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 333-57103-01
Mack-Cali Realty, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3315804
- -------------------------------- ---------------------------
(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 .
MACK-CALI REALTY, L.P.
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION PAGE
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 Partners' Capital
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 .......................................... 8-29
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ...................................................... 30-38
Item 3. Quantitative and Qualitative Disclosures about Market Risk .......................... 39
PART II OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings ................................................................... 40
Item 2. Changes in Securities and Use of Proceeds ........................................... 40
Item 3. Defaults Upon Senior Securities ..................................................... 40
Item 4. Submission of Matters to a Vote of Security Holders ................................. 40
Item 5. Other Information ................................................................... 40
Item 6. Exhibits ............................................................................ 41-44
Signatures .......................................................................... 45
2
MACK-CALI REALTY, L.P.
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
The accompanying unaudited consolidated balance sheets, statements of
operations, of changes in partners' capital, 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, L.P.'s Annual Report on Form 10-K and
Form 10-K/A 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
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
======================================================================================================================
September 30,
2001 December 31,
ASSETS (UNAUDITED) 2000
- -------------------------------------------------------------------------------- ---------------- --------------
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 PARTNERS' CAPITAL
- -------------------------------------------------------------------------------- ---------------- --------------
Senior unsecured notes $1,096,721 $ 798,099
Revolving credit facilities 73,000 348,840
Mortgages and loans payable 544,697 481,573
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 interest in consolidated partially-owned properties -- 1,925
Commitments and contingencies
PARTNERS' CAPITAL:
Preferred units, 220,340 and 220,340 units outstanding 226,005 226,005
General partner, 56,333,692 and 56,980,893 common units outstanding 1,427,866 1,453,290
Limited partners, 7,955,525 and 7,963,725 common units outstanding 212,003 212,994
Unit warrants, 2,000,000 and 2,000,000 outstanding 8,524 8,524
- -------------------------------------------------------------------------------- ---------------- --------------
Total partners' capital 1,874,398 1,900,813
- -------------------------------------------------------------------------------- ---------------- --------------
Total liabilities and partners' capital $3,728,839 $3,676,977
================================================================================ ================ ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER UNIT 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 interest 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 interest 31,355 26,673 123,988 188,428
Minority interest in consolidated partially-owned
properties -- -- -- 5,072
- ------------------------------------------------------------- ----------------- --------------- --------------- ----------------
Net income 31,355 26,673 123,988 183,356
Preferred unit distributions (3,943) (3,928) (11,701) (11,562)
- ------------------------------------------------------------- ----------------- --------------- --------------- ----------------
Net income available to common unitholders $ 27,412 $ 22,745 $ 112,287 $ 171,794
============================================================= ================= =============== =============== ================
Basic earnings per unit $ 0.43 $ 0.34 $ 1.74 $ 2.58
Diluted earnings per unit $ 0.43 $ 0.34 $ 1.74 $ 2.50
- ------------------------------------------------------------- ----------------- --------------- --------------- ----------------
Distributions declared per common unit $ 0.62 $ 0.61 $ 1.84 $ 1.77
- ------------------------------------------------------------- ----------------- --------------- --------------- ----------------
Basic weighted average units outstanding 64,084 66,729 64,440 66,595
Diluted weighted average units outstanding 64,403 66,914 64,691 73,276
- ------------------------------------------------------------- ----------------- --------------- --------------- ----------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (IN THOUSANDS)
(UNAUDITED)
====================================================================================================================================
General Limited
Preferred Partner Partner Unit Preferred General Limited Unit
Units Units Units Warrants Unitholders Partner Partners Warrants Total
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2001 220 56,981 7,964 2,000 $ 226,005 $1,453,290 $ 212,994 $ 8,524 $1,900,813
Net income -- -- -- 11,701 98,420 13,867 -- 123,988
Distributions -- -- -- -- (11,701) (104,222) (14,639) -- (130,562)
Redemption of limited
partner units for
shares of common stock -- 8 (8) -- -- 219 (219) -- --
Contributions - proceeds
from stock
options exercised -- 173 -- -- -- 4,020 -- -- 4,020
Deferred compensation
plan for directors -- -- -- -- -- 116 -- -- 116
Issuance of Restricted
Stock Awards -- 94 -- -- -- -- -- -- --
Amortization of stock
compensation -- -- -- -- -- 1,031 -- -- 1,031
Cancellation of Restricted
Stock Awards -- (7) -- -- -- -- -- -- --
Repurchase of general
partner units -- (915) -- -- -- (25,008) -- -- (25,008)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2001 220 56,334 7,956 2,000 $ 226,005 $1,427,866 $ 212,003 $ 8,524 $1,874,398
====================================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
======================================================================================================================
Nine Months Ended
September 30,
CASH FLOWS FROM OPERATING ACTIVITIES 2001 2000
- ----------------------------------------------------------------------------------- ---------------- -----------------
Net income $ 123,988 $ 183,356
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 interest in consolidated partially-owned properties -- 5,072
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 general partner units (25,008) (5,237)
Payment of financing costs (3,339) (6,090)
Proceeds from stock options exercised 4,020 2,155
Payment of 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
=================================================================================== ================ =================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
7
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER
UNIT AMOUNTS)
================================================================================
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Mack-Cali Realty, L.P., a Delaware limited partnership, and its subsidiaries
(the "Operating Partnership") was formed on May 31, 1994 to conduct the business
of leasing, management, acquisition, development, construction and
tenant-related services for its sole general partner, Mack-Cali Realty
Corporation and its subsidiaries (the "Corporation" or "General Partner"). The
Operating Partnership, through its operating divisions and subsidiaries,
including the Mack-Cali property-owning partnerships and limited liability
companies (collectively, the "Property Partnerships"), as described below, is
the entity through which all of the General Partner's operations are conducted.
