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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 March 31, 2002
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 /
/.
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MACK-CALI REALTY, L.P.
FORM 10-Q
INDEX
<Table>
<Caption>
PAGE
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 2002
and December 31, 2001.................................... 4
Consolidated Statements of Operations for the three months
ended March 31, 2002 and 2001............................ 5
Consolidated Statement of Changes in Partners' Capital
for the three months ended March 31, 2002................ 6
Consolidated Statements of Cash Flows for the three months
ended March 31, 2002 and 2001............................ 7
Notes to Consolidated Financial Statements.................. 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................ 24
Item 3. Quantitative and Qualitative Disclosures about Market Risk.. 33
PART II OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings........................................... 34
Item 2. Changes in Securities and Use of Proceeds................... 34
Item 3. Defaults Upon Senior Securities............................. 34
Item 4. Submission of Matters to a Vote of Security Holders......... 34
Item 5. Other Information........................................... 34
Item 6. Exhibits.................................................... 35
Signatures.................................................. 38
</Table>
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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 for the fiscal
year ended December 31, 2001.
The results of operations for the three months ended March 31, 2002 are
not necessarily indicative of the results to be expected for the entire
fiscal year or any other period.
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MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
================================================================================
<Table>
<Caption>
March 31,
2002 December 31,
ASSETS (UNAUDITED) 2001
- --------------------------------------------------------------------------------------------------------------------
Rental property
Land and leasehold interests $ 479,914 $ 479,358
Buildings and improvements 2,781,630 2,751,453
Tenant improvements 139,385 140,071
Furniture, fixtures and equipment 7,268 7,189
- --------------------------------------------------------------------------------------------------------------------
3,408,197 3,378,071
Less - accumulated depreciation and amortization (363,271) (350,705)
- --------------------------------------------------------------------------------------------------------------------
3,044,926 3,027,366
Rental property held for sale, net 376,141 384,626
- --------------------------------------------------------------------------------------------------------------------
Net investment in rental property 3,421,067 3,411,992
Cash and cash equivalents 2,136 12,835
Investments in unconsolidated joint ventures 164,093 146,540
Unbilled rents receivable, net 63,572 60,829
Deferred charges and other assets, net 104,951 101,499
Restricted cash 7,401 7,914
Accounts receivable, net of allowance for doubtful accounts
of $834 and $752 5,151 5,161
- --------------------------------------------------------------------------------------------------------------------
Total assets $ 3,768,371 $ 3,746,770
====================================================================================================================
LIABILITIES AND PARTNERS' CAPITAL
- --------------------------------------------------------------------------------------------------------------------
Senior unsecured notes $ 1,096,965 $ 1,096,843
Revolving credit facilities 81,000 59,500
Mortgages and loans payable 542,899 543,807
Distributions payable 44,346 44,069
Accounts payable and accrued expenses 61,189 64,620
Rents received in advance and security deposits 34,724 33,512
Accrued interest payable 9,392 25,587
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 1,870,515 1,867,938
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
PARTNERS' CAPITAL:
Preferred units, 220,340 and 220,340 units outstanding 226,005 226,005
General partner, 57,197,440 and 56,980,893 common units outstanding 1,450,936 1,432,588
Limited partners, 7,951,775 and 7,963,725 common units outstanding 212,391 211,715
Unit warrants, 2,000,000 and 2,000,000 outstanding 8,524 8,524
- --------------------------------------------------------------------------------------------------------------------
Total partners' capital 1,897,856 1,878,832
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and partners' capital $ 3,768,371 $ 3,746,770
====================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
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MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
================================================================================
<Table>
<Caption>
Three Months Ended
March 31,
REVENUES 2002 2001
- ----------------------------------------------------------------------------------------------------
Base rents $126,457 $125,376
Escalations and recoveries from tenants 13,270 14,762
Parking and other 3,064 2,346
Equity in (loss) earnings of unconsolidated joint ventures (1,305) 3,409
Interest income 338 613
- ----------------------------------------------------------------------------------------------------
Total revenues 141,824 146,506
- ----------------------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------------------
Real estate taxes 15,333 15,287
Utilities 10,130 11,956
Operating services 16,198 17,879
General and administrative 6,705 6,010
Depreciation and amortization 23,953 23,484
Interest expense 26,359 28,365
- ----------------------------------------------------------------------------------------------------
Total expenses 98,678 102,981
- ----------------------------------------------------------------------------------------------------
Income before realized gains and unrealized losses
on disposition of rental property 43,146 43,525
Realized gains and unrealized losses on disposition of
rental property, net 7,098 (20,563)
- ----------------------------------------------------------------------------------------------------
Net income 50,244 22,962
Preferred unit distributions (3,943) (3,879)
- ----------------------------------------------------------------------------------------------------
Net income available to common unitholders $ 46,301 $ 19,083
====================================================================================================
Basic earnings per unit: $ 0.72 $ 0.29
Diluted earnings per unit: $ 0.70 $ 0.29
Distributions declared per common unit $ 0.62 $ 0.61
- ----------------------------------------------------------------------------------------------------
Basic weighted average units outstanding 64,751 64,767
Diluted weighted average units outstanding 71,461 64,994
- ----------------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
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MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (IN THOUSANDS)
(UNAUDITED)
================================================================================
<Table>
<Caption>
General Limited
Preferred Partner Partner Preferred General Limited Unit
Units Units Units Unitholders Partner Partners Warrants Total
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2002 220 56,712 7,955 $226,005 $1,432,588 $211,715 $8,524 $1,878,832
Net income -- -- -- 3,943 40,615 5,686 -- 50,244
Distributions -- -- -- (3,943) (35,473) (4,930) -- (44,346)
Redemption of limited
partner units for
shares of common stock -- 3 (3) -- 80 (80) -- --
Contributions - proceeds
from stock
options exercised -- 488 -- -- 12,739 -- -- 12,739
Deferred compensation
plan for directors -- -- -- -- 41 -- -- 41
Amortization of stock
compensation -- -- -- -- 498 -- -- 498
Repurchase of general
partner units -- (5) -- -- (152) -- -- (152)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2002 220 57,198 7,952 $226,005 $1,450,936 $212,391 $8,524 $1,897,856
====================================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
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MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
================================================================================
<Table>
<Caption>
Three Months Ended
March 31,
CASH FLOWS FROM OPERATING ACTIVITIES 2002 2001
- -----------------------------------------------------------------------------------------------------
Net income $ 50,244 $ 22,962
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 23,953 23,484
Amortization of stock compensation 498 301
Amortization of deferred financing costs and debt discount 1,176 1,230
Equity in loss (earnings) of unconsolidated joint ventures 1,305 (3,409)
Realized (gains) and unrealized losses on disposition
of rental property, net (7,098) 20,563
Changes in operating assets and liabilities:
Increase in unbilled rents receivable, net (2,743) (3,775)
Increase in deferred charges and other assets, net (8,742) (3,582)
Decrease (increase) in accounts receivable, net 10 (977)
Decrease in accounts payable and accrued expenses (3,431) (1,216)
Increase in rents received in advance and security deposits 1,212 4,392
Decrease in accrued interest payable (16,196) (7,359)
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 40,188 $ 52,614
=====================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES
- -----------------------------------------------------------------------------------------------------
Additions to rental property $ (39,347) $ (49,382)
Repayment of mortgage note receivable -- 5,983
Investments in unconsolidated joint ventures (21,083) (11,244)
Distributions from unconsolidated joint ventures 2,239 17,146
Proceeds from sales of rental property 17,559 --
Decrease (increase) in restricted cash 513 (964)
- -----------------------------------------------------------------------------------------------------
Net cash used in investing activities $ (40,119) $ (38,461)
=====================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES
- -----------------------------------------------------------------------------------------------------
Proceeds from senior unsecured notes $ -- $ 298,269
Proceeds from revolving credit facilities 113,400 65,497
Repayments of revolving credit facilities (91,900) (329,337)
Repayments of mortgages and loans payable (786) (866)
Repurchase of general partner units (152) (3,605)
Payment of financing costs -- (2,582)
Proceeds from stock options exercised 12,739 508
Payment of distributions (44,069) (43,496)
- -----------------------------------------------------------------------------------------------------
Net cash used in financing activities $ (10,768) $ (15,612)
=====================================================================================================
Net decrease in cash and cash equivalents $ (10,699) $ (1,459)
Cash and cash equivalents, beginning of period 12,835 13,179
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 2,136 $ 11,720
=====================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
7
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MACK-CALI REALTY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER
SHARE/UNIT AMOUNTS)
================================================================================
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Mack-Cali Realty, 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 87.8 percent and 87.7
percent common unit interest in the Operating Partnership as of March 31, 2002
and December 31, 2001, respectively.
