately $468,971.
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, which is
expected to be completed by late 2002. The total cost of the construction
project is estimated to be approximately $103,000. The venture has obtained a
construction loan of $63,700, of which each partner has severally guaranteed
repayment of approximately $11,148.
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 and received $1,330 in cash, a
$2,027 note due 2002 and an equity interest. The venture began development of a
residential housing project on the property for rental, which is expected to be
completed by late 2002.
MC-SJP MORRIS V REALTY, LLC AND MC-SJP MORRIS VI REALTY, LLC
The Company has an agreement with SJP Properties Company ("SJP Properties"),
which provides for a cooperative effort in seeking approvals to develop up to
approximately 1.8 million square feet of office development on certain vacant
land owned or controlled, respectively, by the Company and SJP Properties, in
Hanover and Parsippany, Morris County, New Jersey. The agreement provides that
the parties shall share equally in the costs associated with seeking such
requisite approvals. Subsequent to obtaining the requisite approvals, upon
mutual consent, the Company and SJP Properties may enter into one or more joint
ventures to construct on the vacant land, or seek to dispose of their respective
vacant land parcels subject to the agreement. Pursuant to the agreement with SJP
Properties, on August 24, 2000, the Company entered into a joint venture with
SJP Properties to form MC-SJP Morris V Realty, LLC and MC-SJP Morris VI Realty,
LLC, which acquired developable land able to accommodate approximately 650,000
square feet of office space and located in Parsippany, Morris County, New
Jersey. The land was acquired for approximately $16,193. The venture entered
into an agreement pertaining to the acquired land and two other land parcels in
Parsippany with an insurance company to provide for a guarantee on the funding
of the development of four office properties, aggregating 850,000 square feet.
Such agreement provides, if the venture elects to develop, the insurance company
will be admitted to the joint venture and provide all the equity required to
fund the development, subject to certain conditions. In addition, the venture
obtained a loan on the acquired land from a bank, which is guaranteed by the
insurance company.
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 September 30, 2001
and December 31, 2000:
<Table>
<Caption>
September 30, 2001
----------------------------------------------------------------------------------------------
American MC-SJP
G&G Financial Ramland Ashford Morris Harborside Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Realty South Pier Total
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ 20,111 $137,407 $ 9,764 $ 33,263 $ 18,339 $ 37,435 $ -- $ 17,271 $ 46,796 $320,386
Other assets 1,808 31,029 3,283 (121) 4,740 88 504,313 96 -- 545,236
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 21,919 $168,436 $ 13,047 $ 33,142 $ 23,079 $ 37,523 $504,313 $ 17,367 $ 46,796 $865,622
====================================================================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $103,323 $ 50,000 $ -- $ 16,147 $ -- $283,045 $ 16,028 $ 15,656 $484,199
Other liabilities 122 10,584 1,239 1,346 96 682 8,050 -- 4,838 26,957
Partners'/members' capital 21,797 54,529 (38,192) 31,796 6,836 36,841 213,218 1,339 26,302 354,466
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 21,919 $168,436 $ 13,047 $ 33,142 $ 23,079 $ 37,523 $504,313 $ 17,367 $ 46,796 $865,622
====================================================================================================================================
Company's net investment
in unconsolidated
joint ventures $ 15,222 $ 22,300 $ 3,555 $ 48,775 $ 2,990 $ 7,716 $ 19,724 $ 180 $ 14,954 $135,416
- ------------------------------------------------------------------------------------------------------------------------------------
<Caption>
December 31, 2000
----------------------------------------------------------------------------------------------
American MC-SJP
G&G Financial Ramland Ashford Morris Harborside Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Realty South Pier Total
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ 20,810 $ 78,119 $ 10,589 $ 12,546 $ 18,947 $ 37,665 $ -- $ -- $ -- $178,676
Other assets 2,737 27,082 2,508 11,851 4,755 849 310,342 -- -- 360,124
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 23,547 $105,201 $ 13,097 $ 24,397 $ 23,702 $ 38,514 $310,342 $ -- $ -- $538,800
====================================================================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ 63,486 $ 50,000 $ -- $ 16,666 $ -- $129,562 $ -- $ -- $259,714
Other liabilities 160 5,035 1,368 9,400 522 1,005 3,750 -- -- 21,240
Partners'/members' capital 23,387 36,680 (38,271) 14,997 6,514 37,509 177,030 -- -- 257,846
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 23,547 $105,201 $ 13,097 $ 24,397 $ 23,702 $ 38,514 $310,342 $ -- $ -- $538,800
====================================================================================================================================
Company's net investment
in unconsolidated
joint ventures $ 16,110 $ 35,079 $ 3,973 $ 15,809 $ 2,782 $ 7,874 $ 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 nine month periods ended September 30, 2001 and 2000:
<Table>
<Caption>
Three Months Ended September 30, 2001
----------------------------------------------------------------------------------------------
American MC-SJP
G&G Financial Ramland Ashford Morris Harborside Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Realty South Pier Total
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues $ 1,211 $ 1,427 $ 3,345 $ 4 $ 912 $ 1,298 $ 17,060 $ -- $ -- $ 25,257
Operating and other expenses (393) (781) (920) (11) (297) (632) (3,266) -- -- (6,300)
Depreciation and amortization (290) (623) (387) (10) (243) (235) -- -- -- (1,788)
Interest expense -- (485) (712) -- (264) -- (5,420) -- -- (6,881)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 528 $ (462) $ 1,326 $ (17) $ 108 $ 431 $ 8,374 $ -- $ -- $ 10,288
