<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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
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 .
--- ---
<PAGE>
MACK-CALI REALTY, L.P.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 2000
and December 31, 1999 4
Consolidated Statements of Operations for the three and six month
periods ended June 30, 2000 and 1999 5
Consolidated Statement of Changes in Partners' Capital
for the six months ended June 30, 2000 6
Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 34
Item 3. Quantitative and Qualitative Disclosures about Market Risk 62
PART II OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings 63
Item 2. Changes in Securities and Use of Proceeds 63
Item 3. Defaults Upon Senior Securities 63
Item 4. Submission of Matters to a Vote of Security Holders 63
Item 5. Other Information 63
Item 6. Exhibits 64
Signatures 67
</TABLE>
2
<PAGE>
MACK-CALI REALTY, L.P.
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
The accompanying unaudited consolidated balance sheets, statements of
operations, of changes in partners' capital, and of cash flows and
related notes, have been prepared in accordance with generally
accepted accounting principles ("GAAP") for interim financial
information and in conjunction with the rules and regulations of the
Securities and Exchange Commission ("SEC"). Accordingly, they do not
include all of the disclosures required by GAAP for complete
financial statements. The financial statements reflect all
adjustments consisting only of normal, recurring adjustments, which
are in the opinion of management, necessary for a fair presentation
for the interim periods.
The aforementioned financial statements should be read in conjunction
with the notes to the aforementioned financial statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations and the financial statements and notes thereto
included in Mack-Cali Realty, L.P's Annual Report on Form 10-K and
Form 10-K/A for the fiscal year ended December 31, 1999.
The results of operations for the three and six month periods ended
June 30, 2000 are not necessarily indicative of the results to be
expected for the entire fiscal year or any other period.
3
<PAGE>
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT UNIT AMOUNTS)
================================================================================
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(UNAUDITED) 1999
<S> <C> <C>
ASSETS
----------------------------------------------------------------------------------------------------------------
Rental property
Land and leasehold interests $ 548,813 $ 549,096
Buildings and improvements 3,015,197 3,014,532
Tenant improvements 84,687 85,057
Furniture, fixtures and equipment 6,169 6,160
----------------------------------------------------------------------------------------------------------------
3,654,866 3,654,845
Less - accumulated depreciation and amortization (270,065) (256,629)
----------------------------------------------------------------------------------------------------------------
Total rental property 3,384,801 3,398,216
Cash and cash equivalents 10,535 8,671
Investments in unconsolidated joint ventures 95,382 89,134
Unbilled rents receivable 43,821 53,253
Deferred charges and other assets, net 80,117 66,436
Restricted cash 6,498 7,081
Accounts receivable, net of allowance for doubtful accounts
of $537 and $672 6,950 6,810
----------------------------------------------------------------------------------------------------------------
Total assets $ 3,628,104 $ 3,629,601
================================================================================================================
LIABILITIES AND PARTNERS' CAPITAL
----------------------------------------------------------------------------------------------------------------
Senior unsecured notes $ 782,942 $ 782,785
Revolving credit facilities 215,730 177,000
Mortgages and loans payable 488,605 530,390
Distributions payable 42,543 42,499
Accounts payable and accrued expenses 74,376 63,394
Rents received in advance and security deposits 34,170 36,150
Accrued interest payable 16,263 16,626
----------------------------------------------------------------------------------------------------------------
Total liabilities 1,654,629 1,648,844
----------------------------------------------------------------------------------------------------------------
Minority interest in consolidated partially-owned properties -- 83,600
Commitments and contingencies
PARTNERS CAPITAL:
Preferred units, 223,124 and 229,304 units outstanding 228,861 235,200
General partner, 58,782,808 and 58,446,552 common units outstanding 1,517,830 1,441,882
Limited partners, 8,075,720 and 8,153,710 common units outstanding 218,260 211,551
Unit warrants, 2,000,000 and 2,000,000 outstanding 8,524 8,524
----------------------------------------------------------------------------------------------------------------
Total partners' capital 1,973,475 1,897,157
----------------------------------------------------------------------------------------------------------------
Total liabilities and partners' capital $ 3,628,104 $ 3,629,601
================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<PAGE>
MACK-CALI REALTY, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
REVENUES 2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Base rents $ 122,072 $116,499 $ 243,670 $ 232,579
Escalations and recoveries from tenants 14,627 16,366 31,295 31,226
Parking and other 6,128 3,061 9,450 6,961
Equity in earnings of unconsolidated joint ventures 1,070 834 2,207 628
Interest income 1,992 215 2,246 470
-----------------------------------------------------------------------------------------------------------------------
Total revenues 145,889 136,975 288,868 271,864
-----------------------------------------------------------------------------------------------------------------------
EXPENSES
-----------------------------------------------------------------------------------------------------------------------
Real estate taxes 14,733 14,208 29,437 28,051
Utilities 10,014 9,829 20,393 19,421
Operating services 16,822 17,429 34,564 34,516
General and administrative 5,159 5,568 11,272 13,531
Depreciation and amortization 22,945 22,465 45,127 44,434
Interest expense 26,835 25,697 53,261 49,319
Non-recurring charges 9,228 16,458 9,228 16,458
-----------------------------------------------------------------------------------------------------------------------
Total expenses 105,736 111,654 203,282 205,730
-----------------------------------------------------------------------------------------------------------------------
Income before gain on sales of rental property
and minority interest 40,153 25,321 85,586 66,134
Gain on sales of rental property 73,921 -- 76,169 --
-----------------------------------------------------------------------------------------------------------------------
Income before minority interest 114,074 25,321 161,755 66,134
Minority interest in consolidated partially-owned properties 2,982 -- 5,072 --
-----------------------------------------------------------------------------------------------------------------------
Net income 111,092 25,321 156,683 66,134
Preferred unit distributions (3,765) (3,869) (7,634) (7,738)
-----------------------------------------------------------------------------------------------------------------------
Net income available to common unitholders $ 107,327 $ 21,452 $ 149,049 $ 58,396
=======================================================================================================================
Basic earnings per unit $ 1.61 $ 0.32 $ 2.24 $ 0.87
Diluted earnings per unit $ 1.52 $ 0.32 $ 2.14 $ 0.87
-----------------------------------------------------------------------------------------------------------------------
Distributions declared per common unit $ 0.58 $ 0.55 $ 1.16 $ 1.10
-----------------------------------------------------------------------------------------------------------------------
Basic weighted average units outstanding 66,627 67,173 66,527 67,092
Diluted weighted average units outstanding 73,284 67,486 73,237 67,385
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<PAGE>
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
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 229 58,447 8,154 $235,200 $1,441,882 $211,551 $8,524 $1,897,157
Net income -- -- 7,634 130,923 18,126 -- 156,683
Distributions -- -- -- (7,634) (68,018) (9,392) -- (85,044)
Conversion of preferred units
to limited partner units (6) -- 178 (6,339) -- 6,339 -- --
Redemption of limited partner
units for shares of common stock -- 256 (256) -- 8,364 (8,364) -- --
Contributions - proceeds from
stock options exercised -- 80 -- -- 1,665 -- -- 1,665
Deferred compensation plan
for directors -- -- -- -- 54 -- -- 54
Amortization of stock compensation -- -- -- -- 1,313 -- -- 1,313
Adjustment to fair value
of restricted stock -- -- -- -- 97 -- -- 97
Stock options charge -- -- -- -- 1,550 -- -- 1,550
-----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2000 223 58,783 8,076 $228,861 $1,517,830 $218,260 $8,524 $1,973,475
===================================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
<PAGE>
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
===============================================================================
<TABLE>
<CAPTION>
Six Months Ended June 30,
CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 156,683 $ 66,134
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 45,127 44,434
Amortization of stock compensation 1,410 --
Amortization of deferred financing costs and debt discount 1,802 1,518
Stock options charge 1,550 --
Equity in earnings of unconsolidated joint ventures (2,207) (628)
Gain on sales of rental property (76,169) --
Minority interest in consolidated partially-owned properties 5,072 --
Changes in operating assets and liabilities:
Increase in unbilled rents receivable (5,537) (7,397)
Increase in deferred charges and other assets, net (15,697) (10,794)
Increase in accounts receivable, net (140) (2,770)
Increase in accounts payable and accrued expenses 10,982 5,891
(Decrease) increase in rents received in advance and security deposits (1,937) 1,137
(Decrease) increase in accrued interest payable (363) 12,483
----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 120,576 $ 110,008
================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES
-----------------------------------------------------------------------------------------------------------------
Additions to rental property $(170,062) $ (71,107)
Investments in unconsolidated joint ventures (11,081) (29,941)
Distributions from unconsolidated joint ventures 7,040 10,634
Proceeds from sales of rental property 235,849 --
Decrease (increase) in restricted cash 583 (134)
-----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities $ 62,329 $ (90,548)
=================================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES
----------------------------------------------------------------------------------------------------------------
Proceeds from senior unsecured notes $ -- $ 597,252
Proceeds from revolving credit facilities 435,030 130,900
Proceeds from mortgages and loans payable -- 45,500
Repayments of revolving credit facilities (396,300) (653,900)
Repayments of mortgages and loans payable (41,785) (45,819)
Distributions to minority interest in partially-owned properties (88,672) --
Repurchase of general partner units -- (713)
Payment of financing costs (5,979) (6,592)
Proceeds from stock options exercised 1,665 933
Proceeds from dividend reinvestment and stock purchase plan -- 10
Payment of distributions (85,000) (81,321)
----------------------------------------------------------------------------------------------------------------
Net cash used in financing activities $(181,041) $ (13,750)
================================================================================================================
Net increase in cash and cash equivalents $ 1,864 $ 5,710
Cash and cash equivalents, beginning of period $ 8,671 $ 5,809
----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 10,535 $ 11,519
================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
7
<PAGE>
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER
UNIT AMOUNTS)
===============================================================================
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Mack-Cali Realty, L.P., a Delaware limited partnership, and its subsidiaries
(the "Operating Partnership") was formed on August 31, 1994 to conduct the
business of leasing, management, acquisition, development, construction and
tenant-related services for its sole general partner, Mack-Cali Realty
Corporation and its subsidiaries (the "Corporation" or "General Partner"). The
Operating Partnership, through its operating divisions and subsidiaries,
including the Mack-Cali property-owning partnerships and limited liability
companies, (collectively, the "Property Partnerships"), is the entity through
which all of the General Partner's operations are conducted.
The General Partner is a fully integrated, self-administered, self-managed real
estate investment trust ("REIT"). The General Partner controls the Operating
Partnership as its sole general partner, and owned an 87.9 percent and 87.8
percent common unit interest in the Operating Partnership as of June 30, 2000
and December 31, 1999, 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 June 30, 2000, the Operating Partnership owned or had interests in 266
properties plus developable land (collectively, the "Properties"). The
Properties aggregate approximately 28.4 million square feet, and are comprised
of 163 office buildings and 90 office/flex buildings totaling approximately 28.0
million square feet (which includes eight office buildings and four office/flex
buildings, aggregating 1.5 million square feet, owned by unconsolidated joint
ventures in which the Operating Partnership has investment interests), six
industrial/warehouse buildings totaling approximately 387,400 square feet, two
multi-family residential complexes consisting of 451 units, two stand-alone
retail properties and three land leases. The Properties are located in 12
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. See Investments in
Unconsolidated Joint Ventures in Note 2 for the Operating Partnership's
accounting treatment of unconsolidated joint venture interests. All significant
intercompany accounts and transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
RENTAL
PROPERTY Rental properties are stated at cost less accumulated
depreciation and amortization. Costs directly related to
the acquisition and development of rental properties are
capitalized. Capitalized development costs include
interest, property taxes, insurance and other project
costs incurred during the period of development.
Included in total rental property is
construction-in-progress of $163,179 and $98,438 as of
June 30, 2000 and December 31, 1999, 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.
8
<PAGE>
Properties are depreciated using the straight-line
method over the estimated useful lives of the assets.