The General Partner's business is the ownership of interests in and operation of
the Operating Partnership, and all of the General Partner's expenses are
incurred for the benefit of the Operating Partnership. The General Partner is
reimbursed by the Operating Partnership for all expenses it incurs relating to
the ownership and operation of the Operating Partnership. 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 March 31, 2002, the Operating Partnership owned or had interests in 267
properties plus developable land (collectively, the "Properties"). The
Properties aggregate approximately 28.6 million square feet, and are comprised
of 161 office buildings and 95 office/flex buildings totaling approximately 28.2
million square feet (which includes eight office buildings and one office/flex
building aggregating 1.7 million square feet, owned by unconsolidated joint
ventures in which the Operating Partnership has investment interests), six
industrial/warehouse buildings totaling approximately 387,400 square feet, two
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 and its controlled subsidiaries, including the Property
Partnerships. 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
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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 $245,912 and
$210,463 as of March 31, 2002 and December 31, 2001,
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 the Operating
Partnership's 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 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 6.
Effective January 1, 2002, the Operating Partnership adopted
the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supercedes SFAS No.
121. SFAS No. 144 requires that long-lived assets that are
to be disposed of by sale be measured at the lower of book
value or fair value less cost to sell. SFAS No. 144 retains
the requirements of SFAS No. 121 regarding impairment loss
recognition and measurement. In addition, it requires that
one accounting model be used for long-lived assets to be
disposed of by sale and broadens the presentation of
discontinued operations to include more disposal
transactions. As the statement requires implementation on a
prospective basis, properties which were identified as held
for sale by the Operating Partnership prior to January 1,
2002 are presented in the accompanying financial statements
in a manner consistent with the prior year's presentation.
As there were no additional properties identified as held
for sale in the first quarter of 2002, the Operating
Partnership did not report any discontinued operations for
the current period.
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
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Unconsolidated Joint Ventures, and subsequently adjusted for
equity in earnings and cash contributions and distributions.
See Note 4.
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 $1,176 and $1,121 for the three
months ended March 31, 2002 and 2001, 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 $990 and
$740 for the three months ended March 31, 2002 and 2001,
respectively.
RESTRICTED CASH Restricted cash includes tenant security deposits 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.
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.
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 12.
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.
EARNINGS
PER UNIT The Operating Partnership presents both basic and diluted
earnings per unit ("EPU"). Basic EPU excludes dilution and
is computed by dividing net income available to common
unitholders by the weighted average number of units
outstanding for the period. Diluted EPU reflects the
potential dilution that could occur if securities or other
contracts to issue common units were exercised or converted
into common units, where such exercise or conversion would
result in a lower EPU amount.
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DISTRIBUTIONS
PAYABLE The distributions payable at March 31, 2002 represents
distributions payable to common unitholders of record as of
April 3, 2002 (65,166,265 common units), and preferred
distributions payable to preferred unitholders (220,340
preferred units) for the first quarter 2002. The first
quarter 2002 common unit distributions of $0.62 per common
unit, as well as the first quarter preferred unit
distribution of $17.8932 per preferred unit, were approved
by the Board of Directors of the General Partner on March
15, 2002 and paid on April 22, 2002.
The distributions payable at December 31, 2001 represents
distributions payable to common unitholders of record as of
January 4, 2002 (64,720,615 common units), and preferred
distributions payable to preferred unitholders (220,340
preferred units) for the fourth quarter 2001. The fourth
quarter 2001 common unit distributions of $0.62 common unit,
as well as the fourth quarter preferred unit distribution of
$17.8932 per preferred unit, were approved by the Board of
Directors of the General Partner on December 18, 2001 and
paid on January 22, 2002.
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 10.
RECLASSIFICATIONS Certain reclassifications have been made to prior period
amounts in order to conform with current period
presentation.
3. PROPERTY SALES
The Operating Partnership sold the following multi-family residential property
during the three months ended March 31, 2002:
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------
Sale # of Net Sales Net Book Realized
Date Property Name Location Bldgs. Size Proceeds Value Gain
- ----------------------------------------------------------------------------------------------------------------------
1/30/02 25 Martine Avenue White Plains, Westchester 1 124 units $17,559 $10,461 $7,098
County, NY
- -----------------------------------------------------------------------------------------------------------------------
TOTAL PROPERTY SALES: 1 124 units $17,559 $10,461 $7,098
=======================================================================================================================
</Table>
4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The debt of the Operating Partnership's unconsolidated joint ventures
aggregating $466,320 are non-recourse to the Operating Partnership, except for
customary exceptions pertaining to such matters as intentional misuse of funds,
environmental conditions and material misrepresentations and except as otherwise
indicated below.
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 owned and operated 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. On November 5, 2001,
the Operating Partnership acquired the remaining interest in the property for
approximately $15,073. The property has been consolidated in the Operating
Partnership's
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financial statements subsequent to the acquisition of the remaining interest.
The Operating Partnership performed management and leasing services for the
property when it was owned by the joint venture and recognized $37 in fees for
such services in the three months ended March 31, 2001.
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,
located in the city of Daly City, San Mateo County, California between HPMC
Development Partners II, L.P. and a third-party entity. 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. The Operating Partnership performs management services for this
property owned by the joint venture and recognized $50 and none in fees for
such services in the three months ended March 31, 2002 and 2001,
respectively.
STADIUM GATEWAY
Stadium Gateway is a development joint venture project located in Anaheim,
Orange County, California between HPMC Development Partners II, L.P. and a
third-party entity. The venture has constructed a six-story, 261,554
square-foot office building, which was placed in service in January 2002.
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 the Operating Partnership's 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 $63 and $54 in fees for such services in the three months ended March
31, 2002 and 2001, respectively.
12
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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
profit, as defined in the agreement. The joint venture acquired land on which it
constructed a parking facility, a portion of which is currently licensed to a
parking operator. 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 on certain of the land owned by the venture. Plaza 10 is 100
percent pre-leased to Charles Schwab & Co. Inc. ("Schwab") 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 $15,000. The
project under construction, which is anticipated to be completed in late 2002,
is currently projected to cost the Operating Partnership approximately $145,000,
of which $90,098 has been incurred by the Operating Partnership through March
31, 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 property's principal tenant, Superior Bank has been declared
insolvent and taken over by the Federal Deposit Insurance Corporation (FDIC).
The tenant has continued to meet its rental payment obligation through April
2002 and has not given the Operating Partnership an indication regarding its
intent for the leased space. As a result of uncertainty regarding the tenant's
ability to meet its obligations through the remainder of the term of its lease,
the joint venture wrote off unbilled rents receivable of $1,573 and deferred
lease costs of $705, which is included in the accompanying financial information
presented for the three months ended March 31, 2002. The Operating Partnership
performs management, leasing and other services for the property owned by the
joint venture and recognized $25 and $18 in fees for such services in the three
months ended March 31, 2002 and 2001, 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. The Operating Partnership performed
management and leasing services for the properties owned by the joint venture
and recognized $45 and $47 in fees for such services in the three months ended
March 31, 2002 and 2001, respectively. Under certain circumstances, Prudential
has the right to convert its interest in the venture into common stock of the
Operating Partnership, based on the underlying fair value of Prudential's
interest in the venture at the time of conversion.