====================================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 225 $ 400 $ 506 $ 88 $ 54 $ 86 $ 525 $ -- $ -- $ 1,884
- ------------------------------------------------------------------------------------------------------------------------------------
<Caption>
Three Months Ended September 30, 2000
----------------------------------------------------------------------------------------------
American MC-SJP
G&G Financial Ramland Ashford Morris Harborside Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Realty South Pier Total
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues $ 1,253 $ 2,631 $ 2,783 $ 275 $ 983 $ 1,436 $ 5,357 $ -- $ -- $ 14,718
Operating and other expenses (391) (78) (890) (41) (280) (658) (876) -- -- (3,214)
Depreciation and amortization (307) (747) (384) (27) (252) (211) (70) -- -- (1,998)
Interest expense -- (979) (1,075) -- (407) -- (2,780) -- -- (5,241)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 555 $ 827 $ 434 $ 207 $ 44 $ 567 $ 1,631 $ -- $ -- $ 4,265
====================================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 239 $ 627 $ 286 $ 207 $ 22 $ 113 $ 700 $ -- $ -- $ 2,194
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
17
<Page>
<Table>
<Caption>
Nine Months Ended September 30, 2001
----------------------------------------------------------------------------------------------
American MC-SJP
G&G Financial Ramland Ashford Morris Harborside Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Realty South Pier Total
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues $ 3,700 $ 16,419 $ 9,151 $ 383 $ 2,871 $ 4,365 $ 45,077 $ -- $ -- $ 81,966
Operating and other expenses (1,175) (1,729) (2,571) (53) (905) (2,049) (7,456) -- -- (15,938)
Depreciation and amortization (883) (1,556) (1,164) (29) (726) (698) -- -- -- (5,056)
Interest expense -- (1,741) (2,504) -- (918) -- (13,310) -- -- (18,473)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,642 $ 11,393 $ 2,912 $ 301 $ 322 $ 1,618 $ 24,311 $ -- $ -- $ 42,499
====================================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 728 $ 3,864 $ 1,042 $ (357) $ 208 $ 295 $ 1,550 $ -- $ -- $ 7,330
- ------------------------------------------------------------------------------------------------------------------------------------
<Caption>
Nine Months Ended September 30, 2000
----------------------------------------------------------------------------------------------
American MC-SJP
G&G Financial Ramland Ashford Morris Harborside Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Realty South Pier Total
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues $ 3,721 $ 6,191 $ 8,064 $ 779 $ 2,930 $ 4,268 $ 16,507 $ -- $ -- $ 42,460
Operating and other expenses (1,210) (1,087) (2,443) (123) (870) (1,929) (2,168) -- -- (9,830)
Depreciation and amortization (918) (2,155) (1,146) (47) (734) (614) (70) -- -- (5,684)
Interest expense -- (2,220) (2,989) -- (1,153) -- (4,481) -- -- (10,843)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,593 $ 729 $ 1,486 $ 609 $ 173 $ 1,725 $ 9,788 $ -- $ -- $ 16,103
====================================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 680 $ 729 $ 498 $ 552 $ 84 $ 358 $ 1,500 $ -- $ -- $ 4,401
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
18
<Page>
5. DEFERRED CHARGES AND OTHER ASSETS
<Table>
<Caption>
September 30, December 31,
2001 2000
- -------------------------------------------------------------------------------------------------------
Deferred leasing costs $ 88,069 $ 80,667
Deferred financing costs 26,590 23,085
- -------------------------------------------------------------------------------------------------------
114,659 103,752
Accumulated amortization (33,024) (26,303)
- -------------------------------------------------------------------------------------------------------
Deferred charges, net 81,635 77,449
Prepaid expenses and other assets 19,043 25,206
- -------------------------------------------------------------------------------------------------------
Total deferred charges and other assets, net $ 100,678 $ 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>
September 30, December 31,
2001 2000
- ----------------------------------------------------------------------------------------------------------
Security deposits $7,460 $6,477
Escrow and other reserve funds 83 80
- ----------------------------------------------------------------------------------------------------------
Total restricted cash $7,543 $6,557
==========================================================================================================
</Table>
7. RENTAL PROPERTY HELD FOR SALE
As of September 30, 2001, the Company has identified 39 office properties,
aggregating approximately 4.6 million square feet, a multi-family residential
property and two land parcels as held for sale. These properties are located in
Texas, Colorado, Arizona, Florida and New York. Such properties carried an
aggregate book value of $422,735, net of accumulated depreciation, of $31,195
and a valuation allowance of $46,794 at September 30, 2001.
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 of which are 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 September 30, 2001 for the nine month periods ended
September 30, 2001 and 2000:
<Table>
<Caption>
Nine Months Ended September 30,
2001 2000
- -----------------------------------------------------------------------------------------------------------------
Total revenues $ 61,400 $ 60,416
Operating and other expenses (25,079) (23,896)
Depreciation and amortization (2,604) (8,665)
- -----------------------------------------------------------------------------------------------------------------
Net income $ 33,717 $ 27,855
=================================================================================================================
</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 nine months ended September 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 $46,794 ($26,231
for the three months ended September 30, 2001).