The estimated useful lives are as follows:
<TABLE>
<CAPTION>
<S> <C>
Leasehold interests Remaining lease term
---------------------------------------------------------------------
Buildings and improvements 5 to 40 years
---------------------------------------------------------------------
Tenant improvements The shorter of the term of
the related lease or useful life
---------------------------------------------------------------------
Furniture, fixtures and equipment 5 to 10 years
---------------------------------------------------------------------
</TABLE>
On a periodic basis, management assesses whether there
are any indicators that the value of the real estate
properties may be impaired. A property's value is
impaired only if management's estimate of the aggregate
future cash flows (undiscounted and without interest
charges) to be generated by the property are less than
the carrying value of the property. To the extent
impairment has occurred, the loss shall be measured as
the excess of the carrying amount of the property over
the fair value of the property. Management does not
believe that the value of any of its rental properties
is impaired.
When assets are identified by management as held for
sale, the Operating Partnership discontinues
depreciating the assets and estimates the sales price,
net of 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.
INVESTMENTS IN
UNCONSOLIDATED
JOINT VENTURES The Operating Partnership accounts for its investments
in unconsolidated joint ventures under the equity method
of accounting as the Operating Partnership exercises
significant influence, but does not control these
entities. These investments are recorded initially at
cost, as Investments in Unconsolidated Joint Ventures,
and subsequently adjusted for equity in earnings and
cash contributions and distributions. Any difference
between the carrying amount of these investments on the
balance sheet of the Operating Partnership and the
underlying equity in net assets is amortized as an
adjustment to equity in earnings of unconsolidated joint
ventures over 40 years. See Note 4.
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 $901 and
$917 for the three months ended June 30, 2000 and 1999,
respectively, and $1,802 and $1,518 for the six months
ended June 30, 2000 and 1999, 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 provide leasing services
to the Properties and receive compensation based on
space leased. The portion of such compensation, which is
capitalized and amortized, approximated $896 and $743
for the three months ended June 30, 2000 and 1999,
respectively, and $1,589 and $1,401 for the six months
ended June 30, 2000 and 1999, respectively.
9
<PAGE>
REVENUE
RECOGNITION Base rental revenue is recognized on a straight-line
basis over the terms of the respective leases. Unbilled
rents receivable represents the amount by which
straight-line rental revenue exceeds rents currently
billed in accordance with the lease agreements. Parking
revenue includes income from parking spaces leased to
tenants. Rental income on residential property under
operating leases having terms generally of one year or
less is recognized when earned.
Reimbursements are received from tenants for certain
costs as provided in the lease agreements. These costs
generally include real estate taxes, utilities,
insurance, common area maintenance and other recoverable
costs. See Note 16.
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.
INTEREST RATE
CONTRACTS Interest rate contracts are utilized by the Operating
Partnership to reduce interest rate risks. The Operating
Partnership does not hold or issue derivative financial
instruments for trading purposes. The differentials to
be received or paid under contracts designated as hedges
are recognized over the life of the contracts as
adjustments to interest expense.
In certain situations, the Operating Partnership uses
forward treasury lock agreements to mitigate the
potential effects of changes in interest rates for
prospective transactions. Gains and losses are deferred
and amortized as adjustments to interest expense over
the remaining life of the associated debt to the extent
that such debt remains outstanding.
EARNINGS
PER UNIT In accordance with the Statement of Financial Accounting
Standards No. 128 ("FASB No. 128"), the Operating
Partnership presents both basic and diluted earnings per
unit ("EPU"). Basic EPU excludes dilution and is
computed by dividing net income available to common
unitholders by the weighted average number of units
outstanding for the period. Diluted EPU reflects the
potential dilution that could occur if securities or
other contracts to issue common units were exercised or
converted into common units, where such exercise or
conversion would result in a lower EPU amount.
DISTRIBUTIONS
PAYABLE The distributions payable at June 30, 2000 represent
distributions payable to common unitholders of record as
of July 6, 2000 (66,858,528 common units), and preferred
distributions payable to preferred unitholders (223,124
preferred units) for the second quarter 2000. The second
quarter 2000 common unit distribution of $0.58 per
common unit as well as the second quarter preferred unit
distribution of $16.875 per preferred unit, were
approved by the Board of Directors of the General
Partner on June 20, 2000 and paid on July 24, 2000.
The distributions payable at December 31, 1999 represent
distributions payable to common unitholders of record as
of January 4, 2000 (66,604,262 common units), and
preferred distributions payable to preferred unitholders
(229,304 preferred units) for the fourth quarter 1999.
The fourth quarter 1999 common unit distribution of
$0.58 per common unit (pro-rated for units issued during
the quarter), as well as the fourth quarter preferred
unit distribution of $16.875 per preferred unit, were
approved by the Board of Directors of the General
Partner on December 17, 1999 and paid on January 21,
2000.
10
<PAGE>
UNDERWRITING
COMMISSIONS
AND COSTS Underwriting commissions and costs incurred in
connection with the Corporation's stock offerings and
subsequent reinvestment in general partner units are
reflected as a reduction of these unit values.
STOCK OPTIONS The Operating Partnership accounts for stock-based
compensation using the intrinsic value method prescribed
in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related
Interpretations ("APB No. 25"). Under APB No. 25,
compensation cost is measured as the excess, if any, of
the quoted market price of the Corporation's stock at
the date of grant over the exercise price of the option
granted. Compensation cost for stock options, if any, is
recognized ratably over the vesting period. The
Corporation's policy is to grant options with an
exercise price equal to the quoted closing market price
of the Corporation's stock on the business day preceding
the grant date. Accordingly, no compensation cost has
been recognized under the Corporation's stock option
plans for the granting of stock options. See Note 11.
NON-RECURRING
CHARGES The Operating Partnership considers non-recurring
charges as costs incurred specific to significant
non-recurring events that impact the comparative
measurement of the Operating Partnership's performance.
RECLASSIFICATION Certain reclassifications have been made to prior period
amounts in order to conform with current period
presentation.
3. ACQUISITIONS/TRANSACTIONS
2000 TRANSACTIONS
OPERATING PROPERTY ACQUISITIONS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Investment by
Acquisition # of Rentable Operating
Date Property/Portfolio Name Location Bldgs. Square Feet Partnership (a)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OFFICE
5/23/00 555 & 565 Taxter Road Elmsford, Westchester County, NY 2 341,108 $ 42,980
6/14/00 Four Gatehall Drive Parsippany, Morris County, NJ 1 248,480 42,381
-------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE PROPERTY ACQUISITIONS: 3 589,588 $ 85,361
-------------------------------------------------------------------------------------------------------------------------
OFFICE/FLEX
3/24/00 Two Executive Drive (b) Moorestown, Burlington County, NJ 1 60,800 $ 4,007
-------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE/FLEX PROPERTY ACQUISITION: 1 60,800 $ 4,007
-------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING PROPERTY ACQUISITIONS: 4 650,388 $ 89,368
=========================================================================================================================
</TABLE>
SEE FOOTNOTES ON PAGE 13.
LAND TRANSACTIONS
On January 13, 2000, the Operating Partnership acquired approximately 12.7 acres
of developable land located at the Operating Partnership's Airport Business
Center, Lester, Delaware County, Pennsylvania. The land was acquired for
approximately $2,069.
11
<PAGE>
OTHER TRANSACTIONS
On June 27, 2000, the Corporation, the Operating Partnership, Prentiss
Properties Trust, a Maryland REIT ("Prentiss"), and Prentiss Properties
Acquisition Partners, L.P., a Delaware limited partnership of which Prentiss
(through a wholly-owned direct subsidiary) is the sole general partner
("Prentiss Partnership"), entered into an agreement and plan of merger ("Merger
Agreement"). The Merger Agreement provides for a merger of Prentiss with and
into the Corporation ("the Merger"), with the Corporation being the surviving
corporation and, immediately prior to the merger, a merger of Prentiss
Partnership with and into the Operating Partnership (or a limited liability
company or a limited partnership owned entirely directly or indirectly by the
Operating Partnership) (the "Partnership Merger" and, together with the Merger,
the "Mergers").
Under the terms of the Merger Agreement, Prentiss common stock will be exchanged
for the Corporation's common stock at a fixed exchange ratio of 0.956 of a share
of the Corporation's stock for each share of Prentiss stock. The exchange ratio
is not subject to change based on changes in the market prices of either
company's common stock and there is no "collar" for the exchange ratio. The
transaction values Prentiss at approximately $2,300,000, including approximately
$1,000,000 of debt and $245,000 in preferred equity. The Corporation expects to
issue approximately 36.6 million new shares of common stock in the transaction.
The Operating Partnership intends to finance any cash requirements of the
transaction with funds made available through borrowings on the Operating
Partnership's credit facilities.
With the completion of the transaction, the composition of the Corporation's
13-member Board of Directors will change and increase to 14 with the addition of
Michael V. Prentiss, currently Chairman of the board of trustees at Prentiss, as
Co-Chairman of the Board of Directors of the Corporation.
Subject to certain conditions, including, without limitation, applicable
approval from the shareholders of both the Corporation and Prentiss, and the
unitholders of the Operating Partnership and Prentiss Partnership, the
Corporation expects to consummate the Mergers in the fourth quarter of 2000.
Concurrently with the announcement of the Merger Agreement, the Corporation
announced that William L. Mack was appointed Chairman of the Board of Directors
and John J. Cali was named Chairman Emeritus of the Board of Directors. Brant
Cali resigned as Executive Vice President, Chief Operating Officer and Assistant
Secretary of the Corporation and as a member of the Board of Directors, and John
R. Cali resigned as Executive Vice President, Development of the Corporation.
John R. Cali was appointed to the Board of Directors of the Corporation to take
the seat previously held by Brant Cali. (See Note 15).
DISPOSITIONS
On February 25, 2000, the Operating Partnership sold 39.1 acres of vacant land
located at the Operating Partnership's Horizon Center Business Park in Hamilton
Township, Mercer County, New Jersey, for net proceeds, after selling costs, of
approximately $4,179.
On April 17, 2000, the Operating Partnership sold 95 Christopher Columbus Drive
located in Jersey City, Hudson County, New Jersey, for net proceeds, after
selling costs, of approximately $148,222.
On April 20, 2000, the Operating Partnership sold Atrium at Coulter Ridge
located in Amarillo, Potter County, Texas, for net proceeds, after selling
costs, of approximately $1,467.
On June 9, 2000, the Operating Partnership sold 412 Mt. Kemble Avenue located in
Morris Township, Morris County, New Jersey, for net proceeds, after selling
costs, of approximately $81,981.
12
<PAGE>
1999 TRANSACTIONS
OPERATING PROPERTY ACQUISITIONS
The Operating Partnership acquired the following operating properties during the
year ended December 31, 1999:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Investment by
Acquisition # of Rentable Operating
Date Property/Portfolio Name Location Bldgs. Square Feet Partnership (c)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OFFICE
3/05/99 Pacifica Portfolio - Phase III (d) Colorado Springs, El Paso County, CO 2 94,737 $ 5,709
7/21/99 1201 Connecticut Avenue, NW Washington, D.C. 1 169,549 32,799
-------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE PROPERTY ACQUISITIONS: 3 264,286 $ 38,508
-------------------------------------------------------------------------------------------------------------------------
OFFICE/FLEX
12/21/99 McGarvey Portfolio - Phase III (b)Moorestown, Burlington County, NJ 3 138,600 $ 8,012
-------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE/FLEX PROPERTY ACQUISITION: 3 138,600 $ 8,012
-------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING PROPERTY ACQUISITIONS: 6 402,886 $ 46,520
=========================================================================================================================
</TABLE>
PROPERTIES PLACED IN SERVICE
The Operating Partnership placed in service the following properties through the
completion of development or redevelopment during the year ended December 31,
1999:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Investment by
Date Placed # of Rentable Operating
in Service Property Name Location Bldgs. Square Feet Partnership (c)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OFFICE
8/09/99 2115 Linwood Avenue Fort Lee, Bergen County, NJ 1 68,000 $ 8,147
11/01/99 795 Folsom Street (e) San Francisco, San Francisco County, CA 1 183,445 37,337
-------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE PROPERTIES PLACED IN SERVICE: 2 251,445 $ 45,484
-------------------------------------------------------------------------------------------------------------------------
OFFICE/FLEX
3/01/99 One Center Court Totowa, Passaic County, NJ 1 38,961 $ 2,140
9/17/99 12 Skyline Drive Hawthorne, Westchester County, NY 1 46,850 5,023
12/10/99 600 West Avenue (f) Stamford, Fairfield County, CT 1 66,000 5,429
-------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE/FLEX PROPERTIES PLACED IN SERVICE: 3 151,811 $ 12,592
-------------------------------------------------------------------------------------------------------------------------
LAND LEASE
2/01/99 Horizon Center Business Park (g) Hamilton Township, Mercer County, NJ N/A 27.7 acres $ 1,007
-------------------------------------------------------------------------------------------------------------------------
TOTAL LAND LEASE TRANSACTIONS: 27.7 acres $ 1,007
-------------------------------------------------------------------------------------------------------------------------
TOTAL PROPERTIES PLACED IN SERVICE: 5 403,256 $ 59,083
=========================================================================================================================
</TABLE>
(a) Transaction was funded primarily from net proceeds received in the sale or
sales of rental property.