ARCAP INVESTORS, L.L.C.
In 1999, the Operating Partnership invested $20,000 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").
William L. Mack, Chairman of the Board of Directors of the Corporation,
is a principal of an entity that owns approximately 28 percent of the venture
and has nominated a member of its board of directors. At March 31, 2002, the
venture held approximately $576,536 of assets, comprised principally of
subordinated CMBS recorded at market value.
13
<Page>
MC-SJP MORRIS V REALTY, LLC AND MC-SJP MORRIS VI REALTY, LLC The Operating
Partnership has an agreement with 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 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. 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 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, that 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.
SOUTH PIER AT HARBORSIDE - HOTEL DEVELOPMENT
On November 17, 1999, the Operating Partnership entered into an agreement with
Hyatt Corporation ("Hyatt") 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, including
the Operating Partnership, has severally guaranteed repayment of approximately
$11,148. Additionally, the Operating Partnership has posted an $8,000 letter of
credit in support of another loan to the joint venture, $4,000 of which is
indemnified by Hyatt. In addition, the Operating Partnership and Hyatt have
guaranteed completion of the hotel project to the joint venture's construction
lender. If the joint venture fails to complete the hotel project as required
under the construction loan documents and the construction loan proceeds
remaining to be advanced together with the capital contributed by the partners
to such date are insufficient to complete the hotel project, the Operating
Partnership and/or Hyatt may be required to provide additional funds sufficient
to complete the hotel project.
14
<Page>
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 March
31, 2002 and December 31, 2001:
<Table>
<Caption>
March 31, 2002
--------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ -- $19,234 $ 9,245 $97,130 $17,699 $37,197 $ --
Other assets 59 19,493 2,710 65 2,709 1,185 576,536
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 59 $38,727 $ 11,955 $97,195 $20,408 $38,382 $ 576,536
==================================================================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $13,976 $ 50,000 $ -- $15,801 $ -- $ 323,966
Other liabilities -- 493 1,249 6,635 99 349 2,303
Partners'/members' capital 59 24,258 (39,294) 90,560 4,508 38,033 250,267
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 59 $38,727 $ 11,955 $97,195 $20,408 $38,382 $ 576,536
==================================================================================================================================
Operating Partnership's net
investment in unconsolidated
joint ventures $ -- $25,299 $ 2,726 $95,358 $ 1,826 $ 7,941 $ 15,129
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
March 31, 2002
----------------------------------------------
MC-SJP
Morris Harborside Combined
Realty South Pier Total
- ------------------------------------------------------------------------------------
ASSETS:
Rental property, net $16,539 $76,737 $273,781
Other assets 165 100 603,022
- ------------------------------------------------------------------------------------
Total assets $16,704 $76,837 $876,803
====================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $17,433 $45,144 $466,320
Other liabilities 103 5,391 16,622
Partners'/members' capital (832) 26,302 393,861
- ------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $16,704 $76,837 $876,803
====================================================================================
Operating Partnership's net
investment in unconsolidated
joint ventures $ 186 $15,628 $164,093
- ------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
December 31, 2001
--------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ -- $19,556 $ 9,598 $81,070 $18,119 $37,359 $ --
Other assets 732 20,267 2,163 120 4,822 1,132 595,937
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 732 $39,823 $ 11,761 $81,190 $22,941 $38,491 $ 595,937
==================================================================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $13,976 $ 50,000 $ -- $15,974 $ -- $ 324,819
Other liabilities -- 897 1,196 9,667 83 949 3,736
Partners'/members' capital 732 24,950 (39,435) 71,523 6,884 37,542 267,382
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 732 $39,823 $ 11,761 $81,190 $22,941 $38,491 $ 595,937
==================================================================================================================================
Operating Partnership's net
investment in unconsolidated
joint ventures $ 350 $24,545 $ 2,795 $74,651 $ 3,014 $ 7,809 $ 17,897
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
December 31, 2001
----------------------------------------------
MC-SJP
Morris Harborside Combined
Realty South Pier Total
- ------------------------------------------------------------------------------------
ASSETS:
Rental property, net $16,607 $63,236 $245,545
Other assets 107 100 625,380
- ------------------------------------------------------------------------------------
Total assets $16,714 $63,336 $870,925
====================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $16,795 $34,107 $455,671
Other liabilities 103 2,927 19,558
Partners'/members' capital (184) 26,302 395,696
- ------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $16,714 $63,336 $870,925
====================================================================================
Operating Partnership's net
investment in unconsolidated
joint ventures $ 183 $15,296 $146,540
- ------------------------------------------------------------------------------------
</Table>
15
<Page>
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 months ended March 31, 2002 and 2001:
<Table>
<Caption>
Three Months Ended March 31, 2002
--------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenues $ 1 $ 1,308 $ 3,405 $ 3 $ 973 $ 1,031 $ 21,350
Operating and other expenses 6 (392) (853) (9) (1,856) (448) (24,253)
Depreciation and amortization - (385) (406) (10) (1,303) (162) --
Interest expense - (151) (505) -- (190) -- (8,244)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 7 $ 380 $ 1,641 $ (16) $ (2,376) $ 421 $ (11,147)
==================================================================================================================================
Operating Partnership's equity in
(loss) earnings of
unconsolidated joint ventures $ (13) $ 1,315 $ 681 $ (16) $ (1,188) $ 132 $ (2,216)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
Three Months Ended March 31, 2002
---------------------------------------------
MC-SJP
Morris Harborside Combined
Realty South Pier Total
- -----------------------------------------------------------------------------------
Total revenues $ -- $ -- $ 28,071
Operating and other expenses (315) -- (28,120)
Depreciation and amortization -- -- (2,266)
Interest expense (638) -- (9,728)
- -----------------------------------------------------------------------------------
Net income $ (953) $ -- $(12,043)
===================================================================================
Operating Partnership's equity in
(loss) earnings of
unconsolidated joint ventures $ -- $ -- $ (1,305)
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
Three Months Ended March 31, 2001
---------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenues $ 1,253 $ 5,512 $ 2,721 $ 220 $ 969 $ 1,574 $ 19,354
Operating and other expenses (413) (729) (805) (33) (343) (717) (1,841)
Depreciation and amortization (293) (1,823) (389) (15) (246) (231) --
Interest expense -- (1,376) (985) -- (356) -- (3,014)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 547 $ 1,584 $ 542 $ 172 $ 24 $ 626 $ 14,499
===================================================================================================================================
Operating Partnership's equity in
(loss) earnings of
unconsolidated joint ventures $ 258 $ 2,152 $ 171 $ 172 $ 59 $ 97 $ 500
- -----------------------------------------------------------------------------------------------------------------------------------
<Caption>
Three Months Ended March 31, 2001
--------------------------------------------
MC-SJP
Morris Harborside Combined
Realty South Pier Total
- ----------------------------------------------------------------------------------
Total revenues $ -- $ -- $ 31,603
Operating and other expenses -- -- (4,881)
Depreciation and amortization -- -- (2,997)
Interest expense -- -- (5,731)
- ----------------------------------------------------------------------------------
Net income $ -- $ -- $ 17,994
==================================================================================
Operating Partnership's equity in
(loss) earnings of
unconsolidated joint ventures $ -- $ -- $ 3,409
- ----------------------------------------------------------------------------------
</Table>
16
<Page>
5. DEFERRED CHARGES AND OTHER ASSETS
<Table>
<Caption>
March 31, December 31,
2002 2001
- --------------------------------------------------------------------------------------------
Deferred leasing costs $ 97,923 $ 93,677
Deferred financing costs 26,569 26,569
- --------------------------------------------------------------------------------------------
124,492 120,246
Accumulated amortization (41,121) (36,746)
- --------------------------------------------------------------------------------------------
Deferred charges, net 83,371 83,500
Prepaid expenses and other assets 21,580 17,999
- --------------------------------------------------------------------------------------------
Total deferred charges and other assets, net $104,951 $101,499
============================================================================================
</Table>
6. RENTAL PROPERTY HELD FOR SALE
PROPERTIES HELD FOR SALE
As of March 31, 2002, the Operating Partnership has identified 37 office
properties, aggregating approximately 4.3 million square feet and a land parcel
as held for sale. These properties are located in Texas, Colorado, Arizona and
Florida. Such properties carried an aggregate book value of $376,200, net of
accumulated depreciation of $27,018 and a valuation allowance of $40,464, at
March 31, 2002.