The following table summarizes realized gains and unrealized losses on
disposition of rental property:
<Table>
<Caption>
Nine Months Ended September 30,
2001 2000
- --------------------------------------------------------------------------------------------------------------------
Realized gain on sale of rental property and land $ 37,117 $ 86,205
Valuation allowance on rental property held for sale (46,794) --
- --------------------------------------------------------------------------------------------------------------------
Total realized gains and unrealized losses, net $ (9,677) $ 86,205
====================================================================================================================
</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 September 30, 2001 and December 31, 2000 is
as follows:
<Table>
<Caption>
September 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 299,804 299,744 7.27%
7.250% Senior Unsecured Notes, due March 15, 2009 298,248 298,072 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 298,386 -- 7.93%
- ---------------------------------------------------------------------------------------------------------------
Total Senior Unsecured Notes $1,096,721 $ 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") (one-month
LIBOR: 2.63 percent at September 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
20
<Page>
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 rate and facility fee will be adjusted 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 and was repaid in full and
terminated at maturity on June 29, 2001.
SUMMARY
As of September 30, 2001 and December 31, 2000, the Company had outstanding
borrowings of $73,000 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 September 30, 2001
and December 31, 2000 is as follows:
<Table>
<Caption>
EFFECTIVE PRINCIPAL BALANCE AT
INTEREST SEPTEMBER 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% -- 2,169 12/31/01
Mack-Cali Willowbrook CIGNA 8.67% 8,821 9,460 10/01/03
400 Chestnut Ridge Prudential Insurance Co. 9.44% 12,890 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% 25,397 25,911 10/01/05
500 West Putnam Avenue New York Life Ins. Co. 6.52% 9,477 10,069 10/10/05
Harborside - Plaza 1 U.S. West Pension Trust 5.61% 57,051 54,370 01/01/06
Harborside - Plazas 2 and 3 Northwestern/Principal 7.36% 162,949 95,630 01/01/06
Mack-Cali Airport Allstate Life Insurance Co. 7.05% 10,434 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 $544,697 $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 September 30, 2001
are as follows:
<Table>
<Caption>
WEIGHTED AVG.
SCHEDULED PRINCIPAL INTEREST RATE OF
PERIOD AMORTIZATION MATURITIES TOTAL FUTURE REPAYMENTS (a)
- --------------------------------------- ------------------- --------------- --------------- --------------------------
October through December 2001 $ 767 $ -- $ 767 7.70%
2002 3,259 -- 3,259 7.72%
2003 3,407 265,094 268,501 6.50%
2004 2,247 309,863 312,110 7.34%
2005 1,420 253,178 254,598 7.13%
Thereafter (1,359) 876,542 875,183 7.41%
- --------------------------------------- ------------------- --------------- --------------- --------------------------
Totals/Weighted Average $ 9,741 $1,704,677 $1,714,418 7.19%
======================================= =================== =============== =============== ==========================
</Table>
(a) Revolving credit facility and other variable debt inerest rates
calculated using the Company's actual LIBOR contracts in effect at
September 30, 2001 (weighted average LIBOR of 3.52 percent).
CASH PAID FOR INTEREST AND INTEREST CAPITALIZED
Cash paid for interest for the nine months ended September 30, 2001 and 2000 was
$100,892 and $93,903, respectively. Interest capitalized by the Company for the
nine months ended September 30, 2001 and 2000 was $11,994 and $7,482,
respectively.
22
<Page>
SUMMARY OF INDEBTEDNESS
As of September 30, 2001, the Company's total indebtedness of $1,714,418
(weighted average interest rate of 7.19 percent) was comprised of $105,178 of
revolving credit facility borrowings and other variable rate mortgage debt
(weighted average rate of 4.27 percent) and fixed rate debt of $1,609,240
(weighted average rate of 7.39 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 nine months ended September 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 -- -- -- 11,701 13,867 -- 25,568
Distributions -- -- -- (11,701) (14,639) -- (26,340)
Redemption of common
units for shares of
common stock -- (8,200) -- -- (219) -- (219)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2001 220,340 7,955,525 2,000,000 $ 226,005 $ 212,003 $ 8,524 $ 446,532
====================================================================================================================================
</Table>
MINORITY INTEREST OWNERSHIP
As of September 30, 2001 and December 31, 2000, the minority interest common
unitholders owned 12.3 percent (20.2 percent, including the effect of the
conversion of Preferred Units into common units) and 12.3 percent (20.2 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 its discretion, may match employee
contributions and/or make discretionary contributions. The Company 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 an
employee's annual salary, as defined in the 401(k) Plan, contributed to the plan
for 2001. Total expense recognized by the Company for both the nine month
periods ended September 30, 2001 and 2000 was $300.
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 September 30, 2001, are as
follows:
<Table>
<Caption>
Period Amount
- --------------------------------------------------------------------------------
October through December 2001 $ 133
2002 531
2003 531
2004 534
2005 534
Thereafter 21,997
- --------------------------------------------------------------------------------
Total $24,260
================================================================================
</Table>
Ground lease expense incurred during the nine months ended September 30, 2001
and 2000 amounted to $426 and $427, respectively.
OTHER
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.
24
<Page>
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
915,300 shares of its outstanding common stock for an aggregate cost of
approximately $25,008 for the nine months ended September 30, 2001.