(b) The properties were acquired through the exercise of a purchase option
obtained in the initial acquisition of the McGarvey portfolio in January
1998.
(c) Unless otherwise noted, transactions were funded by the Operating
Partnership with funds primarily made available through draws on the
Operating Partnership's credit facilities.
(d) William L. Mack, Chairman of the Board of Directors of the Corporation and
an equity holder of the Operating Partnership, was an indirect owner of an
interest in certain of the buildings contained in the Pacifica portfolio.
(e) On June 1, 1999, the building was acquired for redevelopment for
approximately $34,282.
(f) On May 4, 1999, the Operating Partnership acquired, from an entity whose
principals include Timothy M. Jones, Martin S. Berger and Robert F.
Weinberg, each of whom are affiliated with the Operating Partnership as the
President of the Corporation, a current member of the Board of Directors
and a former member of the Board of Directors of the Corporation,
respectively, approximately 2.5 acres of vacant land in the Stamford
Executive Park, located in Stamford, Fairfield County, Connecticut. The
Operating Partnership acquired the land for approximately $2,181.
(g) On February 1, 1999, the Operating Partnership entered into a ground lease
agreement to lease 27.7 acres of developable land located at the Operating
Partnership's Horizon Center Business Park, located in Hamilton Township,
Mercer County, New Jersey on which Home Depot constructed a 134,000
square-foot retail store.
13
<PAGE>
LAND TRANSACTIONS
On February 26, 1999, the Operating Partnership acquired approximately 2.3 acres
of vacant land adjacent to one of the Operating Partnership's operating
properties located in San Antonio, Bexar County, Texas for approximately $1,524,
which was made available from the Operating Partnership's cash reserves.
On March 2, 1999, the Operating Partnership entered into a joint venture
agreement with SJP Vaughn Drive, L.L.C. Under the agreement, the Operating
Partnership has agreed to contribute its vacant land at Three Vaughn Drive,
Princeton, Mercer County, New Jersey, subject to satisfaction of certain
conditions, for an equity interest in the venture.
On March 15, 1999, the Operating Partnership entered into a joint venture with
SJP 106 Allen Road, L.L.C. to form MC-SJP Pinson Development, LLC, which
acquired vacant land located in Bernards Township, Somerset County, New Jersey.
The venture has commenced construction of a 132,010 square-foot office building
on this site. The Operating Partnership accounts for the joint venture on a
consolidated basis.
On August 31, 1999, the Operating Partnership acquired, from an entity whose
principals include Brant Cali, a former Executive Vice President and Chief
Operating Officer of the Corporation and a former member of the Board of
Directors of the Corporation, and certain immediate family members of John J.
Cali, Chairman Emeritus of the Board of Directors of the Corporation,
approximately 28.1 acres of developable land adjacent to two of the Operating
Partnership's operating properties located in Roseland, Essex County, New Jersey
for approximately $6,097. The acquisition was funded with cash and the issuance
of 121,624 common units to the seller (see Note 12). The Operating Partnership
has commenced construction of a 220,000 square-foot office building on the
acquired land.
In August 1999, the Operating Partnership entered into an agreement with SJP
Properties Company ("SJP Properties") which provides a cooperative effort in
seeking approvals to develop up to approximately 1.8 million square feet of
office development on certain vacant land owned or controlled, respectively, by
the Operating Partnership and SJP Properties, in Hanover and Parsippany, Morris
County, New Jersey. The agreement provides that the parties shall share equally
in the costs associated with seeking such requisite approvals. Subsequent to
obtaining the requisite approvals, upon mutual consent, the Operating
Partnership and SJP Properties may enter into one or more joint ventures to
construct on the vacant land, or seek to dispose of their respective vacant land
parcels subject to the agreement.
DISPOSITIONS
On November 15, 1999, the Operating Partnership sold its 70,550 square-foot
office building located at 400 Alexander Road in Princeton, Mercer County, New
Jersey for net proceeds, after selling costs, of approximately $8,628.
On December 15, 1999, the Operating Partnership sold its 119,301 square-foot
office building located at 20002 North 19th Avenue in Phoenix, Maricopa County,
Arizona for net proceeds, after selling costs, of approximately $8,772.
4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
PRU-BETA 3 (NINE CAMPUS DRIVE)
On March 27, 1998, the Operating Partnership acquired a 50 percent interest in
an existing joint venture with The Prudential Insurance Company of America
("Prudential"), known as Pru-Beta 3, which owns and operates Nine Campus Drive,
a 156,495 square-foot office building, located in the Mack-Cali Business Campus
(formerly Prudential Business Campus) office complex in Parsippany, Morris
County, New Jersey. The Operating Partnership performs management and leasing
services for the property owned by the joint venture and recognized $75 and $75
in fees for such services in the six months ended June 30, 2000 and 1999,
respectively.
14
<PAGE>
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, Peninsula Gateway 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 237,360 square-foot office building located in El
Segundo, Los Angeles County, California, which was constructed and placed in
service by the venture.
SUMMIT RIDGE
Summit Ridge is an office complex of three one-story buildings aggregating
133,750 square feet located in San Diego, San Diego County, California, which
was constructed and placed in service by the venture.
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.
PENINSULA GATEWAY
Peninsula Gateway is a parcel of land purchased from the City of Daly City,
California, upon which the venture has commenced construction of an office
building and theater and retail complex aggregating 471,379 square feet.
STADIUM GATEWAY
Stadium Gateway is a 1.5 acre site located in Anaheim, Orange County,
California, acquired by the venture upon which it has commenced construction
of a six-story 261,554 square-foot office building.
G&G MARTCO (CONVENTION PLAZA)
On April 30, 1998, the Operating Partnership acquired a 49.9 percent interest in
an existing joint venture, known as G&G Martco, which owns Convention Plaza, a
305,618 square-foot office building, located in San Francisco, San Francisco
County, California. A portion of its initial investment was financed through the
issuance of common units, as well as funds drawn from the Operating
Partnership's credit facilities. Subsequently, on June 4, 1999, the Operating
Partnership acquired an additional 0.1 percent interest in G&G Martco through
the issuance of common units (see Note 12). The Operating Partnership performs
management and leasing services for the property owned by the joint venture and
recognized $104 and $108 in fees for such services in the six months ended June
30, 2000 and 1999, respectively.
AMERICAN FINANCIAL EXCHANGE L.L.C.
On May 20, 1998, the Operating Partnership entered into a joint venture
agreement with Columbia Development Company, L.L.C. to form American Financial
Exchange L.L.C. The venture was initially formed to acquire land for future
development, located on the Hudson River waterfront in Jersey City, Hudson
County, New Jersey, adjacent to the Operating Partnership's Harborside Financial
Center office complex. The Operating Partnership holds a 50 percent interest in
the joint venture. Among other things, the partnership agreement provides for a
preferred return on the Operating Partnership's invested capital in the venture,
in addition to the Operating Partnership's proportionate share of the venture's
profit, as defined in the agreement. The joint venture acquired land on which it
constructed a parking facility, which is currently leased to a parking operator
under a 10-year agreement. Such parking facility serves a ferry service between
the Operating Partnership's Harborside property and Manhattan.
15
<PAGE>
RAMLAND REALTY ASSOCIATES L.L.C. (ONE RAMLAND ROAD)
On August 20, 1998, the Operating Partnership entered into a joint venture
agreement with S.B. New York Realty Corp. to form Ramland Realty Associates
L.L.C. The venture was formed to own, manage and operate One Ramland Road, a
232,000 square-foot office/flex building plus adjacent developable land, located
in Orangeburg, Rockland County, New York. In August 1999, the joint venture
completed redevelopment of the property and placed the office/flex building in
service. The Operating Partnership holds a 50 percent interest in the joint
venture. The Operating Partnership performs management, leasing and other
services for the property owned by the joint venture and recognized $147 and $0
in fees for such services in the six months ended June 30, 2000 and 1999,
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 joint venture may be required to pay
additional consideration due to earn-out provisions in the acquisition
contracts. Subsequently, through June 30, 2000, the venture paid $16,519 ($3,304
representing the Operating Partnership's share) in accordance with the earn-out
provisions in the acquisition contracts. The Operating Partnership performs
management and leasing services for the properties owned by the joint venture
and recognized $59 and $63 in fees for such services in the six months ended
June 30, 2000 and 1999, respectively.
ARCAP INVESTORS, L.L.C.
On March 18, 1999, the Operating Partnership invested in ARCap Investors,
L.L.C., a joint venture with several participants, which was formed to invest in
sub-investment grade tranches of commercial mortgage-backed securities ("CMBS").
The Operating Partnership has invested $20,000 in the venture. William L. Mack,
Chairman of the Board of Directors of the Corporation and an equity holder of
the Operating Partnership, is a principal of the managing member of the venture.
At June 30, 2000, the venture held approximately $338,961 face value of CMBS
bonds at an aggregate cost of $147,872.
NORTH PIER AT HARBORSIDE RESIDENTIAL DEVELOPMENT
On August 5, 1999, the Operating Partnership entered into an agreement which,
upon satisfaction of certain conditions, provides for the contribution of its
North Pier at Harborside Financial Center, Jersey City, Hudson County, New
Jersey to a joint venture with Lincoln Property Company Southwest, Inc., in
exchange for cash and an equity interest in the venture. The venture intends to
develop residential housing on the property.
SOUTH PIER AT HARBORSIDE HOTEL DEVELOPMENT
On November 17, 1999, the Operating Partnership entered into an agreement with
Hyatt Corporation to develop a 350-room luxury hotel on the Operating
Partnership's South Pier at Harborside Financial Center, Jersey City, Hudson
County, New Jersey, subject to the satisfaction of certain conditions.