The Property Partnerships, not a legal entity, consist of partnerships and
limited liability companies which are engaged in the ownership and operation of
the Properties (as hereinafter defined) of the Operating Partnership.
The General Partner is a fully integrated, self-administered, self-managed real
estate investment trust ("REIT"). The General Partner controls the Operating
Partnership as its sole general partner, and owned an 87.6 percent and 87.7
percent common unit interest in the Operating Partnership as of September 30,
2001 and December 31, 2000, respectively.
The General Partner's business is the ownership of interest in and operation of
the Operating Partnership, and all of the General Partner's expenses are
incurred for the benefit of the Operating Partnership. The General partner is
reimbursed by the Operating Partnership for all expenses it incurs relating to
the ownership and operation of the Operating Partnership. The Operating
Partnership earns a management fee of between three percent and five percent of
revenues, as defined, for its management of the Property Partnerships.
As of September 30, 2001, the Operating Partnership owned or had interest 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 Operating Partnership has investment interests), six
industrial/warehouse buildings totaling approximately 387,400 square feet, one
multi-family residential complex consisting of 124 units, two stand-alone retail
properties and three land leases. The Properties are located in 10 states,
primarily in the Northeast, plus the District of Columbia.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include all accounts of the
Operating Partnership, its majority-owned and/or controlled subsidiaries, which
consist principally of Mack-Cali Realty, L.P. ("Operating Partnership"). See
Investments in Unconsolidated Joint Ventures in Note 2 for the Operating
Partnership'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.
8
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:
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
------------------------------------------ --------------------------------------------------
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
Operating Partnership 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 Operating Partnership accounts for its investments in
unconsolidated joint ventures under the equity method of
accounting as the Operating Partnership exercises significant
influence, but does not control these entities. These
investments are recorded initially at cost, as Investments in
Unconsolidated Joint Ventures, and subsequently adjusted for
equity in earnings and cash contributions and distributions.
Any difference between the carrying amount of these
investments on the balance sheet of the Operating Partnership
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 Operating Partnership 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 Operating
Partnership. The equity interests of the other members are
reflected as minority interests: partially-owned properties
in the consolidated financial statements of the Operating
Partnership.
9
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 Operating Partnership 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.
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 Operating Partnership,
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 Operating Partnership is a partnership and, as a
result, all income and losses of the partnership are allocated
to the partners for inclusion in their respective income tax
returns. Accordingly, no provision or benefit for income taxes
has been made in the accompanying financial statements.
DERIVATIVE
INSTRUMENTS The Operating Partnership 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 Operating Partnership's financial statements.
Interest rate contracts are utilized by the Operating
Partnership to reduce interest rate risks. The Operating
Partnership 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.
10
In certain situations, the Operating Partnership 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 UNIT In accordance with the Statement of Financial
Accounting Standards No. 128 ("FASB No. 128"), the Operating
Partnership presents both basic and diluted earnings per unit
("EPU"). Basic EPU excludes dilution and is computed by
dividing net income available to common unitholders by the
weighted average number of shares outstanding for the period.
Diluted EPU reflects the potential dilution that could occur
if securities or other contracts to issue common units were
exercised or converted into common units, where such exercise
or conversion would result in a lower EPU amount.
DISTRIBUTIONS
PAYABLE The distributions payable at September 30, 2001 represents
distributions payable to common unitholders of record as of
October 3, 2001 (64,604,994 common units), and preferred
distributions payable to preferred unitholders (220,340
preferred units) for the third quarter 2001. The third quarter
2001 common unit distribution of $0.62 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 distributions payable at December 31, 2000 represents
distributions payable to common unitholders of record as of
January 4, 2001 (64,946,618 common units), and preferred
distributions payable to preferred unitholders (220,340
preferred units) for the fourth quarter 2000. The fourth
quarter 2000 common unit distribution of $0.61 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 Corporation's stock offerings and
subsequent reinvestment in general partner units are reflected
as a reduction of these unit values.
STOCK OPTIONS The Operating Partnership 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 Corporation'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 Corporation's policy is to grant options with an
exercise price equal to the quoted closing market price of
the Corporation's stock on the business day preceding the
grant date. Accordingly, no compensation cost has been
recognized under the Corporation's stock option plans for
the granting of stock options. See Note 11.
11
3. ACQUISITIONS, PROPERTY SALES AND OTHER TRANSACTIONS
OPERATING PROPERTY ACQUISITIONS
The Operating Partnership acquired the following operating properties during the
nine months ended September 30, 2001:
- --------------- ------------------------------- ----------------------------------- -------- ------------ --------------
Investment by
Acquisition # of Rentable Operating
Date Property/Portfolio Name Location Bldgs. Square Feet Partnership
- --------------- ------------------------------- ----------------------------------- -------- ------------ --------------
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
=============================================== =================================== ======== ============ ==============
(a) Transaction was funded primarily through borrowing on the Operating
Partnership's revolving credit facility.
(b) Transactions were funded primarily from net proceeds received in the
sale of a rental property as well as the Operating Partnership'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 Operating Partnership as
the President of the Corporation, a current member of the Board of
Directors and a former member of the Board of Directors of the
Corporation, respectively.
PROPERTIES PLACED IN SERVICE
The Operating Partnership placed in service the following properties during the
nine months ended September 30, 2001:
- ---------------- ---------------------------- --------------------------------- ------- ------------ ----------------
Investment by
Date Placed # of Rentable Operating
in Service Property/Portfolio Name Location Bldgs. Square Feet Partnership (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
============================================= ================================= ======= ============ ================
(a) Transactions were funded primarily through draws on the Operating
Partnership's revolving credit facilities.
LAND ACQUISITIONS
On September 13, 2001, the Operating Partnership 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 Operating Partnership as the President of the
Corporation, a current member of the Board of Directors and a former member of
the Board of Directors of the Corporation, respectively. The Operating
Partnership has commenced construction of a fully pre-leased 33,000 square-foot
office/flex building on the acquired land.