As of December 31, 2001, the Operating Partnership had identified 37 office
properties, aggregating approximately 4.3 million square feet, a multi-family
residential property and a land parcel as held for sale. These properties are
located in Texas, Colorado, Arizona, Florida and New York. Such properties
carried an aggregate book value of $384,626, net of accumulated depreciation of
$28,379 and a valuation allowance of $40,464 at December 31, 2001.
On January 30, 2002, the Operating Partnership sold 25 Martine Avenue, a
124-unit multi-family, residential property located in White Plains, Westchester
County, New York, for net sales proceeds of approximately $17,559, which
resulted in a gain of approximately $7,098.
The following is a summary of the condensed results of operations of the rental
properties held for sale at March 31, 2002 for the three months ended March 31,
2002 and 2001:
<Table>
<Caption>
Three Months Ended
March 31,
2002 2001
- -----------------------------------------------------------------------------
Total revenues $ 17,308 $ 17,974
Operating and other expenses (7,211) (7,194)
Depreciation and amortization (13) (2,293)
- -----------------------------------------------------------------------------
Net income $ 10,084 $ 8,487
=============================================================================
</Table>
While considered probable, there can be no assurance if and when sales of the
Operating Partnership's rental properties held for sale will occur.
During the three months ended March 31, 2001, the Operating Partnership
determined that the carrying amounts of certain properties identified as held
for sale were not expected to be recovered from estimated net sale proceeds from
these property sales and, accordingly, recognized a valuation allowance of
$20,563 in that period.
17
<Page>
REALIZED GAINS AND UNREALIZED LOSSES, NET
The following table summarizes realized gains and unrealized losses on
disposition of rental property, net, for the three months ended March 31, 2002
and 2001:
<Table>
<Caption>
Three Months Ended
March 31,
2002 2001
- ------------------------------------------------------------------------------------------
Realized gains on sale of rental property, net $7,098 $ --
Valuation allowance on rental property held for sale -- (20,563)
- ------------------------------------------------------------------------------------------
Realized gains and unrealized losses, net $7,098 $(20,563)
==========================================================================================
</Table>
7. SENIOR UNSECURED NOTES
A summary of the terms of the Senior Unsecured Notes outstanding as of March 31,
2002 and December 31, 2001 is as follows:
<Table>
<Caption>
March 31, December 31, Effective
2002 2001 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 299,844 299,824 7.27%
7.250% Senior Unsecured Notes, due March 15, 2009 298,365 298,307 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 298,473 298,429 7.93%
- -----------------------------------------------------------------------------------------------------
Total Senior Unsecured Notes $1,096,965 $1,096,843 7.51%
=====================================================================================================
</Table>
(1) Includes the cost of terminated treasury lock agreements (if any), offering
and other transaction costs and the discount on the notes, as applicable.
8. REVOLVING CREDIT FACILITY
The Operating Partnership has 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") (1.88 percent at March
31, 2002) 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. Subject to certain conditions, the Operating Partnership has the
ability through June 22, 2002 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.
9. 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.
18
<Page>
A summary of the Operating Partnership's mortgages and loans payable as of March
31, 2002 and December 31, 2001 is as follows:
<Table>
<Caption>
EFFECTIVE PRINCIPAL BALANCE AT
INTEREST MARCH 31, DECEMBER 31,
PROPERTY NAME LENDER RATE 2002 2001 MATURITY
- ------------------------------------------------------------------------------------------------------------------
Mack-Cali Willowbrook CIGNA 8.67% $ 8,371 $ 8,598 10/01/03
400 Chestnut Ridge Prudential Insurance Co. 9.44% 12,396 12,646 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% 25,037 25,218 10/01/05
500 West Putnam Avenue New York Life Ins. Co. 6.52% 9,064 9,273 10/10/05
Harborside - Plaza 1 U.S. West Pension Trust 5.61% 58,922 57,978 01/01/06
Harborside - Plazas 2 and 3 Northwestern/Principal 7.36% 161,078 162,022 01/01/06
Mack-Cali Airport Allstate Life Insurance Co. 7.05% 10,353 10,394 04/01/07
Kemble Plaza I Mitsubishi Tr & Bk Co. LIBOR+0.65% 32,178 32,178 01/31/09
- ------------------------------------------------------------------------------------------------------------------
Total Property Mortgages $542,899 $543,807
==================================================================================================================
</Table>
(a) The Operating Partnership has the option to convert the mortgage loan,
which is secured by 12 properties, to unsecured debt, subject to, amongst
other things, the Operating Partnership having investment grade ratings
from two rating agencies (at least one of which must be from S&P or
Moody's) at the time of conversion.
CASH PAID FOR INTEREST AND INTEREST CAPITALIZED
Cash paid for interest for the three months ended March 31, 2002 and 2001 was
$46,773 and $37,917, respectively. Interest capitalized by the Operating
Partnership for the three months ended March 31, 2002 and 2001 was $5,454 and
$3,350, respectively.
SUMMARY OF INDEBTEDNESS
As of March 31, 2002, the Operating Partnership's total indebtedness of
$1,720,864 (weighted average interest rate of 7.07 percent) was comprised of
$113,178 of revolving credit facility borrowings and other variable rate
mortgage debt (weighted average rate of 2.71 percent) and fixed rate debt of
$1,607,686 (weighted average rate of 7.38 percent).
As of December 31, 2001, the Operating Partnership's total indebtedness of
$1,700,150 (weighted average interest rate of 7.17 percent) was comprised of
$91,678 of revolving credit facility borrowings and other variable rate mortgage
debt (weighted average rate of 3.38 percent) and fixed rate debt of $1,608,472
(weighted average rate of 7.38 percent).
10. 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-rate share of net income and distributions.
19
<Page>
REPURCHASE OF GENERAL PARTNER UNITS
On August 6, 1998, the Board of Directors of the Corporation authorized a share
repurchase program ("Repurchase Program") under which the Corporation was
permitted to purchase up to $100,000 of the Corporation's outstanding common
stock. Purchases could be made from time to time in open market transactions at
prevailing prices or through privately negotiated transactions. 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 $52,562 from August 1998 through December 1999. Concurrent with
these purchases, the Corporation sold to the Operating Partnership 1,869,200
common units for approximately $52,562.
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 $150,000 of the Corporation's outstanding common stock above the
$52,562 that had previously been purchased. The Corporation purchased for
constructive retirement 3,300,800 shares of its outstanding common stock for an
aggregate cost of approximately $91,077 from September 13, 2000 through March
31, 2002. Concurrent with these purchases, the Corporation sold to the Operating
Partnership 3,300,800 common units for approximately $91,077.
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 have become 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. As of March 31, 2002, the stock options outstanding
had a weighted average remaining contractual life of approximately 7.1 years.
Information regarding the Corporation's stock option plans is summarized below:
<Table>
<Caption>
Weighted
Shares Average
Under Exercise
Options Price
- ---------------------------------------------------------------------------------------
Outstanding at January 1, 2002 4,511,886 $ 31.28
Exercised (488,540) $ 26.09
Lapsed or canceled (35,880) $ 29.04
- ---------------------------------------------------------------------------------------
Outstanding at March 31, 2002 3,987,466 $ 31.94
=======================================================================================
Options exercisable at March 31, 2002 2,173,458 $ 35.13
Available for grant at March 31, 2002 1,510,143
- ---------------------------------------------------------------------------------------
</Table>
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 issuance). 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 issuance). Such warrants are all currently
exercisable and expire on December 12, 2007.