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 became
exercisable over a three-year period and those options granted under both the
2000 Employee Plan and Employee Plan subsequent to 1995 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 1,045,300 stock options granted for the nine months ended September 30,
2001. As of September 30, 2001, stock options outstanding had a weighted average
remaining contractual life of approximately 7.3 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 1,045,300 $ 28.85
Exercised (173,708) $ 23.20
Lapsed or canceled (209,635) $ 29.80
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at September 30, 2001 5,295,276 $ 30.13
======================================================================================================================
Options exercisable at September 30, 2001 2,604,582 $ 31.33
Available for grant at September 30, 2001 1,422,901
- ----------------------------------------------------------------------------------------------------------------------
</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 September 30, 2001, there were a total of 749,976 Stock Warrants
outstanding. As of September 30, 2001, there were 671,980 Stock Warrants
exercisable. For the nine months ended September 30, 2001, no Stock Warrants
were canceled. No Stock Warrants have been exercised through September 30, 2001.
25
<Page>
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 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 nine months
ended September 30, 2001, 7,408 unvested Restricted Stock Awards were canceled.
EARNINGS PER SHARE
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 nine
month periods ended September 30, 2001 and 2000:
<Table>
<Caption>
Three Months Ended September 30,
2001 2000
----------------------------- ------------------------
Basic EPS Diluted EPS Basic EPS Diluted EPS
- -----------------------------------------------------------------------------------------------------------------
Net income $ 24,009 $ 24,009 $ 20,012 $ 20,012
Add: Net income attributable to
Operating Partnership - common units -- 3,403 -- 2,733
- -----------------------------------------------------------------------------------------------------------------
Adjusted net income $ 24,009 $ 27,412 $ 20,012 $ 22,745
=================================================================================================================
Weighted average shares 56,129 64,403 58,711 66,914
- -----------------------------------------------------------------------------------------------------------------
Per Share $ 0.43 $ 0.43 $ 0.34 $ 0.34
=================================================================================================================
<Caption>
Nine Months Ended September 30,
2001 2000
----------------------------- ------------------------
Basic EPS Diluted EPS Basic EPS Diluted EPS
- -----------------------------------------------------------------------------------------------------------------
Net income $ 98,420 $ 98,420 $150,935 $150,935
Add: Net income attributable to
Operating Partnership - common units -- 13,867 -- 20,859
Net income attributable to
Operating Partnership - preferred units -- -- -- 11,562
- -----------------------------------------------------------------------------------------------------------------
Adjusted net income $ 98,420 $112,287 $150,935 $183,356
=================================================================================================================
Weighted average shares 56,482 64,691 58,518 73,276
- -----------------------------------------------------------------------------------------------------------------
Per Share $ 1.74 $ 1.74 $ 2.58 $ 2.50
=================================================================================================================
</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 Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
- --------------------------------------------------------------------------------------------------------
Basic EPS Shares: 56,129 58,711 56,482 58,518
Add: Operating Partnership - common units 7,955 8,018 7,958 8,077
Operating Partnership - preferred units
(after conversion to common units) -- -- -- 6,504
Stock options 319 185 251 177
- --------------------------------------------------------------------------------------------------------
Diluted EPS Shares: 64,403 66,914 64,691 73,276
========================================================================================================
</Table>
Through September 30, 2001, under the Repurchase Program, the Company purchased
for constructive retirement, a total of 4,810,800 shares of its outstanding
common stock for an aggregate cost of approximately $133,084.
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 nine month periods ended
September 30, 2001 and 2000 and selected asset information as of September 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:
September 30, 2001 $ 142,542 $ 1,541 $ 144,083 (f)
September 30, 2000 137,919 1,979 139,898 (g)
Nine months ended:
September 30, 2001 $ 427,098 $ 4,046 $ 431,144 (h)
September 30, 2000 418,179 4,999 423,178 (i)
TOTAL OPERATING AND INTEREST EXPENSES(b):
Three months ended:
September 30, 2001 $ 46,484 $ 33,920 $ 80,404 (j)
September 30, 2000 44,615 30,899 75,514 (k)
Nine months ended:
September 30, 2001 $ 135,377 $ 103,830 $ 239,207 (l)
September 30, 2000 129,423 95,018 224,441 (m)
NET OPERATING INCOME(c):
Three months ended:
September 30, 2001 $ 96,058 $ (32,379) $ 63,679 (f)(j)
September 30, 2000 93,304 (28,920) 64,384 (g)(k)
Nine months ended:
September 30, 2001 $ 291,721 $ (99,784) $ 191,937 (h)(l)
September 30, 2000 288,756 (90,019) 198,737 (i)(m)
TOTAL ASSETS:
September 30, 2001 $3,694,307 $ 34,532 $3,728,839
December 31, 2000 3,623,107 53,870 3,676,977
TOTAL LONG-LIVED ASSETS(d):
September 30, 2001 $3,545,159 $ 24,449 $3,569,608
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 $1,891 of adjustments for straight-lining of rents and ($62) for
the Company's share of straight-line rent adjustments from unconsolidated
joint ventures.
(g) Excludes $3,520 of adjustments for straight-lining of rents and ($36) for
the Company's share of straight-line rent adjustments from unconsolidated
joint ventures.
(h) Excludes $9,628 of adjustments for straight-lining of rents and $64 for the
Company's share of straight-line rent adjustments from unconsolidated joint
ventures.
(i) Excludes $9,055 of adjustments for straight-lining of rents and $17 for the
Company's share of straight-line rent adjustments from unconsolidated joint
ventures.
(j) Excludes $22,529 of depreciation and amortization.