12
On January 5, 2001, the Operating Partnership acquired approximately 7.1 acres
of developable land located in Littleton, Arapahoe County, Colorado. The land
was acquired for approximately $2,711. When the Operating Partnership had
committed itself to acquire the land, the Operating Partnership had intended to
develop the site consistent with its then business strategy. Due to a change in
the Operating Partnership's strategy, this land is now being held for sale (see
Note 7).
PROPERTY SALES
The Operating Partnership sold the following properties during the nine months
ended September 30, 2001:
- ------------------------------------------------------------------------------------------------------------------------------
Sale # of Rentable Net Sales Net Book Realized
Date Property Name Location Bldgs. Square Proceeds Value Gain (Loss)
Feet
- ------------------------------------------------------------------------------------------------------------------------------
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, NJ -- n/a 3,357 2,918 439
(a)
- ------------------------------------------------------------------------------------------------------------------------------
Totals: 6 660,910 $126,270 $89,153 $37,117
==============================================================================================================================
(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 Corporation and Brant Cali resigned as a director of the
Corporation. John R. Cali was appointed to the Board of Directors of the
Corporation to take the seat previously held by Brant Cali. As required by Brant
Cali and John R. Cali's employment agreements with the Corporation: (i) the
Corporation 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
Corporation'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 Corporation. 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 Corporation 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 Corporation, 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 Operating Partnership 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
Operating Partnership 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 Operating Partnership 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 Operating
Partnership performs management and leasing services for the property
13
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 Operating Partnership acquired the entire interest in the
property for approximately $14,250.
HPMC
On April 23, 1998, the Operating Partnership entered into a joint venture
agreement with HCG Development, L.L.C. and Summit Partners I, L.L.C. to form
HPMC Development Partners, L.P. and, on July 21, 1998, entered into a second
joint venture, HPMC Development Partners II, L.P. (formerly known as HPMC Lava
Ridge Partners, L.P.), with these same parties. HPMC Development Partners,
L.P.'s efforts have focused on two development projects, commonly referred to as
Continental Grand II and Summit Ridge. HPMC Development Partners II, L.P.'s
efforts have focused on three development projects, commonly referred to as Lava
Ridge, Pacific Plaza I & II and Stadium Gateway. Among other things, the
partnership agreements provide for a preferred return on the Operating
Partnership'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 Operating Partnership 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 Operating
Partnership's credit facilities. Subsequently, on June 4, 1999, the Operating
Partnership acquired an additional 0.1 percent interest in G&G Martco through
the issuance of common units. The Operating Partnership 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 Operating Partnership 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 Operating Partnership's Harborside Financial
Center office complex. The Operating Partnership holds a 50 percent interest in
the joint venture. Among other things, the partnership agreement provides for a
preferred return on the Operating Partnership's invested capital in the venture,
in addition to the Operating Partnership's proportionate share of the venture's
14
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 Operating Partnership's Harborside property and Manhattan. In the fourth
quarter 2000, the Operating Partnership 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.
RAMLAND REALTY ASSOCIATES L.L.C. (ONE RAMLAND ROAD)
On August 20, 1998, the Operating Partnership 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 Operating Partnership holds a 50 percent interest in the joint
venture. The Operating Partnership 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 Operating Partnership 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 Operating Partnership holds a 20
percent interest in the joint venture. Subsequently, through September 30, 2001,
the venture paid $19,907 ($3,943 representing the Operating Partnership's share)
in accordance with earn-out provisions in the acquisition contracts. The
Operating Partnership 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 Operating Partnership 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 Operating Partnership has invested $20,000 in the venture. William L. Mack,
Chairman of the Board of Directors of the Corporation 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 Operating Partnership entered into an agreement with
Hyatt Corporation to develop a 350-room hotel on the Operating Partnership'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 Operating Partnership 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 Operating Partnership 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.
15
MC-SJP MORRIS V REALTY, LLC AND MC-SJP MORRIS VI REALTY, LLC
The Operating Partnership 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 Operating
Partnership 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 Operating Partnership 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 Operating Partnership 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.