16
<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 June
30, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
June 30, 2000
------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Rental property, net $ 21,312 $101,147 $ 11,100 $ 10,918 $ 19,417 $ 34,664 $ -- $198,558
Other assets 2,616 13,968 2,778 134 4,110 893 274,434 298,933
------------------------------------------------------------------------------------------------------------------------
Total assets $ 23,928 $115,115 $ 13,878 $ 11,052 $ 23,527 $ 35,557 $274,434 $497,491
========================================================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ 56,345 $ 50,000 $ -- $ 17,012 $ -- $136,953 $260,310
Other liabilities 171 6,643 1,321 1 331 533 36,989 45,989
Partners'/members' capital 23,757 52,127 (37,443) 11,051 6,184 35,024 100,492 191,192
------------------------------------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 23,928 $115,115 $ 13,878 $ 11,052 $ 23,527 $ 35,557 $274,434 $497,491
========================================================================================================================
Operating Partnership's net
investment in unconsolidated
joint ventures $ 16,397 $ 33,219 $ 4,949 $ 11,100 $ 2,655 $ 7,349 $ 19,713 $ 95,382
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Rental property, net $ 21,817 $ 70,823 $ 13,672 $ 10,752 $ 19,549 $ 28,755 $ -- $165,368
Other assets 3,319 3,260 2,467 773 5,069 704 239,441 255,033
------------------------------------------------------------------------------------------------------------------------
Total assets $ 25,136 $ 74,083 $ 16,139 $ 11,525 $ 24,618 $ 29,459 $239,441 $420,401
========================================================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ 41,274 $ 43,081 $ -- $ 17,300 $ -- $108,407 $210,062
Other liabilities 186 4,769 1,383 2 1,263 815 36,109 44,527
Partners'/members' capital 24,950 28,040 (28,325) 11,523 6,055 28,644 94,925 165,812
------------------------------------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 25,136 $ 74,083 $ 16,139 $ 11,525 $ 24,618 $ 29,459 $239,441 $420,401
========================================================================================================================
Operating Partnership's net
investment in unconsolidated
joint ventures $ 17,072 $ 23,337 $ 8,352 $ 11,571 $ 2,697 $ 6,073 $ 20,032 $ 89,134
------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<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 and six month periods ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000
--------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $1,234 $2,504 $2,569 $254 $ 969 $1,469 $4,606 $13,605
Operating and other expenses (401) (813) (793) (51) (273) (641) (721) (3,693)
Depreciation and amortization (305) (1,065) (336) (7) (241) (210) -- (2,164)
Interest expense -- (793) (1,039) -- (377) -- (932) (3,141)
--------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 528 $ (167) $ 401 $196 $ 78 $ 618 $2,953 $ 4,607
==========================================================================================================================
Operating Partnership's equity in
earnings of unconsolidated
joint ventures $ 225 $ 102 $ 43 $139 $ 37 $ 124 $ 400 $ 1,070
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
--------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $1,239 -- $2,160 $229 -- $1,071 $ 2,528 $7,227
Operating and other expenses (371) -- (699) (61) -- (575) (1,622) (3,328)
Depreciation and amortization (307) -- (230) (23) -- (108) -- (668)
Interest expense -- -- (738) -- -- -- (519) (1,257)
--------------------------------------------------------------------------------------------------------------------------
Net income $ 561 -- $ 493 $145 -- $ 388 $ 387 $1,974
==========================================================================================================================
Operating Partnership's equity in
earnings of unconsolidated
joint ventures $ 242 -- $ 89 $145 -- $ 78 $ 280 $ 834
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
--------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $2,468 $ 3,560 $ 5,281 $504 $1,947 $ 2,832 $11,150 $27,742
Operating and other expenses (819) (987) (1,553) (82) (590) (1,271) (1,292) (6,594)
Depreciation and amortization (611) (1,406) (762) (20) (482) (403) -- (3,684)
Interest expense -- (1,120) (1,914) -- (746) -- (1,701) (5,481)
--------------------------------------------------------------------------------------------------------------------------
Net income $1,038 $ 47 $ 1,052 $402 $ 129 $ 1,158 $ 8,157 $11,983
==========================================================================================================================
Operating Partnership's equity in
earnings of unconsolidated
joint ventures $ 441 $ 102 $ 212 $345 $ 62 $ 245 $ 800 $ 2,207
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
--------------------------------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues $2,470 -- $ 4,150 $ 417 -- $ 1,988 $ 2,775 $11,800
Operating and other expenses (745) -- (1,390) (130) -- (1,048) (2,012) (5,325)
Depreciation and amortization (625) -- (463) (46) -- (216) -- (1,350)
Interest expense -- -- (1,448) -- -- -- (544) (1,992)
--------------------------------------------------------------------------------------------------------------------------
Net income $1,100 -- $ 849 $ 241 -- $ 724 $ 219 $ 3,133
==========================================================================================================================
Operating Partnership's equity in
earnings (loss) of unconsolidated
joint ventures $ 356 -- $ (277) $ 191 -- $ 134 $ 224 $ 628
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
5. DEFERRED CHARGES AND OTHER ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred leasing costs $ 70,274 $62,076
Deferred financing costs 22,669 16,690
--------------------------------------------------------------------------------------------------------------------------
92,943 78,766
Accumulated amortization (22,002) (20,197)
--------------------------------------------------------------------------------------------------------------------------
Deferred charges, net 70,941 58,569
Prepaid expenses and other assets 9,176 7,867
--------------------------------------------------------------------------------------------------------------------------
Total deferred charges and other assets, net $ 80,117 $ 66,436
==========================================================================================================================
</TABLE>
6. RESTRICTED CASH
Restricted cash includes security deposits for the Operating Partnership's
residential properties and certain commercial properties, and escrow and reserve
funds for debt service, real estate taxes, property insurance, capital
improvements, tenant improvements, and leasing costs established pursuant to
certain mortgage financing arrangements, and is comprised of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------------------------------------------------------------------------------------
<S> <C> <C>
Security deposits $ 6,377 $ 6,021
Escrow and other reserve funds 121 1,060
----------------------------------------------------------------------------------------------
Total restricted cash $ 6,498 $ 7,081
==============================================================================================
</TABLE>
7. RENTAL PROPERTY HELD FOR SALE
As of June 30, 2000 and December 31, 1999, included in total rental property is
an office property that the Operating Partnership has identified as held for
sale. The office property has a carrying value of $12,493 and $12,479 as of June
30, 2000 and December 31, 1999, respectively, and is located in Omaha, Douglas
County, Nebraska.
Also, as of December 31, 1999, included in total rental property were two office
properties that the Operating Partnership had identified as held for sale. The
two office properties had an aggregate carrying value of $65,304 as of December
31, 1999 and were located in Jersey City, Hudson County, New Jersey and
Amarillo, Potter County,
19
<PAGE>
Texas. The Hudson County, New Jersey and Potter County, Texas properties were
each sold in April 2000 in two separate transactions (see Note 3).
The following is a summary of the condensed results of operations of the rental
property held for sale at June 30, 2000 for the six months ended June 30, 2000
and 1999:
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
---------------------------------------------------------------------------------------
<S> <C> <C>
Total revenues $ 1,931 $ 1,881
Operating and other expenses (1,017) (993)
Depreciation and amortization (1) (186)
---------------------------------------------------------------------------------------
Net income $ 913 $ 702
=======================================================================================
</TABLE>
There can be no assurance if and when the sale of the Operating Partnership's
rental property in Douglas County, Nebraska will occur.
8. SENIOR UNSECURED NOTES
On March 16, 1999, the Operating Partnership issued $600,000 face amount of
senior unsecured notes with interest payable semi-annually in arrears. The total
proceeds from the issuance (net of selling commissions and discount) of
approximately $593,500 were used to pay down outstanding borrowings under the
Unsecured Facility, as defined in Note 9, and to pay off certain mortgage loans.
The senior unsecured notes were issued at a discount of approximately $2,748,
which is being amortized over the terms of the respective tranches as an
adjustment to interest expense.
On August 2, 1999, the Operating Partnership issued an additional $185,283 of
senior unsecured notes with interest payable monthly. The Operating Partnership
used the proceeds to retire the TIAA Mortgage, as defined in Note 10.
The Operating Partnership's total senior unsecured notes (collectively, "Senior
Unsecured Notes") are redeemable at any time at the option of the Operating
Partnership, subject to certain conditions including yield maintenance.
A summary of the terms of the Senior Unsecured Notes outstanding as of June 30,
2000 and December 31, 1999 is as follows:
<TABLE>
<CAPTION>
June 30, December 31, Effective
2000 1999 Rate (1)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7.18% Senior Unsecured Notes, due December 31, 2003 $185,283 $185,283 7.23%
7.00% Senior Unsecured Notes, due March 15, 2004 299,704 299,665 7.27%
7.25% Senior Unsecured Notes, due March 15, 2009 297,955 297,837 7.49%
------------------------------------------------------------------------------------------------------------------
Total Senior Unsecured Notes $782,942 $782,785 7.34%
==================================================================================================================
</TABLE>
(1) Includes the cost of terminated treasury lock agreements (if any), offering
and other transaction costs and the discount on the notes, as applicable.
The terms of the Senior Unsecured Notes include certain restrictions and
covenants which require compliance with financial ratios relating to the maximum
amount of debt leverage, the maximum amount of secured indebtedness, the minimum
amount of debt service coverage and the maximum amount of unsecured debt as a
percent of unsecured assets.
20
<PAGE>
9. REVOLVING CREDIT FACILITIES
2000 UNSECURED FACILITY
On June 22, 2000, the Operating Partnership obtained an unsecured revolving
credit facility ("2000 Unsecured Facility") with a current borrowing capacity of
$800,000 from a group of 24 lenders. The interest rate on outstanding borrowings
under the credit line is currently the London Inter-Bank Offered Rate ("LIBOR")
(6.64 percent at June 30, 2000) 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. Based upon a change in the
Operating Partnership's unsecured debt rating, the interest rate will be changed
on a sliding scale. 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 to
increase the borrowing capacity of the credit line up to $1,000,000. The 2000
Unsecured Facility matures in June 2003, with an extension option of one year,
which would require a payment of 25 basis points of the then borrowing capacity
of the credit line upon exercise.
The terms of the 2000 Unsecured Facility include certain restrictions and
covenants which limit, among other things the payment of dividends (as discussed
below), the incurrence of additional indebtedness, the incurrence of liens and
the disposition of assets, and which require compliance with financial ratios
relating to the maximum leverage ratio, the maximum amount of secured
indebtedness, the minimum amount of tangible net worth, the minimum amount of
debt service coverage, the minimum amount of fixed charge coverage, the maximum
amount of unsecured indebtedness, the minimum amount of unencumbered property
debt service coverage and certain investment limitations. The dividend
restriction referred to above provides that, except to enable the Corporation to
continue to qualify as a REIT under the Code, the Corporation will not during
any four consecutive fiscal quarters make distributions with respect to common
stock or other equity interests in an aggregate amount in excess of 90 percent
of funds from operations (as defined) for such period, subject to certain other
adjustments.
The lending group for the 2000 Unsecured Facility consists of: Chase Manhattan
Bank, as administrative agent; Fleet National Bank, as syndication agent; Bank
of America, N.A., as documentation agent; Bank One, NA, Commerzbank
Aktiengesellschaft, First Union National Bank, as senior managing agents; PNC
Bank, N.A., as managing agent; Bank Austria Creditanstalt Corporate Finance,
Inc., Bayerische Hypo-und Vereinsbank AG, Dresdner Bank AG, Societe Generale,
Summit Bank, Wells Fargo Bank, N.A., as co-agents; and Bayerische Landesbank
Girozentrale; Citizens Bank of Massachusetts; European American Bank; Chevy
Chase Bank; Citicorp Real Estate, Inc.; DG Bank Deutsche Genossenschaftsbank,
AG; Erste Bank; KBC Bank N.V.; SunTrust Bank; Bank Leumi USA; and Israel
Discount Bank of New York.
In conjunction with obtaining the 2000 Unsecured Facility, the Operating
Partnership drew funds on the new facility to repay in full and terminate the
Unsecured Facility.
UNSECURED FACILITY
The Operating Partnership had an unsecured revolving credit facility ("Unsecured
Facility") with a borrowing capacity of $1,000,000 from a group of 28 lenders.
The interest rate was based on the Operating Partnership's achievement of
investment grade unsecured debt ratings and, at the Operating Partnership's
election, bore interest at either 90 basis points over LIBOR or the higher of
the lender's prime rate or the Federal Funds rate plus 50 basis points. In
conjunction with obtaining the 2000 Unsecured Facility, the Operating
Partnership repaid in full and terminated the Unsecured Facility on June 22,
2000.
PRUDENTIAL FACILITY
The Operating Partnership has a revolving credit facility ("Prudential
Facility") with Prudential Securities Corp. ("PSC") in the amount of $100,000,
which currently bears interest at 110 basis points over one-month LIBOR, with a
maturity date of June 29, 2001. The Prudential Facility is a recourse liability
of the Operating Partnership and is secured by the Operating Partnership's
equity interest in Harborside Plazas II and III. The Prudential Facility limits
the ability of the Operating Partnership to make any distributions during any
fiscal quarter in an amount in excess of 100 percent of the Operating
Partnership's available funds from operations (as defined) for the immediately
preceding fiscal quarter (except to the extent such excess distributions or
dividends are attributable to gains from the sale of the Operating Partnership's
assets or are required for the Corporation to maintain its status as a REIT
under the Code); provided, however, that the Operating Partnership may make
distributions and pay dividends in excess of
21
<PAGE>
100 percent of available funds from operations (as defined) for the preceding
fiscal quarter for not more than three consecutive quarters. In addition to the
foregoing, the Prudential Facility limits the liens placed upon the subject
property and certain collateral, the use of proceeds from the Prudential
Facility, and the maintenance of ownership of the subject property and assets
derived from said ownership.