(k) Excludes $23,320 of depreciation and amortization and non-recurring charges
of $27,911.
(l) Excludes $67,964 of depreciation and amortization.
(m) Excludes $68,447 of depreciation and amortization and non-recurring charges
of $37,139.
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 nine month periods ended September
30, 2001 ("2001"), as compared to the three and nine month periods ended
September 30, 2000 ("2000"), make reference to the following: (i) the effect of
the "Same-Store Properties," which represent all in-service properties owned by
the Company at June 30, 2000 (for the three-month period comparisons), and which
represent all in-service properties owned by the Company at December 31, 1999
(for the nine-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 July 1, 2000
through September 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 September 30, 2001 (for the nine-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 SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS
ENDED SEPTEMBER 30, 2000
<Table>
<Caption>
Quarter Ended
September 30, Dollar Percent
(DOLLARS IN THOUSANDS) 2001 2000 Change Change
- ---------------------------------------------------------------------------------------------------------------
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 126,789 $ 123,600 $ 3,189 2.6%
Escalations and recoveries from tenants 13,944 13,763 181 1.3
Parking and other 2,610 3,534 (924) (26.1)
- ---------------------------------------------------------------------------------------------------------------
Sub-total 143,343 140,897 2,446 1.7
Equity in earnings of unconsolidated joint ventures 1,884 2,194 (310) (14.1)
Interest income 685 291 394 135.4
- ---------------------------------------------------------------------------------------------------------------
Total revenues 145,912 143,382 2,530 1.8
- ---------------------------------------------------------------------------------------------------------------
PROPERTY EXPENSES:
Real estate taxes 16,012 15,732 280 1.8
Utilities 11,517 11,604 (87) (0.7)
Operating services 16,336 16,855 (519) (3.1)
- ---------------------------------------------------------------------------------------------------------------
Sub-total 43,865 44,191 (326) (0.7)
General and administrative 8,767 5,461 3,306 60.5
Depreciation and amortization 22,529 23,320 (791) (3.4)
Interest expense 27,772 25,862 1,910 7.4
Non-recurring charges -- 27,911 (27,911) (100.0)
- ---------------------------------------------------------------------------------------------------------------
Total expenses 102,933 126,745 (23,812) (18.8)
- ---------------------------------------------------------------------------------------------------------------
Income before realized gains and unrealized losses
on disposition of rental property and
minority interests 42,979 16,637 26,342 158.3
Realized gains and unrealized losses on disposition
of rental property (11,624) 10,036 (21,660) (215.8)
- ---------------------------------------------------------------------------------------------------------------
Income before minority interests 31,355 26,673 4,682 17.6
MINORITY INTERESTS:
Operating partnership 7,346 6,661 685 10.3
- ---------------------------------------------------------------------------------------------------------------
Net income $ 24,009 $ 20,012 $ 3,997 20.0%
===============================================================================================================
</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 $ 3,189 2.6% $ 1,408 1.1% $ 6,414 5.2% $ (4,633) (3.7)%
Escalations and recoveries
from tenants 181 1.3 (48) (0.3) 427 3.0 (198) (1.4)
Parking and other (924) (26.1) (809) (22.9) 107 3.1 (222) (6.3)
- --------------------------------------------------------------------------------------------------------------------------
Total $ 2,446 1.7% $ 551 0.4% $ 6,948 4.9% $ (5,053) (3.6)%
==========================================================================================================================
PROPERTY EXPENSES:
Real estate taxes $ 280 1.8% $ (65) (0.4)% $ 830 5.3% $ (485) (3.1)%
Utilities (87) (0.7) 41 0.4 565 4.9 (693) (6.0)
Operating services (519) (3.1) (264) (1.6) 862 5.1 (1,117) (6.6)
- --------------------------------------------------------------------------------------------------------------------------
Total $ (326) (0.7)% $ (288) (0.7)% $ 2,257 5.2% $ (2,295) (5.2)%
==========================================================================================================================
OTHER DATA:
Number of Consolidated Properties 260 246 14 13
Square feet (in thousands) 27,188 25,614 1,574 2,610
</Table>
Base rents for the Same-Store Properties increased $1.4 million, or 1.1 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
$0.1 million, or 0.3 percent, for 2001 over 2000, due to the recovery of a
decreased amount of total property expenses in 2001. Parking and other income
for the Same-Store Properties decreased $0.8 million, or 22.9 percent, due
primarily to decreased third party management fees in 2001.
Real estate taxes on the Same-Store Properties decreased $0.1 million, or 0.4
percent, for 2001 as compared to 2000, due primarily to lower assessments on
certain properties in 2001. Utilities for the Same-Store Properties increased
$0.1 million, or 0.4 percent, for 2001 as compared to 2000, due primarily to
increased electric rates. Operating services for the Same-Store Properties
decreased $0.3 million, or 1.6 percent, due primarily to a decrease in repair
costs in 2001.
Equity in earnings of unconsolidated joint ventures decreased $0.3 million, or
14.1 percent, for 2001 as compared to 2000. This is due primarily to the sale of
two joint venture office properties in 2001 (see Note 4 to the Financial
Statements).
Interest income increased $0.4 million, or 135.4 percent, for 2001 as compared
to 2000. This increase was due primarily to the effect of net proceeds from
certain property sales being invested in cash and cash equivalents for the
period of time prior to which such proceeds were reinvested.