16
SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the financial position of the unconsolidated joint
ventures in which the Operating Partnership had investment interests as of
September 30, 2001 and December 31, 2000:
September 30, 2001
----------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ----------- -------------
ASSETS:
Rental property, net $20,111 $137,407 $ 9,764 $ 33,263 $18,339 $37,435 $ --
Other assets 1,808 31,029 3,283 (121) 4,740 88 504,313
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ----------- -------------
Total assets $21,919 $ 168,436 $ 13,047 $ 33,142 $23,079 $37,523 $504,313
===================================== ============= ============= ============= ============ ============ =========== =============
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $103,323 $ 50,000 $ -- $16,147 $ -- $283,045
Other liabilities 122 10,584 1,239 1,346 96 682 8,050
Partners'/members' capital 21,797 54,529 (38,192) 31,796 6,836 36,841 213,218
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ----------- -------------
Total liabilities and
partners'/members' capital $21,919 $ 168,436 $ 13,047 $ 33,142 $23,079 $37,523 $504,313
===================================== ============= ============= ============= ============ ============ =========== =============
Operating Partnership's net
investment in unconsolidated
joint ventures $15,222 $ 22,300 $ 3,555 $ 48,775 $2,990 $ 7,716 $ 19,724
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ----------- -------------
December 31, 2000
----------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ----------- -------------
ASSETS:
Rental property, net $20,810 $ 78,119 $ 10,589 $12,546 $18,947 $37,665 $ --
Other assets 2,737 27,082 2,508 11,851 4,755 849 310,342
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ----------- -------------
Total assets $23,547 $105,201 $ 13,097 $24,397 $23,702 $38,514 $310,342
===================================== ============= ============= ============= ============ ============ =========== =============
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ 63,486 $ 50,000 $ -- $16,666 $ -- $129,562
Other liabilities 160 5,035 1,368 9,400 522 1,005 3,750
Partners'/members' capital 23,387 36,680 (38,271) 14,997 6,514 37,509 177,030
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ----------- -------------
Total liabilities and
partners'/members' capital $23,547 $105,201 $ 13,097 $24,397 $23,702 $38,514 $310,342
===================================== ============= ============= ============= ============ ============ =========== =============
Operating Partnership's net
investment in unconsolidated
joint ventures $16,110 $ 35,079 $ 3,973 $15,809 $ 2,782 $ 7,874 $ 19,811
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ----------- -------------
- --------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
Realty South Pier Total
- ---------------------------------------------------- ------------- -------------
ASSETS:
Rental property, net $ 17,271 $46,796 $320,386
Other assets 96 -- 545,236
- ---------------------------------------------------- ------------- -------------
Total assets $ 17,367 $46,796 $865,622
==================================================== ============= =============
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ 16,028 $15,656 $484,199
Other liabilities -- 4,838 26,957
Partners'/members' capital 1,339 26,302 354,466
- ---------------------------------------------------- ------------- -------------
Total liabilities and
partners'/members' capital $ 17,367 $46,796 $865,622
==================================================== ============= =============
Operating Partnership's net
investment in unconsolidated
joint ventures $ 180 $14,954 $135,416
- ---------------------------------------------------- ------------- -------------
- --------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
Realty South Pier Total
- ---------------------------------------------------- ------------- -------------
ASSETS:
Rental property, net $ -- $ -- $178,676
Other assets -- -- 360,124
- ---------------------------------------------------- ------------- -------------
Total assets $ -- $ -- $538,800
==================================================== ============= =============
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ -- $259,714
Other liabilities -- -- 21,240
Partners'/members' capital -- -- 257,846
- ---------------------------------------------------- ------------- -------------
Total liabilities and
partners'/members' capital $ -- $ -- $538,800
==================================================== ============= =============
Operating Partnership's net
investment in unconsolidated
joint ventures $ -- $ -- $101,438
- ---------------------------------------------------- ------------- -------------
17
The following is a summary of the results of operations of the unconsolidated
joint ventures for the period in which the Operating Partnership had investment
interests during the three and nine month periods ended September 30, 2001 and
2000:
Three Months Ended September 30, 2001
----------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
Total revenues $1,211 $1,427 $3,345 $ 4 $ 912 $1,298 $17,060
Operating and other expenses (393) (781) (920) (11) (297) (632) (3,266)
Depreciation and amortization (290) (623) (387) (10) (243) (235) --
Interest expense -- (485) (712) -- (264) -- (5,420)
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
Net income $ 528 $ (462) $1,326 $(17) $ 108 $ 431 $ 8,374
===================================== ============= ============= ============= ============ ============ ============ ============
Operating Partnership's equity
in earnings of unconsolidated
joint ventures $ 225 $ 400 $ 506 $ 88 $ 54 $ 86 $ 525
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
Realty South Pier Total
- ---------------------------------------------------- ------------- -------------
Total revenues $ -- $ -- $25,257
Operating and other expenses -- -- (6,300)
Depreciation and amortization -- -- (1,788)
Interest expense -- -- (6,881)
- ---------------------------------------------------- ------------- -------------
Net income $ -- $ -- $10,288
==================================================== ============= =============
Operating Partnership's equity
in earnings of unconsolidated
joint ventures $ -- $ -- $ 1,884
- ---------------------------------------------------- ------------- -------------
Three Months Ended September 30, 2000
----------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
Total revenues $1,253 $2,631 $ 2,783 $275 $ 983 $1,436 $ 5,357
Operating and other expenses (391) (78) (890) (41) (280) (658) (876)
Depreciation and amortization (307) (747) (384) (27) (252) (211) (70)
Interest expense -- (979) (1,075) -- (407) -- (2,780)
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
Net income $ 555 $ 827 $ 434 $207 $ 44 $ 567 $ 1,631
===================================== ============= ============= ============= ============ ============ ============ ============
Operating Partnership's equity
in earnings of unconsolidated
joint ventures $ 239 $ 627 $ 286 $207 $ 22 $ 113 $ 700
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
Realty South Pier Total
- ---------------------------------------------------- ------------- -------------
Total revenues $ -- $ -- $14,718
Operating and other expenses -- -- (3,214)
Depreciation and amortization -- -- (1,998)
Interest expense -- -- (5,241)
- ---------------------------------------------------- ------------- -------------
Net income $ -- $ -- $ 4,265
==================================================== ============= =============
Operating Partnership's equity
in earnings of unconsolidated
joint ventures $ -- $ -- $ 2,194
- ---------------------------------------------------- ------------- -------------
18
Nine Months Ended September 30, 2001
----------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
Total revenues $ 3,700 $16,419 $ 9,151 $ 383 $2,871 $ 4,365 $ 45,077
Operating and other expenses (1,175) (1,729) (2,571) (53) (905) (2,049) (7,456)
Depreciation and amortization (883) (1,556) (1,164) (29) (726) (698) --
Interest expense -- (1,741) (2,504) -- (918) -- (13,310)
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
Net income $ 1,642 $11,393 $ 2,912 $ 301 $ 322 $ 1,618 $ 24,311
===================================== ============= ============= ============= ============ ============ ============ ============
Operating Partnership's equity
in earnings of unconsolidated
joint ventures $ 728 $ 3,864 $ 1,042 $(357) $ 208 $ 295 $ 1,550
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
Realty South Pier Total
- ---------------------------------------------------- ------------- -------------
Total revenues $ -- $ -- $ 81,966