SUMMARY
As of June 30, 2000 and December 31, 1999, the Operating Partnership had
outstanding borrowings of $215,730 and $177,000, respectively, under its
revolving credit facilities (with aggregate borrowing capacity of $900,000 and
$1,000,000, respectively). The total outstanding borrowings were from the 2000
Unsecured Facility at June 30, 2000 and from the Unsecured Facility at December
31, 1999, with no outstanding borrowings under the Prudential Facility.
10. MORTGAGES AND LOANS PAYABLE
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------------------------------------------------------------------------
<S> <C> <C>
Portfolio Mortgages $150,000 $150,000
Property Mortgages 338,605 380,390
----------------------------------------------------------------------------------
Total mortgages and loans payable $488,605 $530,390
==================================================================================
</TABLE>
PORTFOLIO MORTGAGES
TIAA MORTGAGE
The Operating Partnership had an aggregate $185,283 non-recourse mortgage loan
with Teachers Insurance and Annuity Association of America, with interest only
payable monthly at a fixed annual rate of 7.18 percent ("TIAA Mortgage"). The
TIAA Mortgage was secured and cross collateralized by 43 properties. The TIAA
Mortgage was prepayable in whole or in part subject to certain provisions,
including yield maintenance.
Using the proceeds from the issuance of $185,283 of senior unsecured notes on
August 2, 1999 (see Note 8), the Operating Partnership repaid in full and
retired the TIAA Mortgage.
$150,000 PRUDENTIAL MORTGAGE LOAN
The Operating Partnership has a $150,000, interest-only, non-recourse mortgage
loan from Prudential ("$150,000 Prudential Mortgage Loan"). The loan, which is
secured by 11 properties, has an effective annual interest rate of 7.10 percent
and a seven-year term. The Operating Partnership has the option to convert the
mortgage loan to unsecured debt as a result of the achievement of an investment
grade credit rating. The mortgage loan is prepayable in whole or in part subject
to certain provisions, including yield maintenance.
PROPERTY MORTGAGES
The Operating Partnership's property mortgages ("Property Mortgages") are
comprised of various non-recourse loans which are collateralized by certain of
the Operating Partnership's rental properties. Payments on Property Mortgages
are generally due in monthly installments of principal and interest, or interest
only.
22
<PAGE>
A summary of the Property Mortgages as of June 30, 2000 and December 31, 1999 is
as follows:
<TABLE>
<CAPTION>
Principal Balance At
Effective -------------------------
Interest June 30, December 31,
Property Name Lender Rate 2000 1999 Maturity
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
201 Commerce Drive Sun Life Assurance Co. 6.240% $ 1,026 $ 1,059 09/01/00
3 & 5 Terri Lane First Union National Bank 6.220% 4,414 4,434 10/31/00
101 & 225 Executive Drive Sun Life Assurance Co. 6.270% 2,281 2,375 06/01/01
Mack-Cali Morris Plains Corestates Bank 7.510% 2,196 2,235 12/31/01
Mack-Cali Willowbrook CIGNA 8.670% 9,797 10,250 10/01/03
400 Chestnut Ridge Prudential Insurance Co. 9.440% 14,027 14,446 07/01/04
Mack-Cali Centre VI Principal Life Insurance Co. 6.865% 35,000 35,000 04/01/05
Mack-Cali Bridgewater I New York Life Ins. Co. 7.000% 23,000 23,000 09/10/05
Mack-Cali Woodbridge II New York Life Ins. Co. 7.500% 17,500 17,500 09/10/05
Mack-Cali Short Hills Prudential Insurance Co. 7.740% 26,238 26,604 10/01/05
500 West Putnam Avenue New York Life Ins. Co. 6.520% 10,448 10,784 10/10/05
Harborside - Plaza I U.S. West Pension Trust 5.610% 52,662 51,015 01/01/06
Harborside - Plaza II and III Northwestern Mutual Life Ins. 7.320% 97,338 98,985 01/01/06
Mack-Cali Airport Allstate Life Insurance Co. 7.050% 10,500 10,500 04/01/07
Kemble Plaza II Mitsubishi Tr & Bk Co. LIBOR+0.65% -- 40,025 01/31/08
Kemble Plaza I Mitsubishi Tr & Bk Co. LIBOR+0.65% 32,178 32,178 01/31/09
---------------------------------------------------------------------------------------------------------------------
Total Property Mortgages $338,605 $380,390
=====================================================================================================================
</TABLE>
INTEREST RATE CONTRACTS
On May 24, 1995, the Operating Partnership entered into an interest rate swap
agreement with a commercial bank. The swap agreement fixed the Operating
Partnership's one-month LIBOR base to 6.285 percent per annum on a notional
amount of $24,000. The swap agreement expired in August 1999.
On January 23, 1996, the Operating Partnership entered into an interest rate
swap agreement with a commercial bank. The swap agreement fixed the Operating
Partnership's one-month LIBOR base to 5.265 percent per annum on a notional
amount of $26,000. The swap agreement expired in January 1999.
On November 20, 1997, the Operating Partnership entered into a forward treasury
rate lock agreement with a commercial bank. The agreement locked an interest
rate of 5.88 percent per annum for the interpolated seven-year U.S. Treasury
Note effective March 1, 1998, on a notional amount of $150,000. The agreement
was used to fix the interest rate on the $150,000 Prudential Mortgage Loan. On
March 2, 1998, the Operating Partnership paid $2,035 in settlement of the
agreement, which is being amortized to interest expense over the term of the
$150,000 Prudential Mortgage Loan.
On October 1, 1998, the Operating Partnership entered into a forward treasury
rate lock agreement with a commercial bank. The agreement locked an interest
rate of 4.089 percent per annum for the three-year U.S. Treasury Note effective
November 4, 1999, on a notional amount of $50,000. The agreement was used to fix
the Index Rate on $50,000 of the Harborside-Plaza I mortgage, for which the
interest rate was re-set to the three-year U.S. Treasury Note (5.82 percent)
plus 110 basis points for the three years beginning November 4, 1999 (see
"Property Mortgages: Harborside-Plaza I"). The Operating Partnership received
$2,208 in settlement of the agreement, which is being amortized to interest
expense over the three year-period.
In connection with the issuance of the $600,000 face amount of Senior Unsecured
Notes in March 1999, the Operating Partnership entered into and settled forward
treasury rate lock agreements. These agreements were settled at a cost of
approximately $517, which is being amortized to interest expense over the terms
of the respective tranches.
23
<PAGE>
SCHEDULED PRINCIPAL PAYMENTS
Scheduled principal payments and related weighted average annual interest rates
for the Operating Partnership's Senior Unsecured Notes (Note 8), revolving
credit facilities (Note 9) and mortgages and loans payable as of June 30, 2000
are as follows:
<TABLE>
<CAPTION>
Weighted Avg.
Scheduled Principal Interest Rate of
Year Amortization Maturities Total Future Repayments (a)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July through December 2000 $ 1,705 $ 5,419 $ 7,124 6.93%
2001 3,257 4,211 7,468 7.44%
2002 3,458 -- 3,458 8.20%
2003 3,518 407,824 411,342 7.40%
2004 2,332 309,863 312,195 7.34%
Thereafter 970 744,720 745,690 7.19%
------------------------------------------------------------------------------------------------------------------
Totals/Weighted Average $ 15,240 $ 1,472,037 $1,487,277 7.28%
==================================================================================================================
</TABLE>
(a) Assumes a weighted average LIBOR rate at June 30, 2000 of 6.59 percent in
calculating revolving credit facility and other variable rate debt interest
rates.
Scheduled principal payments during the six months ended June 30, 2000 and 1999
amounted to $1,603 and $1,815, respectively.
CASH PAID FOR INTEREST & INTEREST CAPITALIZED
Cash paid for interest for the six months ended June 30, 2000 and 1999 was
$56,035 and $38,216, respectively. Interest capitalized by the Operating
Partnership for the six months ended June 30, 2000 and 1999 was $4,189 and
$3,019, respectively.
SUMMARY OF INDEBTEDNESS
As of June 30, 2000, the Operating Partnership's total indebtedness of
$1,487,277 (weighted average interest rate of 7.28 percent) was comprised of
$247,908 of revolving credit facility borrowings and other variable rate
mortgage debt (weighted average rate of 7.46 percent) and fixed rate debt of
$1,239,369 (weighted average rate of 7.24 percent).
As of December 31, 1999, the Operating Partnership's total indebtedness of
$1,490,175 (weighted average interest rate of 7.27 percent) was comprised of
$249,204 of revolving credit facility borrowings and other variable rate
mortgage debt (weighted average rate of 7.42 percent) and fixed rate debt of
$1,240,971 (weighted average rate of 7.24 percent).
11. PARTNERS' CAPITAL
Partners' capital in the accompanying financial statements of the Operating
Partnership 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 ("Units Warrants") in the
Operating Partnership issued in connection with the Operating Partnership's
December 1997 acquisition of 54 office properties ("Mack Properties") from the
Mack Company and Patriot American Office Group ("Mack Transaction").
Net income allocated to the preferred unitholders and limited partners reflects
their pro-rata share of net income and distributions.
24
<PAGE>
COMMON STOCK
On August 6, 1998, the Board of Directors of the Corporation authorized a share
repurchase program ("Repurchase Program") under which the Corporation is
permitted to purchase up to $100,000 of the Corporation's outstanding common
stock. Purchases can be made from time to time in open market transactions at
prevailing prices or through privately negotiated transactions.
Through December 31, 1999, the Corporation, under the Repurchase Program,
purchased for constructive retirement, 1,869,200 shares of its outstanding
common stock for an aggregate cost of approximately $52,558. Concurrent with
these purchases, the Corporation sold to the Operating Partnership 1,869,200
common units for approximately $52,558. The Corporation did not purchase any of
its outstanding common stock during the six months ended June 30, 2000.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Corporation filed a registration statement with the SEC for the
Corporation's dividend reinvestment and stock purchase plan ("Plan") which was
declared effective in February 1999. The Plan commenced on March 1, 1999.
During the year ended December 31, 1999, 1,082 shares were issued and proceeds
of approximately $32 were received from stock purchases and/or dividend
reinvestments under the Plan. The proceeds of the shares issued were contributed
by the Corporation to the Operating Partnership in exchange for common units.
The Corporation did not issue any shares under the Plan during the six months
ended June 30, 2000.
SHAREHOLDER RIGHTS PLAN
On June 10, 1999, the Board of Directors of the Corporation authorized a
dividend distribution of one preferred share purchase right ("Right") for each
outstanding share of common stock which were distributed to all holders of
record of the common stock on July 6, 1999. Each Right entitles the registered
holder to purchase from the Corporation one one-thousandth of a share of Series
A junior participating preferred stock, par value $0.01 per share ("Preferred
Shares"), at a price of $100.00 per one one-thousandth of a Preferred Share
("Purchase Price"), subject to adjustment as provided in the rights agreement.
The Rights expire on July 6, 2009, unless the expiration date is extended or the
Right is redeemed or exchanged earlier by the Corporation.
The Rights are attached to each share of common stock. The Rights are generally
exercisable only if a person or group becomes the beneficial owner of 15 percent
or more of the outstanding common stock or announces a tender offer for 15
percent or more of the outstanding common stock ("Acquiring Person"). In the
event that a person or group becomes an Acquiring Person, each holder of a Right
will have the right to receive, upon exercise, common stock having a market
value equal to two times the Purchase Price of the Right.
On June 27, 2000, the Corporation amended its shareholder rights plan to prevent
the triggering of such plan as a result of the Mergers.
STOCK OPTION PLANS
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 the
Employee Plan in 1996, 1997, 1998 and 1999 become exercisable over a five-year
period. All stock options granted under the 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 June 30, 2000 and December 31, 1999,
the stock options outstanding had a weighted average remaining contractual life
of approximately 6.8 and 7.4 years, respectively.