General and administrative increased by $3.3 million, or 60.5 percent, for 2001
as compared to 2000. This increase is due primarily to bad debt expense of
approximately $2.5 million in 2001, related to a lease breakage fee receivable
from a former tenant deemed uncollectible, 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 $0.8 million, or 3.4 percent, for
2001 over 2000. Of this decrease, $1.5 million, or 6.3 percent, is attributable
to the Same-Store Properties, and $0.5 million, or 2.1 percent, is due to the
Dispositions, partially offset by an increase of $1.2 million, or 5.0 percent,
due to the Acquired Properties.
30
<Page>
Interest expense increased $1.9 million, or 7.4 percent, for 2001 as compared to
2000. This increase is due primarily to higher average outstanding debt balances
in 2001 versus 2000, primarily as a result of Common Stock repurchases in late
2000 and early 2001 and, to a lesser extent, the replacement in early 2001 of
short-term credit facility borrowings with long-term, higher, fixed rate debt.
The Company incurred non-recurring charges of $27.9 million in 2000, as a result
of costs associated with the termination of the Prentiss merger agreement (see
Note 3 to the Financial Statements).
Income before realized gains and unrealized losses on disposition of rental
property and minority interests increased to $43.0 million in 2001 from $16.6
million in 2000. The increase of approximately $26.4 million is due to the
factors discussed above.
Net income increased by $4.0 million, from $20.0 million in 2000 to $24.0
million in 2001. This increase was a result of an increase in income before
realized gains and unrealized losses on disposition of rental property and
minority interests of $26.4 million, which was partially offset by an unrealized
loss on disposition of rental property in 2001 of $11.6 million, a gain on sale
of rental property in 2000 of $10.0 million, and a decrease in minority
interests of $0.8 million in 2001.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 2000
<Table>
<Caption>
Nine Months Ended
September 30, Dollar Percent
(DOLLARS IN THOUSANDS) 2001 2000 Change Change
- -------------------------------------------------------------------------------------------------------------------
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 381,584 $ 367,270 $ 14,314 3.9%
Escalations and recoveries from tenants 42,136 45,058 (2,922) (6.5)
Parking and other 8,016 12,984 (4,968) (38.3)
- -------------------------------------------------------------------------------------------------------------------
Sub-total 431,736 425,312 6,424 1.5
Equity in earnings of unconsolidated joint ventures 7,330 4,401 2,929 66.6
Interest income 1,770 2,537 (767) (30.2)
- -------------------------------------------------------------------------------------------------------------------
Total revenues 440,836 432,250 8,586 2.0
- -------------------------------------------------------------------------------------------------------------------
PROPERTY EXPENSES:
Real estate taxes 46,809 45,169 1,640 3.6
Utilities 34,172 31,997 2,175 6.8
Operating services 51,901 51,419 482 0.9
- -------------------------------------------------------------------------------------------------------------------
Sub-total 132,882 128,585 4,297 3.3
General and administrative 21,633 16,733 4,900 29.3
Depreciation and amortization 67,964 68,447 (483) (0.7)
Interest expense 84,692 79,123 5,569 7.0
Non-recurring charges -- 37,139 (37,139) (100.0)
- -------------------------------------------------------------------------------------------------------------------
Total expenses 307,171 330,027 (22,856) (6.9)
- -------------------------------------------------------------------------------------------------------------------
Income before realized gains and unrealized losses
on disposition of rental property and
minority interests 133,665 102,223 31,442 30.8
Realized gains and unrealized losses on disposition
of rental property (9,677) 86,205 (95,882) (111.2)
- -------------------------------------------------------------------------------------------------------------------
Income before minority interests 123,988 188,428 (64,440) (34.2)
MINORITY INTERESTS:
Operating partnership 25,568 32,421 (6,853) (21.1)
Partially-owned properties -- 5,072 (5,072) (100.0)
- -------------------------------------------------------------------------------------------------------------------
Net income $ 98,420 $ 150,935 $ (52,515) (34.8)%
===================================================================================================================
</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 $14,314 3.9% $10,428 2.8% $20,595 5.6% $(16,709) (4.5)%
Escalations and recoveries
from tenants (2,922) (6.5) (1,963) (4.4) 1,593 3.6 (2,552) (5.7)
Parking and other (4,968) (38.3) (4,527) (34.9) 285 2.2 (726) (5.6)
- --------------------------------------------------------------------------------------------------------------------
Total $ 6,424 1.5% $3,938 0.9% $22,473 5.3% $(19,987) (4.7)%
====================================================================================================================
PROPERTY EXPENSES:
Real estate taxes $ 1,640 3.6% $ 401 0.9% $ 2,795 6.1% $ (1,556) (3.4)%
Utilities 2,175 6.8 1,903 5.9 1,799 5.7 (1,527) (4.8)
Operating services 482 0.9 716 1.4 3,062 5.9 (3,296) (6.4)
- --------------------------------------------------------------------------------------------------------------------
Total $ 4,297 3.3% $3,020 2.3% $ 7,656 6.0% $ (6,379) (5.0)%
====================================================================================================================
OTHER DATA:
Number of Consolidated Properties 260 242 18 13
Square feet (in thousands) 27,188 24,964 2,224 2,610
</Table>
Base rents for the Same-Store Properties increased $10.4 million, or 2.8
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 $2.0 million, or 4.4 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 $4.5 million, or 34.9 percent, due primarily to fewer lease
termination fees in 2001.