20
<Page>
As of March 31, 2002, there were a total of 749,976 Stock Warrants outstanding
and exercisable. For the three months ended March 31, 2002, no Stock Warrants
were canceled or exercised.
STOCK COMPENSATION
The Corporation has granted stock awards to officers and certain other employees
of the Corporation (collectively, "Restricted Stock Awards"), which allows the
employees to each receive a certain amount of shares of the Corporation's common
stock generally over a five-year vesting period. Certain Restricted Stock Awards
are contingent upon the Corporation meeting certain performance and/or stock
price appreciation objectives. All Restricted Stock Awards provided to the
officers and certain other employees were granted under the 2000 Employee Plan
and Employee Plan.
Information regarding the Restricted Stock Awards is summarized below:
<Table>
<Caption>
Shares
- --------------------------------------------------------------------------------
Outstanding at January 1, 2002 198,279
Granted --
Vested (44,545)
Canceled --
- --------------------------------------------------------------------------------
Outstanding at March 31, 2002 153,734
================================================================================
</Table>
DEFERRED STOCK COMPENSATION PLAN FOR DIRECTORS
The Deferred Compensation Plan for Directors, which commenced January 1, 1999,
allows non-employee directors of the Corporation to elect to defer up to 100
percent of their annual retainer fee into deferred stock units. The deferred
stock units are convertible into an equal number of shares of common stock upon
the directors' termination of service from the Board of Directors or a change in
control of the Corporation, as defined in the plan. Deferred stock units are
credited to each director quarterly using the closing price of the Corporation's
common stock on the applicable dividend record date for the respective quarter.
Each participating director's account is also credited for an equivalent amount
of deferred stock units based on the dividend rate for each quarter.
During the three months ended March 31, 2002 and 2001, 1,211 and 1,441 deferred
stock units were earned, respectively.
EARNINGS PER UNIT
Basic EPU excludes dilution and is computed by dividing net income available to
common unitholders by the weighted average number of units outstanding for the
period. Diluted EPU reflects the potential dilution that could occur if
securities or other contracts to issue common units were exercised or converted
into common units.
The following information presents the Operating Partnership's EPU results for
the three months ended March 31, 2002 and 2001:
<Table>
<Caption>
Three Months Ended March 31,
2002 2001
---------------------------------------------------------------
Basic EPU Diluted EPU Basic EPU Diluted EPU
- --------------------------------------------------------------------------------------------------------------------
Net income available to common unitholders $46,301 $46,301 $19,083 $19,083
Add: Net income attributable to
Operating Partnership - Preferred units -- 3,943 -- --
- --------------------------------------------------------------------------------------------------------------------
Adjusted net income $46,301 $50,244 $19,083 $19,083
====================================================================================================================
Weighted average units 64,751 71,461 64,767 64,994
- --------------------------------------------------------------------------------------------------------------------
Per Unit $ 0.72 $ 0.70 $ 0.29 $ 0.29
====================================================================================================================
</Table>
21
<Page>
The following schedule reconciles the shares used in the basic EPU calculation
to the shares used in the diluted EPU calculation:
<Table>
<Caption>
Three Months Ended March 31,
2002 2001
- -------------------------------------------------------------------------------------------------
Basic EPU Units 64,751 64,767
Add: Operating Partnership - preferred units
(after conversion to common units) 6,359 --
Stock options 351 227
- -------------------------------------------------------------------------------------------------
Diluted EPU Units 71,461 64,994
=================================================================================================
</Table>
Preferred Units outstanding in 2001 were not included in the 2001 computation of
diluted EPU as such units were anti-dilutive during the period.
Through March 31, 2002, under the Repurchase Program, the Corporation purchased
for constructive retirement, a total of 5,170,000 shares of its outstanding
common stock for an aggregate cost of approximately $143,639. Concurrent with
these purchases, the Corporation sold an equal number of common units to the
Operating Partnership.
11. COMMITMENTS AND CONTINGENCIES
The Operating Partnership is a defendant in litigation arising in the normal
course of business activities. Management does not believe that the ultimate
resolution of these matters will have a materially adverse effect upon the
Operating Partnership.
12. TENANT LEASES
The Properties are leased to tenants under operating leases with various
expiration dates through 2017. 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.
13. 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.
22
<Page>
Selected results of operations for the three months ended March 31, 2002 and
2001 and selected asset information as of March 31, 2002 and December 31, 2001
regarding the Operating Partnership's operating segment are as follows:
<Table>
<Caption>
Total
Corporate Operating
Total Segment & Other (e) Partnership
- -----------------------------------------------------------------------------------------------------
TOTAL CONTRACT REVENUES (a)
Three months ended:
March 31, 2002 $ 142,011 $ (1,899) $ 140,112 (f)
March 31, 2001 141,805 896 142,701 (g)
TOTAL OPERATING AND INTEREST EXPENSES (b):
Three months ended:
March 31, 2002 $ 41,486 $ 33,239 $ 74,725 (h)
March 31, 2001 45,276 34,221 79,497 (i)
NET OPERATING INCOME (c):
Three months ended:
March 31, 2002 $ 100,525 $ (35,138) $ 65,387 (f)(h)
March 31, 2001 96,529 (33,325) 63,204 (g)(i)
TOTAL ASSETS:
March 31, 2002 $3,753,487 $ 14,884 $ 3,768,371
December 31, 2001 3,710,411 36,359 3,746,770
TOTAL LONG-LIVED ASSETS (d):
March 31, 2002 $3,628,979 $ 19,753 $ 3,648,732
December 31, 2001 3,595,012 24,348 3,619,360
=====================================================================================================
</Table>
(a) Total contract revenues represent all revenues during the period (including
the Operating Partnership's share of net income (loss) 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 & 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 &
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 $2,760 of adjustments for straight-lining of rents and ($1,047)
for the Operating Partnership's share of straight-line rent adjustments
from unconsolidated joint ventures.
(g) Excludes $3,770 of adjustments for straight-lining of rents and $35 for the
Operating Partnership's share of straight-line rent adjustments from
unconsolidated joint ventures.
(h) Excludes $23,953 of depreciation and amortization.
(i) Excludes $23,484 of depreciation and amortization.
23
<Page>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements of Mack-Cali Realty, L.P. and the notes thereto. Certain
defined terms used herein have the meaning ascribed to them in the Financial
Statements.
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. 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. Plaza 5 is approximately 58 percent leased as
of May 6, 2002. The project is currently projected to cost approximately $260
million, of which $141.9 million has been incurred by the Operating Partnership
through March 31, 2002, 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 Operating Partnership holds a 50
percent interest in the joint venture. Among other things, the joint ventures
agreement provides for a preferred return on the Operating Partnership's
invested capital in the venture, in addition to the Operating Partnership's
proportionate share of the venture's profit, as defined in the agreement. The
project is currently projected to cost the Operating Partnership approximately
$145 million, of which $90.1 million has been incurred by the Operating
Partnership through March 31, 2002. The Project, which is 100 percent leased to
Charles Schwab & Co. Inc. ("Schwab") for a 15-year term, is anticipated to be
completed in late 2002. The lease agreement obligates the Operating Partnership,
among other things, to deliver space to the tenant by required timelines and
offers the tenant expansion options into 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 million. The Operating Partnership anticipates expending an
additional approximately $186.7 million for the completion of Plaza 5, Plaza 10
and other projects. The Operating Partnership expects to finance its funding
requirements primarily through drawing on its revolving credit facility.
On a periodic basis, management assesses whether there are any indicators that
the value of the Operating Partnership's 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. Except for
certain assets classified as held for sale, as discussed below, management does
not believe that the value of any of the Operating Partnership's 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 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.
As of March 31, 2002, the Operating Partnership identified 37 office properties,
aggregating approximately 4.3 million square feet, and a land parcel as held for
sale. These properties are located in Texas, Colorado, Arizona and Florida. Such
properties carried an aggregate book value of $376.2 million, net of accumulated
depreciation of $27.0 million and a valuation allowance of $40.5 million, at
March 31, 2002. The Operating Partnership is currently in various stages of
contract negotiations for the sale or sales of certain of these 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.