25
<PAGE>
Information regarding the Corporation's stock option plans is summarized below:
<TABLE>
<CAPTION>
Weighted
Shares Average
Under Exercise
Options Price
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at January 1, 1999 3,939,982 $33.22
Granted 426,400 $25.23
Exercised (47,583) $22.31
Lapsed or canceled (591,648) $36.92
-----------------------------------------------------------------------------------------------------
Outstanding at December 31, 1999 3,727,151 $31.86
Granted -- --
Exercised (79,910) $20.90
Lapsed or canceled (212,423) $34.91
-----------------------------------------------------------------------------------------------------
Outstanding at June 30, 2000 3,434,818 $31.93
=====================================================================================================
Options exercisable at December 31, 1999 1,724,920 $29.78
Options exercisable at June 30, 2000 2,246,063 $31.25
-----------------------------------------------------------------------------------------------------
Available for grant at December 31, 1999 662,878
Available for grant at June 30, 2000 875,301
-----------------------------------------------------------------------------------------------------
</TABLE>
STOCK WARRANTS
The Corporation has outstanding 380,000 warrants to purchase an equal number of
shares of common stock ("Stock Warrants") at $33 per share (the market price at
date of grant). Such warrants are all currently exercisable and expire on
January 31, 2007.
The Corporation also has outstanding 464,976 Stock Warrants to purchase an equal
number of shares of common stock at $38.75 per share (the market price at date
of grant). Such warrants vest equally over a five-year period through December
31, 2001 and expire on December 12, 2007.
As of June 30, 2000 and December 31, 1999, there were a total of 844,976 and
914,976 Stock Warrants outstanding, respectively. As of June 30, 2000 and
December 31, 1999, there were 688,985 and 585,989 Stock Warrants exercisable,
respectively. During the six months ended June 30, 2000 and 1999, 70,000 and no
Stock Warrants were canceled, respectively. No Stock Warrants have been
exercised through June 30, 2000.
STOCK COMPENSATION
In July 1999, the Corporation entered into amended and restated employment
contracts with six of its then key executive officers which provided for, among
other things, compensation in the form of stock awards and associated tax
obligation payments. In addition, in December 1999, the Corporation granted
stock awards to certain other officers of the Corporation. In connection with
the stock awards (collectively, "Restricted Stock Awards"), the executive
officers and certain other officers are to receive up to a total of 211,593
shares of the Corporation's common stock vesting over a five-year period
contingent upon the Corporation meeting certain performance and/or stock price
appreciation objectives. The Restricted Stock Awards provided to the executive
officers and certain other officers were granted under the Employee Plan.
Effective January 1, 2000, 31,737 shares of the Corporation's common stock were
issued to the executive officers and certain other officers upon meeting the
required objectives.
Pursuant to the Cali Agreement, an aggregate of 38,649 shares of the
Corporation's common stock were issued to Brant Cali and John R. Cali upon
vesting of their remaining Restricted Stock Awards.
DEFERRED STOCK COMPENSATION PLAN FOR DIRECTORS
The Deferred Compensation Plan for Directors ("Deferred Compensation Plan"),
which commenced January 1, 1999, is a plan which 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
26
<PAGE>
participating director's account is also credited for an equivalent amount of
deferred stock units based on the dividend rate for each quarter.
During 1999, 3,319 deferred stock units were earned. During the six months ended
June 30, 2000, 2,132 deferred stock units were earned.
EARNINGS PER UNIT
FASB No. 128 requires a dual presentation of basic and diluted EPU on the face
of the income statement for all companies with complex capital structures even
where the effect of such dilution is not material. Basic EPU excludes dilution
and is computed by dividing net income available to common unitholders by the
weighted average number of units outstanding for the period. Diluted EPU
reflects the potential dilution that could occur if securities or other
contracts to issue common units were exercised or converted into common units.
The following information presents the Operating Partnership's results for the
three and six month periods ended June 30, 2000 and 1999 in accordance with FASB
No. 128:
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
------------------------------------------------------------------------------------------------
Basic EPU Diluted EPU Basic EPU Diluted EPU
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income available to common unitholders $107,327 $107,327 $ 21,452 $ 21,452
Add: Net income attributable to
Operating Partnership - preferred units -- 3,765 -- --
------------------------------------------------------------------------------------------------
Adjusted net income $107,327 $111,092 $ 21,452 $ 21,452
================================================================================================
Weighted average units 66,627 73,284 67,173 67,486
------------------------------------------------------------------------------------------------
Per Unit $ 1.61 $ 1.52 $ 0.32 $ 0.32
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
----------------------------------------------------------------------------------------------------
Basic EPU Diluted EPU Basic EPU Diluted EPU
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income available to common unitholders $149,049 $149,049 $ 58,396 $ 58,396
Add: Net income attributable to
Operating Partnership - preferred units -- 7,634 -- --
----------------------------------------------------------------------------------------------------
Adjusted net income $149,049 $156,683 $58,396 $ 58,396
====================================================================================================
Weighted average units 66,527 73,237 67,092 67,385
----------------------------------------------------------------------------------------------------
Per Unit $ 2.24 $ 2.14 $ 0.87 $ 0.87
====================================================================================================
</TABLE>
The following schedule reconciles the units used in the basic EPU calculation to
the units used in the diluted EPU calculation:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic EPU Units: 66,627 67,173 66,527 67,092
Add:Operating Partnership - preferred units 6,457 -- 6,537 --
(after conversion to common units)
Stock options 200 313 173 293
----------------------------------------------------------------------------------------------------------
Diluted EPU Units: 73,284 67,486 73,237 67,385
==========================================================================================================
</TABLE>
Contingent Units and Restricted Stock Awards outstanding in 2000 and 1999, if
any, were not included in the computation of diluted EPU as such units were
anti-dilutive during each of the periods. Preferred Units outstanding in 1999
were not included in the 1999 computation of diluted EPU as such units were
anti-dilutive during the periods.
27
<PAGE>
Pursuant to the Repurchase Program, during 1999, the Corporation purchased for
constructive retirement 1,014,500 shares of its outstanding common stock for
approximately $27,500. Concurrent with these purchases, the Corporation sold an
equivalent number of common units to the Operating Partnership. The Corporation
did not purchase any of its outstanding common stock during the six months ended
June 30, 2000.
12. REDEEMABLE PARTNERSHIP UNITS
PREFERRED UNITS
In connection with the Mack Transaction in December 1997, the Operating
Partnership issued 15,237 Series A Preferred Units and 215,325 Series B
Preferred Units, with an aggregate value of $236,491. The Preferred Units have a
stated value of $1,000 per unit and are preferred as to assets over any class of
common units or other class of preferred units of the Operating Partnership,
based on circumstances per the applicable unit certificates.
The quarterly distribution on each Preferred Unit (representing 6.75 percent of
the Preferred Unit stated value of $1,000 on an annualized basis) is an amount
equal to the greater of (i) $16.875 or (ii) the quarterly distribution
attributable to a Preferred Unit determined as if such unit had been converted
into common units, subject to adjustment for customary anti-dilution rights.
Each of the Series A Preferred Units may be converted at any time into common
units at a conversion price of $34.65 per unit, and, after the one year
anniversary of the date of the Series A Preferred Units' initial issuance,
common units received pursuant to such conversion may be redeemed into common
stock. Each of the Series B Preferred Units may be converted at any time into
common units at a conversion price of $34.65 per unit, and, after the three year
anniversary of the date of the Series B Preferred Units' initial issuance,
common units received pursuant to such conversion may be redeemed into common
stock. Each of the common units are redeemable for an equal number of shares of
common stock.
During 1999, 20,952 Series A Preferred Units were converted into 604,675 common
units. During the six months ended June 30, 2000, 6,180 Series A Preferred Units
were converted into 178,355 common units.
As of June 30, 2000, there were 223,124 Series B Preferred Units outstanding
(convertible into 6,439,366 common units).
COMMON UNITS
Certain individuals and entities own common units in the Operating Partnership.
A common unit and a share of common stock of the General Partner have
substantially the same economic characteristics in as much as they effectively
share equally in the net income or loss of the Operating Partnership.
Common units are redeemable by the common unitholders at their option, subject
to certain restrictions, on the basis of one common unit for either one share of
common stock or cash equal to the fair market value of a share at the time of
the redemption. The General Partner has the option to deliver shares of common
stock in exchange for all or any portion of the cash requested. When a
unitholder redeems a common unit for common stock of the Corporation, limited
partners' capital is reduced and the General Partner's capital is increased.
Effective August 21, 1998, the partnership agreement was amended to vest this
right in the Operating Partnership, rather than in the General Partnership.
Common units held by the General Partner are not redeemable.
On June 4, 1999, in connection with the acquisition of a 0.1 percent interest in
the G&G Martco joint venture (see Note 4), the Operating Partnership issued 437
common units, valued at approximately $17.
On August 31, 1999, in connection with the acquisition of 28.1 acres of
developable land located in Roseland, New Jersey, the Operating Partnership
issued 121,624 common units, valued at approximately $3,345.
During 1999, an aggregate of 1,934,657 common units were redeemed for an
equivalent number of shares of common stock in the Corporation.
During 1999, the Operating Partnership also issued 275,046 common units, valued
at approximately $8,141, in connection with the achievement of certain
performance goals at the Mack Properties in redemption of an equivalent number
of contingent common units.
28
<PAGE>
During the six months ended June 30, 2000, an aggregate of 256,346 common units
were redeemed for an equivalent number of shares of common stock in the
Corporation.
As of June 30, 2000, there were 8,075,720 common units outstanding.
CONTINGENT COMMON & PREFERRED UNITS
In connection with the Mack Transaction in December 1997, 2,006,432 contingent
common units, 11,895 Series A contingent Preferred Units and 7,799 Series B
contingent Preferred Units were issued as contingent non-participating units
("Contingent Units"). Redemption of such Contingent Units occurred upon the
achievement of certain performance goals relating to certain of the Mack
Properties, specifically the achievement of certain leasing activity. When
Contingent Units are redeemed for common and Preferred Units, an adjustment to
the purchase price of certain of the Mack Properties is recorded, based on the
value of the units issued.
On account of certain of the performance goals at the Mack Properties having
been achieved during 1999, the Operating Partnership redeemed 275,046 contingent
common units and issued an equivalent number of common units, as indicated
above. There were no Contingent Units outstanding as of December 31, 1999.
UNIT WARRANTS
The Operating Partnership has 2,000,000 Unit Warrants outstanding. The Unit
Warrants are exercisable at $37.80 per common unit and expire on December 11,
2002.
13. MINORITY INTEREST IN CONSOLIDATED PARTIALLY-OWNED PROPERTIES
On December 28, 1999, the Operating Partnership sold an interest in six office
properties located in Parsippany, Morris County, New Jersey for $83,600. Amongst
other things, the operating agreements provide for a preferred return to the
joint venture members. On June 29, 2000, the Operating Partnership acquired a
100 percent interest in these properties and the Operating Partnership paid an
additional $836 to the minority interest member in excess of its investment.
The Operating Partnership controls these operations and has consolidated the
financial position and results of operations of partially-owned properties in
the financial statements of the Operating Partnership. The equity interests of
the other members are reflected as minority interests: partially-owned
properties in the consolidated financial statements of the Operating
Partnership.
14. EMPLOYEE BENEFIT PLAN
All employees of the Corporation who meet certain minimum age and period of
service requirements are eligible to participate in a 401(k) defined
contribution plan (the "401(k) Plan"). The 401(k) Plan allows eligible employees
to defer up to 15 percent of their annual compensation, subject to certain
limitations imposed by federal law. The amounts contributed by employees are
immediately vested and non-forfeitable. The Corporation, at management's
discretion, may match employee contributions and/or make discretionary
contributions. Total expense recognized by the Operating Partnership for the six
months ended June 30, 2000 and 1999 was $200 and $0, respectively.
29
<PAGE>
15. COMMITMENTS AND CONTINGENCIES
TAX ABATEMENT AGREEMENTS
HARBORSIDE FINANCIAL CENTER PROPERTY
Pursuant to an agreement with the City of Jersey City, New Jersey obtained by
the former owner of the Harborside property in 1988 and assumed by the
Operating Partnership as part of the acquisition of the property in November
1996, the Operating Partnership is required to make payments in lieu of
property taxes ("PILOT") on its Harborside property. The agreement, which
commenced in 1990, is for a term of 15 years. Such PILOT is equal to two
percent of Total Project Costs, as defined, in year one and increases by $75
per annum through year fifteen. Total Project Costs, as defined, are
$145,644. The PILOT totaled $1,338 and $1,302 for the six months ended June
30, 2000 and 1999, respectively.