Real estate taxes on the Same-Store Properties increased $0.4 million, or 0.9
percent, for 2001 as compared to 2000, due primarily to property tax rate
increases in certain municipalities in 2001, partially offset by lower
assessments on certain properties in 2001. Utilities for the Same-Store
Properties increased $1.9 million, or 5.9 percent, for 2001 as compared to 2000,
due primarily to increased gas rates. Operating services for the Same-Store
Properties increased $0.7 million, or 1.4 percent, due primarily to an increase
in maintenance costs in 2001.
Equity in earnings of unconsolidated joint ventures increased $2.9 million, or
66.6 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, partially offset by the sale of a joint
venture office property in 2001 (see Note 4 to the Financial Statements).
Interest income decreased $0.8 million, or 30.2 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 for
longer periods of time.
General and administrative increased by $4.9 million, or 29.3 percent, for 2001
as compared to 2000. This increase is due primarily to increased, bad debt
expense of approximately $2.5 million in 2001, related to a lease breakage fee
receivable due from a former tenant deemed uncollectible, 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 $0.5 million, or 0.7 percent, for
2001 over 2000. Of this decrease, $2.2 million, or 3.3 percent, is due to the
Same-Store Properties and $2.1 million, or 3.0 percent, attributable to the
Dispositions, partially offset by an increase of $3.8 million, or 5.6 percent,
due to the Acquired Properties.
32
<Page>
Interest expense increased $5.7 million, or 7.0 percent, for 2001 as compared to
2000. This increase is due primarily to higher average outstanding debt balances
in 2001 versus 2000, primarily as a result of Common Stock repurchases in late
2000 and early 2001 and, to a lesser extent, the replacement in early 2001 of
short-term credit facility borrowings with long-term, higher, fixed rate debt.
Non-recurring charges of $37.1 million were incurred in 2000, as a result of
costs associated with the termination of the Prentiss merger agreement (see Note
3 to the Financial Statements) in September 2000 and costs associated with the
resignations of Brant Cali and John R. Cali (see Note 13 to Financial
Statements) in June 2000.
Income before realized gains and unrealized losses on disposition of rental
property and minority interests increased to $133.7 million in 2001 from $102.2
million in 2000. The increase of approximately $31.5 million is due to the
factors discussed above.
Net income decreased by $52.5 million, from $150.9 million in 2000 to $98.4
million in 2001. This decrease was a result of a gain on sale of rental property
of $86.2 million in 2000 and unrealized losses on disposition of rental property
of $9.7 million in 2001. This was partially offset by an increase in income
before realized gains and unrealized losses on disposition of rental property
and minority interests of $31.5 million, and a decrease in minority interests of
$11.9 million in 2001.
LIQUIDITY AND CAPITAL RESOURCES
STATEMENT OF CASH FLOWS During the nine months ended September 30, 2001, the
Company generated $188.1 million in cash flows from operating activities, and
together with $695.6 million in borrowings from the Company's senior
unsecured notes, revolving credit facilities and additional mortgage
financing, $124.1 million in proceeds from sales of rental property, $37.5
million in distributions received from unconsolidated joint ventures, $6.0
million in proceeds from repayment of a mortgage note receivable and $4.0
million in proceeds from stock options exercised used an aggregate of
approximately $1.1 billion to acquire properties and land parcels and pay for
other tenant and building improvements totaling $189.9 million, repay
outstanding borrowings on its revolving credit facilities and other mortgage
debt of $610.1 million, pay quarterly dividends and distributions of $130.0
million, invest $64.2 million in unconsolidated joint ventures, pay financing
costs of $3.3 million, repurchase 915,300 shares of its outstanding common
stock for $25.0 million, add $1.0 million to restricted cash and add $31.8
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, which is approximately 40 percent leased. 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 primarily through drawing on its revolving credit facility.
33
<Page>
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 October
31, 2001, the Company purchased for constructive retirement 2.9 million shares
of its outstanding common stock for an aggregate cost of approximately $80.5
million under the Repurchase Program. The Company has authorization to
repurchase up to an additional $69.5 million of its outstanding common stock
which it may repurchase from time to time in open market transactions at
prevailing prices or through privately negotiated transactions.
As of September 30, 2001, the Company's total indebtedness of $1.7 billion
(weighted average interest rate of 7.19 percent) was comprised of $105.2 million
of revolving credit facility borrowings and other variable rate mortgage debt
(weighted average rate of 4.27 percent) and fixed rate debt of $1.6 billion
(weighted average rate of 7.39 percent).
As of September 30, 2001, the Company had outstanding borrowings of $73.0
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.
34
<Page>
On May 18, 2001, the Company obtained $70.0 million in additional mortgage
financing secured by Harborside Financial Center Plazas 2 and 3 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 2 and 3 of $162.9 million at September 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 September 30, 2001, the Company had 236 unencumbered properties, totaling
21.0 million square feet, representing 77.3 percent of the Company's total
portfolio on a square footage basis.
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 frequently examines 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 September 30, 2001, the Company classified 42 properties with an aggregate
net book value of $422.7 million as held for sale. The Company is currently in
various stages of contract negotiations for the sale of certain of the
properties. Substantially all of the properties are unencumbered. The sale of
one or more of these assets will enhance the company's short-term liquidity
although there is no assurance when and if any sales will occur or, if they
occur, how much proceeds the Company will realize.