Operating and other expenses -- -- (15,938)
Depreciation and amortization -- -- (5,056)
Interest expense -- -- (18,473)
- ---------------------------------------------------- ------------- -------------
Net income $ -- $ -- $ 42,499
==================================================== ============= =============
Operating Partnership's equity
in earnings of unconsolidated
joint ventures $ -- $ -- $ 7,330
- ---------------------------------------------------- ------------- -------------
Nine Months Ended September 30, 2000
----------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
Total revenues $ 3,721 $ 6,191 $ 8,064 $ 779 $ 2,930 $ 4,268 $16,507
Operating and other expenses (1,210) (1,087) (2,443) (123) (870) (1,929) (2,168)
Depreciation and amortization (918) (2,155) (1,146) (47) (734) (614) (70)
Interest expense -- (2,220) (2,989) -- (1,153) -- (4,481)
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
Net income $ 1,593 $ 729 $ 1,486 $ 609 $ 173 $ 1,725 $ 9,788
===================================== ============= ============= ============= ============ ============ ============ ============
Operating Partnership's equity
in earnings of unconsolidated
joint ventures $ 680 $ 729 $ 498 $ 552 $ 84 $ 358 $ 1,500
- ------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------
MC-SJP
Morris Harborside Combined
Realty South Pier Total
- ---------------------------------------------------- ------------- -------------
Total revenues $ -- $ -- $ 42,460
Operating and other expenses -- -- (9,830)
Depreciation and amortization -- -- (5,684)
Interest expense -- -- (10,843)
- ---------------------------------------------------- ------------- -------------
Net income $ -- $ -- $ 16,103
==================================================== ============= =============
Operating Partnership's equity
in earnings of unconsolidated
joint ventures $ -- $ -- $ 4,401
- ---------------------------------------------------- ------------- -------------
19
5. DEFERRED CHARGES AND OTHER ASSETS
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
====================================================================== ======================= =======================
6. RESTRICTED CASH
Restricted cash includes security deposits for the Operating Partnership'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:
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
============================================================================ ==================== ====================
7. RENTAL PROPERTY HELD FOR SALE
As of September 30, 2001, the Operating Partnership 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 Operating Partnership 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:
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
============================================================================= ==================== ===================
There can be no assurance if and when sales of the Operating Partnership's
rental properties held for sale will occur.
20
During the nine months ended September 30, 2001, the Operating Partnership
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:
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
============================================================================= =================== ===================
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 Operating Partnership, 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:
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%
================================================================== ================= ================== ==============
(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 Operating Partnership 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
21
September 30, 2001) plus 80 basis points. The Operating Partnership 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 Operating Partnership's
unsecured debt rating, the interest rate and facility fee will be adjusted on a
sliding scale. Subject to certain conditions, the Operating Partnership 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 Corporation to
continue to qualify as a REIT under the Code, the Corporation will not during
any four consecutive fiscal quarters make distributions with respect to common
stock or other 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 Operating Partnership 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 Operating Partnership 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.
22
10. MORTGAGES AND LOANS PAYABLE
The Operating Partnership has mortgages and loans payable which are comprised of
various loans collateralized by certain of the Operating Partnership'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 Operating Partnership's mortgages and loans payable as of
September 30, 2001 and December 31, 2000 is as follows:
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
============================== ============================= =============== ================= ============== ===========
(a) The Operating Partnership 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 Operating Partnership'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:
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%
======================================= =================== =============== =============== ==========================
(a) Revolving credit facility and other variable rate debt interest rates
calculated using the Operating Partnership's actual LIBOR contracts in
effect at September 30, 2001 (weighted average LIBOR of 3.52 percent).
23
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 Operating
Partnership for the nine months ended September 30, 2001 and 2000 was $11,994
and $7,482, respectively.
SUMMARY OF INDEBTEDNESS
As of September 30, 2001, the Operating Partnership'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 Operating Partnership'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. PARTNERS' CAPITAL
Partners' Capital in the accompanying consolidated financial statements relates
to common units held by the Corporation in the Operating Partnership, common
units held by the limited partners, preferred units ("Preferred Units") held
by the preferred unitholders of the Operating Partnership and warrants to
purchase common units ("Unit Warrants") in the Operating Partnership.
Net income allocated to the preferred unitholders and limited partners reflects
their pro-rata share of net income and distributions.
REPURCHASE OF GENERAL PARTNER UNITS
On September 13, 2000, the Board of Directors of the Corporation authorized the
Corporation to purchase up to $150,000 of the Corporation's outstanding common
stock ("Repurchase Program"). The Corporation 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.
Concurrent with these purchases, the Corporation sold to the Operating
Partnership 2,026,300 common units for approximately $55,514.
Under the Repurchase Program, the Corporation 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.
Concurrent with these purchases, the Corporation sold to the Operating
Partnership 915,300 common units for approximately $25,008.
STOCK OPTION PLANS
In September 2000, the Corporation 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 Corporation'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 Corporation established the
Mack-Cali Employee Stock Option Plan ("Employee Plan") and the Mack-Cali
Director Stock Option Plan ("Director Plan") under which a total of 5,380,188
shares (subject to adjustment) of the Corporation's common stock 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.
24
Information regarding the Corporation's stock option plans is summarized below:
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
- ------------------------------------------------------------------------------------- ---------------- ---------------
STOCK WARRANTS
The Corporation 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 Corporation 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
STOCK COMPENSATION
In connection with stock awards granted to officers and certain other employees
of the Corporation (collectively, "Restricted Stock Awards"), officers and
certain other employees are to receive up to a total of 198,279 shares of the
Corporation's common stock generally vesting over a five-year period. Certain
Restricted Stock Awards are contingent upon the Corporation 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 UNIT
Basic EPU excludes dilution and is computed by dividing net income available to
common unitholders by the weighted average number of units outstanding for the
period. Diluted EPU reflects the potential dilution that could occur if
securities or other contracts to issue common units were exercised or converted
into common units.