GROUND LEASE AGREEMENTS
Future minimum rental payments under the terms of all non-cancelable ground
leases under which the Operating Partnership is the lessee, as of June 30, 2000,
are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---------------------------------------------------------------
<S> <C>
July 1, 2000 to December 31, 2000 $ 266
2001 531
2002 531
2003 531
2004 534
Thereafter 22,532
---------------------------------------------------------------
Total $24,925
===============================================================
</TABLE>
Ground lease expense incurred during the six months ended June 30, 2000 and 1999
amounted to $285 and $260, respectively.
OTHER
On April 19, 1999, the Corporation announced the following changes in the
membership of its Board of Directors and the identities, titles and
responsibilities of its executive officers: (i) Thomas A. Rizk resigned from the
Board of Directors, the Executive Committee of the Board of Directors, his
position as Chief Executive Officer and as an employee of the Corporation; (ii)
Mitchell E. Hersh was appointed Chief Executive Officer of the Corporation
simultaneous with his resignation from his positions as President and Chief
Operating Officer of the Corporation; (iii) Timothy M. Jones was appointed
President of the Corporation simultaneous with his resignation from his
positions as Executive Vice President and Chief Investment Officer of the
Corporation; and (iv) Brant Cali was appointed to the Board of Directors of the
Corporation to fill the remainder of Thomas A. Rizk's term as a Class III
Director and was appointed Chief Operating Officer of the Corporation, also
remaining as an Executive Vice President and Assistant Secretary of the
Corporation.
Pursuant to the terms of Mr. Rizk's employment agreement entered into with the
Corporation in December 1997 and an agreement entered into simultaneous with his
resigning from the Corporation, Mr. Rizk received a payment of approximately
$14,490 in April 1999, $500 in April 2000 and $500 annually over the next two
years. All costs associated with Mr. Rizk's resignation are included in
non-recurring charges for the three and six month periods ended June 30, 1999.
On June 27, 2000, pursuant to the Cali agreement, both Brant Cali and John R.
Cali resigned their positions as officers of the Corporation and Brant Cali
resigned as director of the Corporation ("Cali Agreement"). As required by Brant
Cali and John R. Cali's amended and restated employment agreements, under the
Cali Agreement: (i) the Corporation paid $2,820 and $2,806 (less applicable
withholding) to Brant Cali and John R. Cali, respectively; and (ii) all options
to acquire shares of the Corporation's common stock and Restricted Stock Awards
held by Brant Cali and John R. Cali became fully vested on the effective date of
their resignations from the Corporation. All costs associated with Brant Cali
and John R. Cali's resignations are included in non-recurring charges for the
three and six month periods ended June 30, 2000.
30
<PAGE>
The Operating Partnership is a defendant in certain litigation arising in the
normal course of business activities. Management does not believe that the
resolution of these matters will have a materially adverse effect upon the
Operating Partnership.
16. TENANT LEASES
The Properties are leased to tenants under operating leases with various
expiration dates through 2016. Substantially all of the leases provide for
annual base rents plus recoveries and escalation charges based upon the tenant's
proportionate share of and/or increases in real estate taxes and certain
operating costs, as defined, and the pass through of charges for electrical
usage.
17. 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 and depreciation and amortization.
The Operating Partnership evaluates performance based upon net operating income
from the combined properties in the segment.
31
<PAGE>
Selected results of operations for the three and six month periods ended June
30, 2000 and 1999 and selected asset information as of June 30, 2000 and
December 31, 1999 regarding the Operating Partnership's operating segment are as
follows:
<TABLE>
<CAPTION>
Total Corporate & Total
Segment Other (e) Operating Partnership
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL CONTRACT REVENUES (a):
Three months ended:
June 30, 2000 $ 140,117 $ 2,372 $ 142,489 (f)
June 30, 1999 132,575 567 133,142 (g)
Six months ended:
June 30, 2000 $ 280,258 $ 3,020 $ 283,278 (h)
June 30, 1999 264,344 142 264,486 (i)
TOTAL OPERATING AND INTEREST EXPENSES (b):
Three months ended:
June 30, 2000 $ 46,079 $ 27,484 $ 73,563 (j)
June 30, 1999 44,567 28,164 72,731 (k)
Six months ended:
June 30, 2000 $ 92,809 $ 56,118 $ 148,927 (l)
June 30, 1999 87,723 57,115 144,838 (m)
NET OPERATING INCOME (c):
Three months ended:
June 30, 2000 $ 94,038 $ (25,112) $ 68,926 (f) (j)
June 30, 1999 88,008 (27,597) 60,411 (g) (k)
Six months ended:
June 30, 2000 $ 187,449 $ (53,098) $ 134,351 (h) (l)
June 30, 1999 176,621 (56,973) 119,648 (i) (m)
TOTAL ASSETS:
June 30, 2000 $3,567,243 $ 60,861 $3,628,104
December 31, 1999 3,576,806 52,795 3,629,601
TOTAL LONG-LIVED ASSETS (d):
June 30, 2000 $3,481,751 $ 42,253 $3,524,004
December 31, 1999 3,510,285 30,318 3,540,603
=================================================================================================
</TABLE>
(a) Total contract revenues represent all revenues during the period (including
the Operating Partnership's share of net income from unconsolidated joint
ventures), excluding adjustments for straight-lining of rents and the
Operating Partnership's share of straight-line rent adjustments from
unconsolidated joint ventures. All interest income is excluded from segment
amounts and is classified in Corporate & 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 is 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 $3,403 of adjustments for straight-lining of rents and ($3) for
the Operating Partnership's share of straight-line rent adjustments from
unconsolidated joint ventures.
(g) Excludes $3,859 of adjustments for straight-lining of rents and ($26) for
the Operating Partnership's share of straight-line rent adjustments from
unconsolidated joint ventures.
(h) Excludes $5,536 of adjustments for straight-lining of rents and $54 for the
Operating Partnership's share of straight-line rent adjustments from
unconsolidated joint ventures.
(i) Excludes $7,422 of adjustments for straight-lining of rents and ($44) for
the Operating Partnership's share of straight-line rent adjustments from
unconsolidated joint ventures.
(j) Excludes $22,945 of depreciation and amortization and non-recurring charges
of $9,228.
(k) Excludes $22,465 of depreciation and amortization and non-recurring charges
of $16,458.
(l) Excludes $45,127 of depreciation and amortization and non-recurring charges
of $9,228.
(m) Excludes $44,434 of depreciation and amortization and non-recurring charges
of $16,458.
32
<PAGE>
18. IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities ("FASB No.
133"). FASB No. 133 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. In June 1999, the FASB delayed the implementation
date of FASB No. 133 by one year (January 1, 2001 for the Operating
Partnership). FASB No. 133 requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. Management of the
Operating Partnership anticipates that, due to its limited use of derivative
instruments, the adoption of FASB No. 133 will not have a significant effect on
the Operating Partnership's results of operations or its financial position.
33
<PAGE>
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements of Mack-Cali Realty, L.P. and the notes thereto. Certain
defined terms used herein have the meaning ascribed to them in the Consolidated
Financial Statements.
The following comparisons for the three and six month periods ended June 30,
2000 ("2000"), as compared to the three and six month periods ended June 30,
1999 ("1999") 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 March 31, 1999 (for the three-month period comparisons), and
which represents all in-service properties owned by the Operating Partnership at
December 31, 1998 (for the six-month period comparisons), all such properties
being owned by the Operating Partnership for the entirety of both periods being
compared, (ii) the effect of the "Acquired Properties," which represents all
properties acquired or placed in service by the Operating Partnership from April
1, 1999 through June 30, 2000 (for the three-month period comparisons), and
which represents all properties acquired or placed in service by the Operating
Partnership from January 1, 1999 through June 30, 2000 (for the six-month period
comparisons), and (iii) the effect of the "Dispositions," which represents the
Operating Partnership's sales of rental property during the respective periods.
34
<PAGE>
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Quarter Ended
June 30, Dollar Percent
(IN THOUSANDS) 2000 1999 Change Change
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 122,072 $ 116,499 $ 5,573 4.8%
Escalations and recoveries from tenants 14,627 16,366 (1,739) (10.6)
Parking and other 6,128 3,061 3,067 100.2
-----------------------------------------------------------------------------------------
Sub-total 142,827 135,926 6,901 5.1
Equity in earnings of
unconsolidated joint ventures 1,070 834 236 28.3
Interest income 1,992 215 1,777 826.5
-----------------------------------------------------------------------------------------
Total revenues 145,889 136,975 8,914 6.5
-----------------------------------------------------------------------------------------
PROPERTY EXPENSES:
Real estate taxes 14,733 14,208 525 3.7
Utilities 10,014 9,829 185 1.9
Operating services 16,822 17,429 (607) (3.5)
-----------------------------------------------------------------------------------------
Sub-total 41,569 41,466 103 0.2
General and administrative 5,159 5,568 (409) (7.3)
Depreciation and amortization 22,945 22,465 480 2.1
Interest expense 26,835 25,697 1,138 4.4
Non-recurring charges 9,228 16,458 (7,230) (43.9)
-----------------------------------------------------------------------------------------
Total expenses 105,736 111,654 (5,918) (5.3)
-----------------------------------------------------------------------------------------
Income before gain on sales of rental
property and minority interest 40,153 25,321 14,832 58.6
Gain on sales of rental property 73,921 -- 73,921 --
-----------------------------------------------------------------------------------------
Income before minority interest 114,074 25,321 88,753 350.5
Minority interest in consolidated
partially-owned properties (2,982) -- (2,982) --
-----------------------------------------------------------------------------------------
Net income 111,092 25,321 85,771 338.7
Preferred unit distribution (3,765) (3,869) 104 2.7
-----------------------------------------------------------------------------------------
Net income available to
common unitholders $ 107,327 $ 21,452 $ 85,875 400.3%
=========================================================================================
</TABLE>
35
<PAGE>
The following is a summary of the changes in revenue from rental operations and
property expenses divided into Acquired Properties, Same-Store Properties and
Dispositions (in thousands):
<TABLE>
<CAPTION>
Total Acquired Same-Store
Operating Partnership Properties Properties Dispositions
--------------------- --------------- --------------- ---------------
Dollar Percent Dollar Percent Dollar Percent Dollar Percent
Change Change Change Change Change Change Change Change
---------------------------------------------------------------------------------------------------------------------
REVENUE FROM RENTAL OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Base rents $ 5,573 4.8% $ 4,833 4.2% $ 4,350 3.7% $ (3,610) (3.1)%
Escalations and recoveries
from tenants (1,739) (10.6) 232 1.4 (758) (4.6) (1,213) (7.4)
Parking and other 3,067 100.2 47 1.5 3,265 106.7 (245) (8.0)
---------------------------------------------------------------------------------------------------------------------
Totals $ 6,901 5.1% $ 5,112 3.8% $ 6,857 5.0% $ (5,068) (3.7)%
=====================================================================================================================
PROPERTY EXPENSES:
Real estate taxes $ 525 3.7% $ 523 3.7% $ 453 3.2% $ (451) (3.2)%
Utilities 185 1.9 243 2.5 373 3.8 (431) (4.4)
Operating services (607) (3.5) 933 5.3 (861) (4.9) (679) (3.9)
---------------------------------------------------------------------------------------------------------------------
Totals $ 103 0.2% $ 1,699 4.1% $ (35) (0.1)% $ (1,561) (3.8)%
=====================================================================================================================
OTHER DATA:
Number of Consolidated Properties 254 11 243 5
Square feet (in thousands) 26,865 1,255 25,610 1,359
</TABLE>
Base rents for the Same-Store Properties increased $4.4 million, or 3.7 percent,
for 2000 as compared to 1999, due primarily to rental rate increases in 2000.