As of September 30, 2001, the Company's total debt had a weighted average term
to maturity of approximately 5.1 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.
35
<Page>
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.
Funds from operations for the three and nine month periods ended September 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 Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Income before realized gains and unrealized losses
on disposition of rental property and
minority interests $42,979 $16,637 $133,665 $ 102,223
Add: Real estate-related depreciation and
amortization (1) 23,179 23,920 70,250 70,072
Gain on sale of land -- -- -- 2,248
Non-recurring charges -- 27,911 -- 37,139
Deduct: Rental income adjustment for
straight-lining of rents (2) (1,830) (3,484) (9,692) (9,074)
Minority interests:
partially-owned properties -- -- -- (5,072)
- ------------------------------------------------------------------------------------------------------------------------
Funds from operations, after adjustment
for straight-lining of rents and non-recurring
charges 64,328 64,984 194,223 197,536
Deduct: Distributions to preferred unitholders (3,943) (3,928) (11,701) (11,562)
- ------------------------------------------------------------------------------------------------------------------------
Funds from operations, after adjustment for
straight-lining of rents and non-recurring
charges, after distributions to preferred
unitholders $60,385 $61,056 $182,522 $ 185,974
========================================================================================================================
Cash flows provided by operating activities $188,148 $ 128,233
Cash flows (used in) provided by investing activities $(87,526) $ 55,157
Cash flows used in financing activities $(68,835) $ (181,471)
- ------------------------------------------------------------------------------------------------------------------------
Basic weighted averages shares/units
outstanding (3) 64,084 66,729 64,440 66,595
- ------------------------------------------------------------------------------------------------------------------------
Diluted weighted average shares/units
outstanding (3) 70,762 73,353 71,050 73,276
- ------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Includes the Company's share from unconsolidated joint ventures of $863 and
$784 for the three months ended September 30, 2001 and 2000, respectively,
and $2,906 and $2,204 for the nine months ended September 30, 2001 and
2000, respectively.
(2) Includes the Company's share from unconsolidated joint ventures of $62
and $36 for the three months ended September 30, 2001 and 2000,
respectively, and $64 and $18 for nine months ended September 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 Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
- ----------------------------------------------------------------------------------------------------------------------
Basic weighted average shares: 56,129 58,711 56,482 58,518
Add: Weighted average common units 7,955 8,018 7,958 8,077
- ----------------------------------------------------------------------------------------------------------------------
Basic weighted average shares/units: 64,084 66,729 64,440 66,595
Add: Weighted average preferred units
(after conversion to common units) 6,359 6,439 6,359 6,504
Stock options 319 185 251 177
- ----------------------------------------------------------------------------------------------------------------------
Diluted weighted average shares/units: 70,762 73,353 71,050 73,276
======================================================================================================================
</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 September 30, 2001
ranged from LIBOR plus 65 basis points to LIBOR plus 80 basis points.
<Table>
<Caption>
SEPTEMBER 30, 2001
DEBT, 10/1/01 -
INCLUDING CURRENT PORTION 12/31/01 2002 2003 2004 2005 THEREAFTER TOTAL FAIR VALUE
- ------------------------- -------- ---- ---- ---- ---- ---------- ----- ----------
Fixed Rate $767 $3,260 $195,500 $312,110 $254,598 $843,005 $1,609,240 $1,672,080
Average Interest Rate 7.70% 7.72% 7.30% 7.34% 7.13% 7.41% 7.39%
Variable Rate - - $73,000 - - $ 32,178 $ 105,178 $ 105,178
</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
Not Applicable.
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:
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
3.1 Restated Charter of Mack-Cali Realty Corporation
dated June 11, 2001 (filed as Exhibit 3.1 to the
Company's Form 10-Q dated June 30, 2001 and
incorporated herein by reference).
3.2 Amended and Restated Bylaws of Mack-Cali Realty
Corporation dated June 10, 1999 (filed as Exhibit 3.2
to the 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).
40
<Page>
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).
41
<Page>
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).
42
<Page>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
*10.19 Agreement of Sale and Acquisition of Beneficial and
Equitable Ownership Interests in Real Property dated
September 13, 2001, between Clearbrook Road
Associates L.L.C., a New York limited liability
company, and Mack-Cali Realty, L.P., a Delaware
limited partnership.
*10.20 Agreement of Sale and Acquisition of Beneficial and
Equitable Ownership Interests in Real Property dated
September 13, 2001, between Robert Martin Company,
L.L.C., a New York limited liability company, and
Clearbrook Road Associates L.L.C., a New York limited
liability company.
*10.21 Purchase Agreement dated August 16, 2001, by and
between the Board of Governors of the Federal Reserve
System and M-C Capitol Associates L.L.C., a Delaware
limited liability company.
(b) Reports on Form 8-K
During the third quarter of 2001, the Company filed a report on Form 8-K dated
July 18, 2001, furnishing under Item 9 certain information regarding its
operations. The Company also filed a report on Form 8-K dated August 8, 2001,
furnishing under Items 7 and 9 certain supplemental data regarding its
operations.
- --------------
*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: November 7, 2001 By: /s/ MITCHELL E. HERSH
--------------------------------
Mitchell E. Hersh
Chief Executive Officer
Date: November 7, 2001 By: /s/ BARRY LEFKOWITZ
--------------------------------
Barry Lefkowitz
Executive Vice President &
Chief Financial Officer
44