The following information presents the Operating Partnership's results for the
three and nine month periods ended September 30, 2001 and 2000:
Three Months Ended September 30,
2001 2000
----------------------------- -----------------------------
Basic EPU Diluted EPU Basic EPU Diluted EPU
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Net income available to common unitholders $27,412 $27,412 $22,745 $22,745
Add: Net income attributable to
Operating Partnership - preferred units -- -- -- --
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Adjusted net income $27,412 $27,412 $22,745 $22,745
========================================================== ============== ============== ============== ==============
Weighted average units 64,084 64,403 66,729 66,914
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Per Unit $ 0.43 $ 0.43 $ 0.34 $ 0.34
========================================================== ============== ============== ============== ==============
Nine Months Ended September 30,
2001 2000
----------------------------- -----------------------------
Basic EPU Diluted EPU Basic EPU Diluted EPU
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Net income available to common unitholders $112,287 $112,287 $171,794 $171,794
Add: Net income attributable to
Operating Partnership - preferred units -- -- -- 11,562
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Adjusted net income $112,287 $112,287 $171,794 $183,356
========================================================== ============== ============== ============== ==============
Weighted average units 64,440 64,691 66,595 73,276
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Per Unit $ 1.74 $ 1.74 $ 2.58 $ 2.50
========================================================== ============== ============== ============== ==============
26
The following schedule reconciles the shares used in the basic EPU calculation
to the shares used in the diluted EPU calculation:
Three Months Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
- --------------------------------------------------------- ------------- ------------- ------------- --------------
Basic EPU Units: 64,084 66,729 64,440 66,595
Add: Operating Partnership - preferred units
(after conversion to common units) -- -- -- 6,504
Stock options 319 185 251 177
- --------------------------------------------------------- ------------- ------------- ------------- --------------
Diluted EPU Units: 64,403 66,914 64,691 73,276
========================================================= ============= ============= ============= ==============
Through September 30, 2001, under the Repurchase Program, the Corporation
purchased for constructive retirement, a total of 4,810,800 shares of its
outstanding common stock for an aggregate cost of approximately $133,084.
12. EMPLOYEE BENEFIT PLAN
All employees of the Corporation 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 Corporation, at its discretion, may
match employee contributions and/or make discretionary contributions. The
Management has approved, for the year ended December 31, 2001, a 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 Operating
Partnership for both the nine month periods ended September 30, 2001 and 2000
was $300.
13. COMMITMENTS AND CONTINGENCIES
GROUND LEASE AGREEMENTS
Future minimum rental payments under the terms of all non-cancelable ground
leases under which the Operating Partnership is the lessee, as of September 30,
2001, are as follows:
Period Amount
- ------------------------------------------------------------ ---------------------------------------------------------
October through December 2001 $ 133
2002 531
2003 531
2004 534
2005 534
Thereafter 21,997
- ------------------------------------------------------------ ---------------------------------------------------------
Total $24,260
============================================================ =========================================================
Ground lease expense incurred during the nine months ended September 30, 2001
and 2000 amounted to $426 and $427, respectively.
27
OTHER
The Operating Partnership 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
Operating Partnership and the Property Partnership.
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. SEGMENT REPORTING
The Operating Partnership operates in one business segment - real estate. The
Operating Partnership provides leasing, management, acquisition, development,
construction and tenant-related services for its portfolio. The Operating
Partnership 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 Operating Partnership evaluates performance based upon net operating income
from the combined properties in the segment.
28
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 Operating Partnership's operating
segment are as follows:
Total
Total Corporate & Operating
Segment Other (e) Partnership
- -------------------------------------------------------------- ----------------- --------------- ------------------
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
- -------------------------------------------------------------- ----------------- --------------- ------------------
(a) Total contract revenues represent all revenues during the period (including
the Operating Partnership's share of net income from unconsolidated joint
ventures), excluding adjustments for straight-lining of rents and the
Operating Partnership'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 Operating Partnership totals.
(f) Excludes $1,891 of adjustments for straight-lining of rents and ($62) for
the Operating Partnership'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 Operating Partnership'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
Operating Partnership'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
Operating Partnership'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.
29
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 L.P. 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 Operating Partnership at June 30, 2000 (for the three-month period
comparisons), and which represent all in-service properties owned by the
Operating Partnership 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 Operating Partnership 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 Operating Partnership 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 Operating
Partnership during the same periods.
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000
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 interest 42,979 16,637 26,342 158.3
Realized gains and unrealized losses on disposition
of rental property, net (11,624) 10,036 (21,660) (215.8)
- ------------------------------------------------------- --------------- --------------- -------------- ---------------
Net income 31,355 26,673 4,682 17.6
Preferred unit distributions (3,943) (3,928) (15) 0.4
- ------------------------------------------------------- --------------- --------------- -------------- ---------------
Net income available to common unitholders $ 27,412 $ 22,745 $ 4,667 20.5%
======================================================= =============== =============== ============== ===============
30
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):
Total
Operating Partnership 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
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.
31
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 Operating Partnership 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 available to common unitholders increased by $4.7 million, from $22.7
million in 2000 to $27.4 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 interest 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 an
increase in preferred unit distributions of $0.1 million in 2001.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2000
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 interest 133,665 102,223 31,442 30.8
Realized gains and unrealized losses on disposition
of rental property, net (9,677) 86,205 (95,882) (111.2)
- ------------------------------------------------------- --------------- --------------- -------------- ---------------
Income before minority interest 123,988 188,428 (64,440) (34.2)
Minority interest in consolidated partially-owned
properties -- 5,072 (5,072) (100.0)
- ------------------------------------------------------- --------------- --------------- -------------- ---------------
Net income 123,988 183,356 (59,368) (32.4)
Preferred unit distributions (11,701) (11,562) (139) 1.2
- ------------------------------------------------------- --------------- --------------- -------------- ---------------
Net income available to common unitholders $112,287 $ 171,794 $ (59,507) (34.6)%
======================================================= =============== =============== ============== ===============
32
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):
Total
Operating Partnership 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
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.