24
<Page>
In January 2002, the Operating Partnership sold 25 Martine Avenue, a 124-unit
multi-family residential property located in White Plains, Westchester County,
New York, for net sales proceeds of approximately $17.6 million, which resulted
in a gain of approximately $7.1 million. The proceeds from the sale were used
primarily to repay borrowings under the Operating Partnership's credit facility.
The following comparisons for the three months ended March 31, 2002 ("2002"), as
compared to the three months ended March 31, 2001 ("2001"), make reference to
the following: (i) the effect of the "Same-Store Properties," which represents
all in-service properties owned by the Operating Partnership at December 31,
2000, excluding Dispositions as defined below, (ii) the effect of the "Acquired
Properties," which represents all properties acquired or placed in service by
the Operating Partnership from January 1, 2001 through March 31, 2002 and (iii)
the effect of the "Dispositions", which represents results for each period for
those rental properties sold by the Operating Partnership during the respective
periods.
THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001
<Table>
<Caption>
Quarter Ended
March 31, Dollar Percent
(DOLLARS IN THOUSANDS) 2002 2001 Change Change
- ----------------------------------------------------------------------------------------------------------
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 126,457 $ 125,376 $ 1,081 0.9%
Escalations and recoveries from tenants 13,270 14,762 (1,492) (10.1)
Parking and other 3,064 2,346 718 30.6
- ----------------------------------------------------------------------------------------------------------
Sub-total 142,791 142,484 307 0.2
Equity in (loss) earnings of unconsolidated
joint ventures (1,305) 3,409 (4,714) (138.3)
Interest income 338 613 (275) (44.9)
- ----------------------------------------------------------------------------------------------------------
Total revenues 141,824 146,506 (4,682) (3.2)
- ----------------------------------------------------------------------------------------------------------
PROPERTY EXPENSES:
Real estate taxes 15,333 15,287 46 0.3
Utilities 10,130 11,956 (1,826) (15.3)
Operating services 16,198 17,879 (1,681) (9.4)
- ----------------------------------------------------------------------------------------------------------
Sub-total 41,661 45,122 (3,461) (7.7)
General and administrative 6,705 6,010 695 11.6
Depreciation and amortization 23,953 23,484 469 2.0
Interest expense 26,359 28,365 (2,006) (7.1)
- ----------------------------------------------------------------------------------------------------------
Total expenses 98,678 102,981 (4,303) (4.2)
- ----------------------------------------------------------------------------------------------------------
Income before realized gains and
unrealized losses on disposition of
rental property 43,146 43,525 (379) (0.9)
Realized gains and unrealized losses on
disposition of rental property, net 7,098 (20,563) 27,661 (134.5)
- ----------------------------------------------------------------------------------------------------------
Net income 50,244 22,962 27,282 118.8
Preferred unit distributions 3,943 3,879 64 1.6
- ----------------------------------------------------------------------------------------------------------
Net income available to common unitholders $ 46,301 $ 19,083 $ 27,218 142.6%
==========================================================================================================
</Table>
25
<Page>
The following is a summary of the changes in revenue from rental operations and
property expenses divided into Same-Store Properties, Acquired Properties and
Dispositions (DOLLARS IN THOUSANDS):
<Table>
<Caption>
TOTAL OPERATING SAME-STORE PROPERTIES ACQUIRED PROPERTIES DISPOSITIONS
PARTNERSHIP
Dollar Percent Dollar Percent Dollar Percent Dollar Percent
Change Change Change Change Change Change Change Change
- ---------------------------------------------------------------------------------------------------------------------------
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 1,081 0.9% $ 2,755 2.2% $ 4,394 3.5% $ (6,068) (4.8)%
Escalations and recoveries
from tenants (1,492) (10.1) (1,557) (10.6) 484 3.3 (419) (2.8)
Parking and other 718 30.6 581 24.8 268 11.4 (131) (5.6)
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 307 0.2% $ 1,779 1.2% $ 5,146 3.6% $ (6,618) (4.6)%
===========================================================================================================================
PROPERTY EXPENSES:
Real estate taxes $ 46 0.3% $ 434 2.8% $ 560 3.7% $ (948) (6.2)%
Utilities (1,826) (15.3) (1,343) (11.2) 339 2.8 (822) (6.9)
Operating services (1,681) (9.4) (945) (5.3) 628 3.5 (1,364) (7.6)
- ---------------------------------------------------------------------------------------------------------------------------
Total $ (3,461) (7.7)% $ (1,854) (4.2)% $ 1,527 3.4% $ (3,134) (6.9)%
===========================================================================================================================
OTHER DATA:
Number of Consolidated Properties 258 246 12 16
Square feet (IN THOUSANDS) 26,983 25,645 1,338 2,971
</Table>
Base rents for the Same-Store Properties increased $2.8 million, or 2.2 percent,
for 2002 as compared to 2001 due primarily to rental rate increases in 2002.
Escalations and recoveries from tenants for the Same-Store Properties decreased
$1.6 million, or 10.6 percent, for 2002 over 2001, due primarily to lower
utilities and operating services expenses in 2002, as described below. Parking
and other income for the Same-Store Properties increased $0.6 million, or 24.8
percent, due primarily to increased lease termination fees in 2002.
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. Escalations and
recoveries are received from tenants for certain costs as provided in the lease
agreements. These costs generally include real estate taxes, utilities,
insurance, common area maintenance and other recoverable costs. See Note 12 to
the Financial Statements.
Real estate taxes on the Same-Store Properties increased $0.4 million, or 2.8
percent, for 2002 as compared to 2001, due primarily to property tax rate
increases in certain municipalities in 2002, partially offset by lower
assessments on certain properties in 2002. Utilities for the Same-Store
Properties decreased $1.3 million, or 11.2 percent, for 2002 as compared to
2001, due primarily to decreased rates and usage. Operating services for the
Same-Store Properties decreased $0.9 million, or 5.3 percent, due primarily to
decreased snow removal costs resulting from a mild winter in 2002.
Equity in (loss) earnings of unconsolidated joint ventures decreased $4.7
million, or 138.3 percent, for 2002 as compared to 2001. This is due primarily
to (i) the loss from the ARCap joint venture resulting from ARCap marking to
market certain collateralized mortgage backed securities and (ii) the loss from
the Ramland Realty joint venture resulting from the write off of the unbilled
rents receivable and deferred lease costs related to the joint venture
property's main tenant, which has been declared insolvent by the FDIC. See Note
4 to the Financial Statements.
26
<Page>
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 to the
Financial Statements.
Interest income decreased $0.3 million, or 44.9 percent, for 2002 as compared to
2001. This decrease was due primarily to a reduction in short-term interest
rates in 2002.
General and administrative increased by $0.7 million, or 11.6 percent, for 2002
as compared to 2001. This increase is due primarily to increased payroll and
payroll-related costs in 2002.
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 $1.0 million and $0.7 million for the
three month periods ended March 31, 2002 and 2001, respectively.
Depreciation and amortization increased by $0.5 million, or 2.0 percent, for
2002 over 2001. Of this increase, $1.0 million, or 4.1 percent, is due to the
Acquired Properties, partially offset by a decrease of $0.5 million, or 2.1
percent, due to the Dispositions.
Interest expense decreased $2.0 million, or 7.1 percent, for 2002 as compared to
2001. This decrease is due primarily to lower interest rates on variable rate
borrowings and a greater amount of capitalized interest as a result of increased
construction-in-progress costs in 2002.
Costs directly related to the development of rental properties are capitalized.
Capitalized development costs include interest, property taxes, insurance and
other project costs incurred during the period of development. Interest
capitalized by the Operating Partnership for the three month periods ended March
31, 2002 and 2001 was $5.5 million and $3.4 million, respectively.
Income before realized gains and unrealized losses on disposition of rental
property decreased to $43.1 million in 2002 from $43.5 million in 2001. The
decrease of approximately $0.4 million is due to the factors discussed above.