33
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 available to common unitholders decreased by $59.5 million, from
$171.8 million in 2000 to $112.3 million in 2001. This decrease was a result of
a gain on sale of rental property of $86.2 million in 2000, unrealized losses on
disposition of rental property of $9.7 million in 2001 and an increase in
preferred unit distributions of $0.2 million. 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 interest in consolidated partially-owned properties of $5.1 million in
2001.
LIQUIDITY AND CAPITAL RESOURCES
STATEMENT OF CASH FLOWS
During the nine months ended September 30, 2001, the Operating Partnership
generated $188.1 million in cash flows from operating activities, and together
with $695.6 million in borrowings from the Operating Partnership'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 Operating Partnership has a focused strategy geared to attractive
opportunities in high-barrier-to-entry markets, primarily predicated on the
Operating Partnership's strong presence in the Northeast region and, to a lesser
extent, certain markets in California. The Operating Partnership 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 Operating
Partnership 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 Operating Partnership, 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 Operating
Partnership'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 Operating Partnership, 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 Operating Partnership to
construct an additional building at Harborside if vacant space is not available
in any of its existing Harborside properties. Should the Operating Partnership
be unable to or choose not to provide such expansion space, the Operating
Partnership could be liable to Schwab for its actual damages, in no event to
exceed $15.0 million. The Operating Partnership expects to finance its funding
requirements under both Plazas 5 and 10 projects primarily through drawing on
its revolving credit facility.
34
On August 6, 1998, the Board of Directors of the Corporation authorized a
Repurchase Program under which the Corporation was permitted to purchase up to
$100.0 million of the Corporation's outstanding common stock. Under the
Repurchase Program, the Corporation 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 Corporation is permitted to purchase up to an
additional $150.0 million of the Corporation's outstanding common stock above
the $52.6 million that had previously been purchased. From that date through
October 31, 2001, the Corporation 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 Corporation 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 Operating Partnership'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 Operating Partnership 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
Operating Partnership 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 Operating Partnership's unsecured debt rating, the interest and
facility fee rate will be changed on a sliding scale. Subject to certain
conditions, the Operating Partnership 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 Operating Partnership 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 Corporation to
continue to qualify as a REIT under the Code, the Corporation will not during
any four consecutive fiscal quarters make distributions with respect to common
stock or other 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 Operating Partnership has three investment grade credit ratings. Standard &
Poor's Rating Services ("S&P") and Fitch, Inc. ("Fitch") have each assigned
their BBB rating to existing and prospective senior unsecured debt of the
Operating Partnership. S&P and Fitch have also assigned their BBB- rating to
prospective preferred stock offerings of the Corporation. 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 Corporation.
35
On May 18, 2001, the Operating Partnership 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 Operating Partnership had 236 unencumbered
properties, totaling 21.0 million square feet, representing 77.3 percent of the
Operating Partnership's total portfolio on a square footage basis.
The Operating Partnership and Corporation have an effective shelf registration
statement with the SEC for an aggregate amount of $2.0 billion in equity
securities of the Operating Partnership. The Operating Partnership and
Corporation 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 Operating
Partnership will have access to the capital resources necessary to expand and
develop its business. To the extent that the Operating Partnership's cash flow
from operating activities is insufficient to finance its non-recurring capital
expenditures such as property acquisition and construction project costs and
other capital expenditures, the Operating Partnership expects to finance such
activities through borrowings under its revolving credit facilities and other
debt and equity financing.
The Operating Partnership 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 Operating Partnership 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 Operating Partnership's financing
requirements. The Operating Partnership expects to meet its financing
requirements through funds generated from operating activities, proceeds from
property sales, long-term or short-term borrowings (including draws on the
Operating Partnership's revolving credit facilities) and the issuance of
additional debt or equity securities.
As of September 30, 2001, the Operating Partnership classified 42 properties
with an aggregate net book value of $422.7 million as held for sale. The
Operating Partnership 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
Operating Partnership's short-term liquidity although there is no assurance when
and if any sales will occur or, if they occur, how much proceeds the Operating
Partnership will realize.
As of September 30, 2001, the Operating Partnership's total debt had a weighted
average term to maturity of approximately 5.1 years. The Operating Partnership
does not intend to reserve funds to retire the Operating Partnership's unsecured
corporate debt or its mortgages and loans payable upon maturity. Instead, the
Operating Partnership will seek to refinance such debt at maturity or retire
such debt through the issuance of additional equity or debt securities. The
Operating Partnership 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
Operating Partnership anticipates that its available cash and cash equivalents
and cash flows from operating activities, together with cash available from
borrowings and other sources, will be adequate to meet the Operating
Partnership's capital and liquidity needs both in the short and long-term.
However, if these sources of funds are insufficient or unavailable, the
Operating Partnership's ability to make the expected distributions discussed
below may be adversely affected.
To maintain its qualification as a REIT, the Corporation must make annual
distributions to its stockholders of at least 90 percent of its REIT taxable
income, determined without regard to the dividends paid deduction and by
excluding net capital gains. Moreover, the Corporation 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.
36
FUNDS FROM OPERATIONS
The Operating Partnership 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 Operating Partnership'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 Operating Partnership'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):
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 units
outstanding (3) 64,084 66,729 64,440 66,595
- ------------------------------------------------------- --------------- --------------- ---------------- ---------------
Diluted weighted average units
outstanding (3) 70,762 73,353 71,050 73,276
- ------------------------------------------------------- --------------- --------------- ---------------- ---------------
(1) Includes the Operating Partnership'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 Operating Partnership'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 the nine months ended September 30,
2001 and 2000, respectively.