Net income available to common unitholders increased by $27.2 million, from
$19.1 million in 2001 to $46.3 million in 2002. The increase was a result of
unrealized loss on disposition of rental property of $20.6 million in 2001 and
realized gains on disposition of $7.1 million in 2002. These were partially
offset by a decrease in income before realized gains and unrealized losses on
disposition of rental property of $0.4 million and an increase in preferred unit
distributions of $0.1 million.
LIQUIDITY AND CAPITAL RESOURCES
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 facility and other debt
and equity financing.
27
<Page>
The Operating Partnership expects to meet its short-term liquidity requirements
generally through its working capital, net cash provided by operating activities
and from its 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 facility) and the issuance of
additional debt or equity securities.
As of March 31, 2002, the Operating Partnership's total indebtedness of $1.7
billion (weighted average interest rate of 7.07 percent) was comprised of $113.2
million of revolving credit facility borrowings and other variable rate mortgage
debt (weighted average rate of 2.71 percent) and fixed rate debt of $1.6 billion
(weighted average rate of 7.38 percent).
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 Operating Partnership. Moody's
Investors Service ("Moody's") 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.
As of March 31, 2002, the Operating Partnership had outstanding borrowings of
$81.0 million under its unsecured facility, as described in Note 8 to the
Financial Statements (with aggregate borrowing capacity of $800.0 million). The
interest rate on outstanding borrowings under the 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 unsecured facility also currently
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 adjusted in accordance with the
following table:
<Table>
<Caption>
OPERATING PARTNERSHIP'S INTEREST RATE -
UNSECURED DEBT RATINGS: APPLICABLE BASIS POINTS FACILITY FEE
S&P/MOODY'S/FITCH (a) ABOVE LIBOR BASIS POINTS
- --------------------------------------------------------------------------------
No rating or less than BBB-/Baa3/BBB- 120.0 30.0
BBB-/Baa3/BBB- 95.0 20.0
BBB/Baa2/BBB (current) 80.0 20.0
BBB+/Baa1/BBB+ 72.5 17.5
A-/A3/A- or higher 65.0 15.0
</Table>
(a) If the Operating Partnership has debt ratings from two rating agencies, one
of which is Standard & Poor's Rating Services ("S&P") or Moody's Investors
Service ("Moody's"), the rates per the above table shall be based on the
lower of such ratings. If the Operating Partnership has debt ratings from
three rating agencies, one of which is S&P or Moody's, the rates per the
above table shall be based on the lower of the two highest ratings. If the
Operating Partnership has debt ratings from only one agency, it will be
considered to have no rating or less than BBB-/Baa3/BBB- per the above
table.
Subject to certain conditions, the Operating Partnership has the ability through
June 22, 2002 to increase the borrowing capacity of the unsecured facility up to
$1.0 billion. The 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 unsecured facility is sufficient to meet its revolving credit
facility needs.
28
<Page>
The terms of the unsecured facility include certain restrictions and covenants
which limit, among other things, the payment of dividends (as discussed below),
the incurrence of additional indebtedness, the incurrence of liens and the
disposition of 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.
The terms of the Operating Partnership's Senior Unsecured Notes, as defined in
Note 7 to the Financial Statements (which totaled approximately $1.1 billion as
of March 31, 2002), 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.
As of March 31, 2002, the Operating Partnership had 234 unencumbered properties,
totaling 20.8 million square feet, representing 77.2 percent of the Operating
Partnership's total portfolio on a square footage basis.
The debt of the Operating Partnership's unconsolidated joint ventures
aggregating $466.3 million are non-recourse to the Operating Partnership except
for (i) customary exceptions pertaining to such matters as intentional misuse of
funds, environmental conditions and material misrepresentations and (ii)
approximately $11.1 million of debt on the Harborside Financial Center South
Pier joint venture with Hyatt Corporation ("Hyatt"). Additionally, the Operating
Partnership has posted an $8.0 million letter of credit in support of another
loan to that joint venture, $4.0 million of which is indemnified by Hyatt. In
addition, the Operating Partnership and Hyatt have guaranteed completion of the
hotel project to the joint venture's construction lender. If the joint venture
fails to complete the hotel project as required under the construction loan
documents and the construction loan proceeds remaining to be advanced together
with the capital contributed by the partners to such date are insufficient to
complete the hotel project, the Operating Partnership and/or Hyatt may be
required to provide additional funds sufficient to complete the hotel project.
The following table outlines the timing of payment requirements related to the
Operating Partnership's debt and ground lease agreements (IN THOUSANDS):
<Table>
<Caption>
PAYMENTS DUE BY PERIOD
------------------------------------------------------------------------------
LESS THAN 1 1--3 4 -- 5 6 -- 10 AFTER 10
TOTAL YEAR YEARS YEARS YEARS YEARS
- ------------------------------------------------------------------------------------------------------------
Senior unsecured notes $ 1,100,196 $ -- $ 485,267 $ -- $ 614,929 $ --
Revolving credit facility 81,000 -- 81,000 -- -- --
Mortgages and loans payable 542,899 2,519 23,552 475,228 41,600 --
Payments in
lieu of taxes (PILOT) 27,970 4,723 10,581 1,911 4,204 6,551
Ground lease payments 24,127 487 1,109 1,068 2,070 19,393
</Table>
As of March 31, 2002, the Operating Partnership's total debt had a weighted
average term to maturity of approximately 4.6 years. The Operating Partnership
does not intend to reserve funds to retire the Operating Partnership's Senior
Unsecured Notes 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 the
remainder of 2002 or during 2003. 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
29
<Page>
may be adversely affected.
The Operating Partnership has an effective shelf registration statement with the
SEC for an aggregate amount of $2.0 billion in equity securities of the
Operating Partnership. The Corporation and Operating Partnership also have an
effective shelf registration statement with the SEC for an aggregate of $2.0
billion in debt securities, preferred stock and preferred stock represented by
depositary shares, under which the Operating Partnership has issued an aggregate
of $1.1 billion of senior unsecured notes.
On September 13, 2000, the Board of Directors authorized an increase to the
Corporation's repurchase program under which the Corporation is permitted to
purchase up to an additional $150.0 million of the Corporation's outstanding
common stock ("Repurchase Program"). From that date through May 6, 2002, the
Corporation purchased for constructive retirement under the Repurchase Program
3.3 million shares of its outstanding common stock for an aggregate cost of
approximately $91.1 million. As a result, the Corporation has a remaining
authorization to repurchase up to an additional $58.9 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.
The Operating Partnership may not dispose of or distribute certain of its
properties, currently comprising 141 properties with an aggregate net book value
of approximately $1.9 billion, which were originally contributed by members of
either the Mack Group (which includes William L. Mack, Chairman of the
Corporation's Board of Directors; Earle I. Mack, director; and Mitchell E.
Hersh, chief executive officer and director), the Robert Martin Group (which
includes Robert F. Weinberg, director; Martin W. Berger, a former director;
Timothy M. Jones, president; and Michael A. Grossman, executive vice president)
or the Cali Group (which includes John J. Cali, director and John R. Cali,
director) without the express written consent of a representative of the Mack
Group, the Robert Martin Group or the Cali Group, as applicable, except in a
manner which does not result in recognition of any built-in-gain (which may
result in an income tax liability) or which reimburses the appropriate Mack
Group, Robert Martin Group or Cali Group members for the tax consequences of the
recognition of such built-in-gains (collectively, the "Property Lock-Ups"). The
aforementioned restrictions do not apply in the event that the Operating
Partnership sells all of its properties or in connection with a sale transaction
which the Corporation's Board of Directors determines is reasonably necessary to
satisfy a material monetary default on any unsecured debt, judgment or liability
of the Operating Partnership or to cure any material monetary default on any
mortgage secured by a property. The Property Lock-Ups expire periodically
through 2008. Upon the expiration of the Property Lock-Ups, the Operating
Partnership is required to use commercially reasonable efforts to prevent any
sale, transfer or other disposition of the subject properties from resulting in
the recognition of built-in gain to the appropriate Mack Group, Robert Martin
Group or Cali Group members.
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 $142.2 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 the Operating
Partnership's debt.
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<Page>
FUNDS FROM OPERATIONS
The Operating Partnership considers funds from operations ("FFO"), after
adjustment for straight-lining of rents, one measure of REIT performance. FFO
is defined as net income (loss) before distribution to preferred unitholders,
computed in accordance with generally accepted accounting principles
("GAAP"), excluding gains (or losses) from debt restructuring, other
extraordinary items, and sales of depreciable rental property, plus real
estate-related depreciation and amortization. FFO 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. FFO presented herein
is not necessarily comparable to FFO 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 FFO is comparable to the FFO 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.
FFO for the three months ended March 31, 2002 and 2001, as calculated in
accordance with NAREIT's definition, after adjustment for straight-lining of
rents, are summarized in the following table (IN THOUSANDS):
<Table>
<Caption>
Three Months Ended
March 31,
2002 2001
- ------------------------------------------------------------------------------------------------------
Income before realized gains and unrealized losses on
disposition of rental property, and minority interest $ 43,146 $ 43,525
Add: Real estate-related depreciation and amortization (1) 24,449 24,003
Deduct: Rental income adjustment for straight-lining of rents (2) (1,713) (3,805)
- ------------------------------------------------------------------------------------------------------
Funds from operations, after adjustment for straight-lining of rents $ 65,882 $ 63,723
Deduct: Distributions to preferred unitholders (3,943) (3,879)
- ------------------------------------------------------------------------------------------------------
Funds from operations, after adjustment for straight-lining
of rents, after distributions to preferred unitholders $ 61,939 $ 59,844
======================================================================================================
Cash flows provided by operating activities $ 40,188 $ 52,614
Cash flows used in investing activities $ (40,119) $ (38,461)
Cash flows used in financing activities $ (10,768) $ (15,612)
- ------------------------------------------------------------------------------------------------------
Basic weighted average units outstanding (3) 64,751 64,767
- ------------------------------------------------------------------------------------------------------
Diluted weighted average units outstanding (3) 71,461 71,353
- ------------------------------------------------------------------------------------------------------
</Table>
(1) Includes the Operating Partnership's share from unconsolidated joint
ventures of $714 and $721 for the three months ended March 31, 2002 and
2001, respectively.
(2) Includes the Operating Partnership's share from unconsolidated joint
ventures of ($1,047) and $35 for the three months ended March 31, 2002 and
2001, respectively.
(3) See calculations for the amounts presented in the following reconciliation.
The following schedule reconciles the Operating Partnership's basic weighted
average units outstanding to the basic and diluted weighted average units
outstanding presented above (IN THOUSANDS):
<Table>
<Caption>
Three Months Ended
March 31,
2002 2001
- ------------------------------------------------------------------------------
Basic weighted average units: 64,751 64,767
Add: Weighted average preferred units
(after conversion to common units) 6,359 6,359
Stock options 351 227
- ------------------------------------------------------------------------------
Diluted weighted average units outstanding: 71,461 71,353
==============================================================================
</Table>
INFLATION
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<Page>
The Operating Partnership's leases with the majority of its tenants provide for
recoveries and escalation charges based upon the tenant's proportionate share
of, and/or increases in, real estate taxes and certain operating costs, which
reduce the Operating Partnership's exposure to increases in operating costs
resulting from inflation.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Certain information discussed in this literature may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and the federal securities laws, including Section 21E of the Securities
Exchange Act of 1934. The Operating Partnership intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995 and
Section 21E of the Securities Exchange Act of 1934. Such forward-looking
statements relate to, without limitation, the Operating Partnership's future
economic performance, plans and objectives for future operations and projections
of revenue and other financial items. Forward-looking statements can be
identified by the use of words such as "may," "will," "should," "expect,"
"anticipate," "estimate," "continue" or comparable terminology. Although the
Operating Partnership believes that the expectations reflected in such
forward-looking statements are based upon reasonable assumptions at the time
made, it can give no assurance that its expectations will be achieved.
Forward-looking statements are inherently subject to certain risks, trends and
uncertainties, many of which the Operating Partnership cannot predict with
accuracy and some of which the Operating Partnership might not even anticipate.
Future events and actual results, financial and otherwise, may differ materially
from the results discussed in the forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements. Among
the risks, trends and uncertainties are changes in the general economic
conditions, including those affecting industries in which the Operating
Partnership's principal tenants compete; any failure of the general economy to
recover timely from the current economic downturn; the extent of any tenant
bankruptcies; the Operating Partnership's ability to lease or re-lease space at
current or anticipated rents; changes in the supply of and demand for office,
office/flex and industrial/warehouse properties; changes in interest rate
levels; changes in operating costs; the Operating Partnership's ability to
obtain adequate insurance, including coverage for terrorist acts; the
availability of financing; and other risks associated with the development and
acquisition of properties, including risks that the development may not be
completed on schedule, that the tenants will not take occupancy or pay rent, or
that development or operating costs may be greater than anticipated. For further
information on factors which could impact the Operating Partnership and the
statements contained herein, reference should be made to the Operating
Partnership's filings with the Securities and Exchange Commission including
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Annual Reports
on Form 10-K. The Operating Partnership assumes no obligation to update or
supplement forward-looking statements that become untrue because of subsequent
events.
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<Page>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to loss resulting from changes in interest rates,
foreign currency exchange rates, commodity prices and equity prices. In pursuing
its business plan, the primary market risk to which the 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
March 31, 2002 ranged from LIBOR plus 65 basis points to LIBOR plus 80 basis
points.
MARCH 31, 2002
<Table>
<Caption>
DEBT, 4/1/02-
INCLUDING CURRENT PORTION 12/31/02 2003 2004 2005 2006 THEREAFTER TOTAL FAIR VALUE
- ------------------------- -------- ---- ---- ---- ---- ---------- ----- ----------
Fixed Rate $ 2,473 $ 195,501 $ 312,110 $ 254,598 $ 219,814 $ 623,190 $ 1,607,686 $ 1,647,593
Average Interest Rate 7.72% 7.30% 7.34% 7.13% 7.06% 7.70% 7.38%
Variable Rate $ 81,000 $ 32,178 $ 113,178 $ 113,178
</Table>
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.
33
<Page>
MACK-CALI REALTY, L.P.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
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.
34
<Page>
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 and incorporated herein by reference).
4.3 Indenture dated as of March 16, 1999, by and among Mack-Cali
Realty, L.P., as issuer, Mack-Cali Realty Corporation, as
guarantor, and Wilmington Trust Company, as trustee (filed as
Exhibit 4.1 to the Operating Partnership's Form 8-K dated March
16, 1999 and incorporated herein by reference).
4.4 Supplemental Indenture No. 1 dated as of March 16, 1999, by and
among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust
Company, as trustee (filed as Exhibit 4.2 to the Operating
Partnership's Form 8-K dated March 16, 1999 and incorporated
herein by reference).
4.5 Supplemental Indenture No. 2 dated as of August 2, 1999, by and
among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust
Company, as trustee (filed as Exhibit 4.4 to the Operating
Partnership's Form 10-Q dated June 30, 1999 and incorporated
herein by reference).
35
<Page>
EXHIBIT
NUMBER EXHIBIT TITLE
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).
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).
36
<Page>
EXHIBIT
NUMBER EXHIBIT TITLE
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 the 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).
- ----------
(b) Reports on Form 8-K
During the first quarter of 2002, the Operating Partnership did not file
any reports on Form 8-K.
37
<Page>
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: May 8, 2002 By: /s/ MITCHELL E. HERSH
-----------------------
Mitchell E. Hersh
Chief Executive Officer
Date: May 8, 2002 By: /s/ BARRY LEFKOWITZ
-----------------------
Barry Lefkowitz
Executive Vice President &
Chief Financial Officer
38