(3) See calculations for the amounts presented in the following reconciliation.
37
The following schedule reconciles the Operating Partnership's basic weighted
average shares to the basic and diluted weighted average shares/units presented
above:
Three Months Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
- ------------------------------------------------------- --------------- --------------- -------------- ---------------
Basic weighted average 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 units: 70,762 73,353 71,050 73,276
======================================================= =============== =============== ============== ===============
INFLATION
The Operating Partnership's leases with the majority of its tenants provide for
recoveries and escalation charges based upon the tenant's proportionate share
of, and/or increases in, real estate taxes and certain operating costs, which
reduce the Operating Partnership's exposure to increases in operating costs
resulting from inflation.
38
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 Operating Partnership is
exposed is interest rate risk. Changes in the general level of interest rates
prevailing in the financial markets may affect the spread between the Operating
Partnership's yield on invested assets and cost of funds and, in turn, our
ability to make distributions or payments to our investors.
Approximately $1.6 billion of the Operating Partnership's long-term debt bears
interest at fixed rates and therefore the fair value of these instruments is
affected by changes in market interest rates. The following table presents
principal cash flows (in thousands) based upon maturity dates of the debt
obligations and the related weighted-average interest rates by expected maturity
dates for the fixed rate debt. The 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.
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
While the Operating Partnership has not experienced any significant credit
losses, in the event of a significant rising interest rate environment and/or
economic downturn, defaults could increase and result in losses to the Operating
Partnership which adversely affect its operating results and liquidity.
39
MACK-CALI REALTY, L.P.
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.
40
MACK-CALI REALTY, L.P.
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 Operating Partnership's
Form 10-Q dated June 30, 2001 and incorporated herein by
reference).
3.2 Amended and Restated Bylaws of Mack-Cali Realty Corporation
dated June 10, 1999 (filed as Exhibit 3.2 to the Corporation's
Form 8-K dated June 10, 1999 and incorporated herein by
reference).
3.3 Second Amended and Restated Agreement of Limited Partnership
of Mack-Cali Realty, L.P. dated December 11, 1997 (filed as
Exhibit 10.110 to the Corporation's Form 8-K dated December
11, 1997 and incorporated herein by reference).
3.4 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 Corporation'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 Operating Partnership'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 Operating Partnership's Form 8-K dated
March 7, 2000 and incorporated herein by reference).
4.2 Amendment No. 1 to the Amended and Restated Shareholder Rights
Agreement, dated as of June 27, 2000, by and among Mack-Cali
Realty Corporation and EquiServe Trust Company, N.A. (filed as
Exhibit 4.1 to the Operating Partnership's Form 8-K dated June
27, 2000).
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).
41
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 Operating
Partnership's Form 10-Q dated June 30, 1999 and incorporated
herein by reference).
10.2 Second Amended and Restated Employment Agreement dated as of
July 1, 1999 between Timothy M. Jones and Mack-Cali Realty
Corporation (filed as Exhibit 10.3 to the Operating
Partnership's Form 10-Q dated June 30, 1999 and incorporated
herein by reference).
10.3 Second Amended and Restated Employment Agreement dated as of
July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty
Corporation (filed as Exhibit 10.6 to the Operating
Partnership's Form 10-Q dated June 30, 1999 and incorporated
herein by reference).
10.4 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 Operating
Partnership'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 Operating Partnership'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 Operating Partnership's Form
10-Q dated June 30, 1999 and incorporated herein by
reference).
10.7 Restricted Share Award Agreement dated as of July 1, 1999
between Timothy M. Jones and Mack-Cali Realty Corporation
(filed as Exhibit 10.9 to the Operating Partnership's Form
10-Q dated June 30, 1999 and incorporated herein by
reference).
10.8 Restricted Share Award Agreement dated as of July 1, 1999
between Barry Lefkowitz and Mack-Cali Realty Corporation
(filed as Exhibit 10.12 to the Operating Partnership's Form
10-Q dated June 30, 1999 and incorporated herein by
reference).
42
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 Operating Partnership'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 Operating Partnership'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 Operating Partnership'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
Operating Partnership'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 Corporation'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 Cali Realty Corporation
and the Mack Group (filed as Exhibit 10.99 to the
Corporation's Form 8-K dated December 11, 1997 and
incorporated herein by reference).
10.15 Employee Stock Option Plan of Mack-Cali Realty Corporation
(filed as Exhibit 10.1 to the Corporation's Post-Effective
Amendment No. 1 to Form S-8, Registration No. 333-44443, and
incorporated herein by reference).
10.16 Director Stock Option Plan of Mack-Cali Realty Corporation
(filed as Exhibit 10.2 to the Corporation's Post-Effective
Amendment No. 1 to Form S-8, Registration No. 333-44443, and
incorporated herein by reference).
10.17 2000 Employee Stock Option Plan (filed as Exhibit 10.1 to the
Corporation's Registration Statement on Form S-8, Registration
No. 333-52478, and incorporated herein by reference).
10.18 2000 Director Stock Option Plan (filed as Exhibit 10.2 to the
Corporation's Registration Statement on Form S-8, Registration
No. 333-52478, and incorporated herein by reference).
43
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
The Operating Partnership did not file a Current Report on Form 8-K
during the third quarter of 2001.
- --------------
*filed herewith
44
MACK-CALI REALTY, L.P.
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, L.P.
---------------------------------
(Registrant)
By: Mack-Cali Realty Corporation,
its General Partner
Date: November 13, 2001 By: /S/ MITCHELL E. HERSH
--------------------------------
Mitchell E. Hersh
Chief Executive Officer
Date: November 13, 2001 By: /S/ BARRY LEFKOWITZ
--------------------------------
Barry Lefkowitz
Executive Vice President &
Chief Financial Officer
45