Escalations and recoveries from tenants for the Same-Store Properties decreased
$0.8 million, or 4.6 percent, for 2000 over 1999, due primarily to the recovery
of a decreased amount of total property expenses, as well as fewer settle-up
billings during the same period in 2000. Parking and other income for the
Same-Store Properties increased $3.3 million, or 106.7 percent, due primarily to
increased lease termination fees in 2000.
Real estate taxes on the Same-Store Properties increased $0.5 million, or 3.2
percent, for 2000 as compared to 1999, due primarily to property tax rate
increases in certain municipalities in 2000. Utilities for the Same-Store
Properties increased $0.4 million, or 3.8 percent, for 2000 as compared to
1999, due primarily to increased usage in 2000. Operating services for the
Same-Store Properties decreased $0.9 million, or 4.9 percent, due primarily
to decreased salaries.
Equity in earnings of unconsolidated joint ventures increased $0.2 million, or
28.3 percent, in 2000 as compared to 1999. This is due primarily to increased
joint venture investments made by the Operating Partnership (see Note 4 to the
Financial Statements).
Interest income increased $1.8 million, or 826.5 percent, for 2000 as compared
to 1999, due primarily to the effect of proceeds from the Dispositions in 2000
being invested in cash and cash equivalents.
General and administrative expense decreased by $0.4 million, or 7.3 percent,
for 2000 as compared to 1999. This decrease is due primarily to decreased
payroll and related costs in 2000.
Depreciation and amortization increased by $0.5 million, or 2.1 percent, for
2000 over 1999. Of this increase, $0.9 million or 4.0 percent, is attributable
to the Acquired Properties, and $0.5 million, or 2.3 percent, due to the
Same-Store Properties, partially offset by a decrease of $0.9 million, or 4.2
percent, due to the Dispositions.
Interest expense increased $1.1 million, or 4.4 percent, for 2000 as compared to
1999. This increase is due primarily to the increase in LIBOR which resulted in
higher borrowing costs on floating rate debt.
Non-recurring charges of $9.2 million were incurred in 2000, as a result of the
resignations of Brant Cali and John R. Cali (see Note 15 to the Financial
Statements). Non-recurring charges of $16.5 million were incurred in 1999, as a
result of the resignation of Thomas A. Rizk (see Note 15 to the Financial
Statements).
36
<PAGE>
Income before gain on sales of rental property and minority interest increased
to $40.2 million in 2000 from $25.3 million in 1999. The increase of
approximately $14.9 million is due to the factors discussed above.
Net income available to common unitholders increased by $85.9 million, from
$21.4 million in 1999 to $107.3 million in 2000. This increase was a result of
an increase in income before gain on sales of rental property and minority
interest of $14.9 million, gain on sales of rental property of $73.9 million in
2000 and a decrease in Preferred Unit distributions of $0.1 million. These were
partially offset by an increase in minority interest of $3.0 million.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Six Months Ended
June 30, Dollar Percent
(IN THOUSANDS) 2000 1999 Change Change
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 243,670 $ 232,579 $ 11,091 4.8%
Escalations and recoveries from tenants 31,295 31,226 69 0.2
Parking and other 9,450 6,961 2,489 35.8
----------------------------------------------------------------------------------------
Sub-total 284,415 270,766 13,649 5.0
Equity in earnings of
unconsolidated joint ventures 2,207 628 1,579 251.4
Interest income 2,246 470 1,776 377.9
----------------------------------------------------------------------------------------
Total revenues 288,868 271,864 17,004 6.3
----------------------------------------------------------------------------------------
PROPERTY EXPENSES:
Real estate taxes 29,437 28,051 1,386 4.9
Utilities 20,393 19,421 972 5.0
Operating services 34,564 34,516 48 0.1
----------------------------------------------------------------------------------------
Sub-total 84,394 81,988 2,406 2.9
General and administrative 11,272 13,531 (2,259) (16.7)
Depreciation and amortization 45,127 44,434 693 1.6
Interest expense 53,261 49,319 3,942 8.0
Non-recurring charges 9,228 16,458 (7,230) (43.9)
----------------------------------------------------------------------------------------
Total expenses 203,282 205,730 (2,448) (1.2)
----------------------------------------------------------------------------------------
Income before gain on sales
of rental property
and minority interest 85,586 66,134 19,452 29.4
Gain on sales of rental property 76,169 -- 76,169 --
----------------------------------------------------------------------------------------
Income before minority interest 161,755 66,134 95,621 144.6
Minority interest in consolidated
partially-owned properties (5,072) -- (5,072) --
----------------------------------------------------------------------------------------
Net income 156,683 66,134 90,549 136.9
Preferred unit distribution (7,634) (7,738) 104 1.3
----------------------------------------------------------------------------------------
Net income available to
common unitholders $ 149,049 $ 58,396 $ 90,653 155.2%
========================================================================================
</TABLE>
37
<PAGE>
The following is a summary of the changes in revenue from rental operations and
property expenses divided into Acquired Properties, Same-Store Properties and
Dispositions (in thousands):
<TABLE>
<CAPTION>
Total Acquired Same-Store
Operating Partnership Properties Properties Dispositions
--------------------- ---------------- ----------------- -----------------
Dollar Percent Dollar Percent Dollar Percent Dollar Percent
Change Change Change Change Change Change Change Change
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 11,091 4.8% $ 8,576 3.8% $ 6,612 2.8% $ (4,097) (1.8)%
Escalations and recoveries
from tenants 69 0.2 519 1.6 687 2.2 (1,137) (3.6)
Parking and other 2,489 35.8 61 0.9 2,667 38.3 (239) (3.4)
--------------------------------------------------------------------------------------------------------------------------
Totals $ 13,649 5.0% $ 9,156 3.3% $ 9,966 3.7% $ (5,473) (2.0)%
==========================================================================================================================
PROPERTY EXPENSES:
Real estate taxes $ 1,386 4.9% $ 913 3.3% $ 941 3.3% $ (468) (1.7)%
Utilities 972 5.0 467 2.4 1,009 5.2 (504) (2.6)
Operating services 48 0.1 1,500 4.3 (754) (2.2) (698) (2.0)
--------------------------------------------------------------------------------------------------------------------------
Totals $ 2,406 2.9% $ 2,880 3.5% $ 1,196 1.4% $ (1,670) (2.0)%
==========================================================================================================================
OTHER DATA:
Number of Consolidated Properties 254 15 239 5
Square feet (in thousands) 26,865 1,389 25,476 1,359
</TABLE>
Base rents for the Same-Store Properties increased $6.6 million, or 2.8 percent,
for 2000 as compared to 1999, due primarily to rental rate increases in 2000.
Escalations and recoveries from tenants for the Same-Store Properties increased
$0.7 million, or 2.2 percent, for 2000 over 1999, due primarily to the recovery
of an increased amount of total property expenses, as well as additional
settle-up billings in 2000. Parking and other income for the Same-Store
Properties increased $2.7 million, or 38.3 percent, due primarily to increased
lease termination fees received in 2000.
Real estate taxes on the Same-Store Properties increased $0.9 million, or 3.3
percent, for 2000 as compared to 1999, due primarily to property tax rate
increases in certain municipalities in 2000. Utilities for the Same-Store
Properties increased $1.0 million, or 5.2 percent, for 2000 as compared to
1999, due primarily to increased usage in 2000. Operating services for the
Same-Store Properties decreased $0.8 million, or 2.2 percent, due primarily
to decreased salaries.
Equity in earnings of unconsolidated joint ventures increased $1.6 million, or
251.4 percent, in 2000 as compared to 1999. This is due primarily to increased
joint venture investments made by the Operating Partnership (see Note 4 to the
Financial Statements).
Interest income increased $1.8 million, or 377.9 percent, for 2000 as compared
to 1999, due primarily to the effect of proceeds from the Dispositions in 2000
being invested in cash and cash equivalents.
General and administrative expense decreased by $2.3 million, or 16.7 percent,
for 2000 as compared to 1999. This decrease is due primarily to decreased
payroll and related costs in 2000.
Depreciation and amortization increased by $0.7 million, or 1.6 percent, for
2000 over 1999. Of this increase, $1.6 million or 3.6 percent, is attributable
to the Acquired Properties and $0.9 million, or 2.1 percent, due to the
Same-Store Properties, partially offset by a decrease of $1.8 million, or 4.1
percent, due to the Dispositions.
Interest expense increased $3.9 million, or 8.0 percent, for 2000 as compared to
1999. This increase is due primarily to the replacement in 1999 of short-term
credit facility borrowings with long-term fixed rate unsecured notes.
38
<PAGE>
Non-recurring charges of $9.2 million were incurred in 2000, as a result of the
resignations of Brant Cali and John R. Cali (see Note 15 to the Financial
Statements). Non-recurring charges of $16.5 million were incurred in 1999, as a
result of the resignation of Thomas A. Rizk (see Note 15 to the Financial
Statements).
Income before gain on sales of rental property and minority interest increased
to $85.6 million in 2000 from $66.1 million in 1999. The increase of
approximately $19.5 million is due to the factors discussed above.
Net income available to common unitholders increased by $90.7 million, from
$58.4 million in 1999 to $149.1 million in 2000. This increase was a result of
an increase in income before gain on sales of rental property and minority
interest of $19.5 million, gain on sales of rental property of $76.2 million in
2000 and a decrease in Preferred Unit distributions of $0.1 million. These were
partially offset by an increase in minority interest of $5.1 million.
LIQUIDITY AND CAPITAL RESOURCES
STATEMENT OF CASH FLOWS
During the six months ended June 30, 2000, the Operating Partnership generated
$120.6 million in cash flows from operating activities, and together with $435.0
million in borrowings from the Operating Partnership's revolving credit
facilities, $235.8 million in proceeds from sales of rental property, $7.1
million in distributions received from unconsolidated joint ventures, $1.7
million in proceeds from stock options exercised and $0.6 million from
restricted cash, used an aggregate of approximately $800.8 million to acquire
properties and land parcels and pay for other tenant and building improvements
totaling $170.1 million, repay outstanding borrowings on its revolving credit
facilities and other mortgage debt of $438.1 million, pay quarterly
distributions of $85.0 million, invest $11.0 million in unconsolidated joint
ventures, distribute $88.7 million to minority interest in partially-owned
properties, pay financing costs of $6.0 million and increase the Operating
Partnership's cash and cash equivalents by $1.9 million.
CAPITALIZATION
In August 1998, the Board of Directors of the Corporation authorized a share
repurchase program under which the Corporation was permitted to purchase up to
$100.0 million 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. Subsequently, through December 31,
1999, the Corporation purchased for constructive retirement, 1,869,200 shares of
its outstanding common stock for an aggregate cost of approximately $52.6
million. Concurrent with these purchases, the Corporation sold to the Operating
Partnership 1,869,200 common units for approximately $52.6 million. The
Corporation did not purchase any of its outstanding common stock during the six
months ended June 30, 2000.
As of June 30, 2000, the Operating Partnership's total indebtedness of $1.5
billion (weighted average interest rate of 7.28 percent) was comprised of $247.9
million of revolving credit facility borrowings and other variable rate mortgage
debt (weighted average rate of 7.46 percent) and fixed rate debt of $1.2 billion
(weighted average rate of 7.24 percent).
As of June 30, 2000, the Operating Partnership had outstanding borrowings of
$215.7 million under its revolving credit facilities (with aggregate borrowing
capacity of $900.0 million). The total outstanding borrowings were from the 2000
Unsecured Facility, with no outstanding borrowings under the Prudential
Facility. The interest rate on outstanding borrowings under the 2000 Unsecured
Facility is currently LIBOR plus 80 basis points. The Operating Partnership may
instead elect an interest rate representing the higher of the lender's prime
rate or the Federal Funds rate plus 50 basis points. Based upon a change in the
Operating Partnership's unsecured debt rating, the interest rate will be changed
on a sliding scale. 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 to
increase the borrowing capacity of the 2000 Unsecured Facility up to $1.0
billion. The 2000 Unsecured Facility matures in June 2003, with an extension
option of one year, which would require a payment of 25 basis points of the then
borrowing capacity of the credit line upon exercise. The Prudential Facility
carries an interest rate of 110 basis points over LIBOR and matures in June
2001.
The terms of the 2000 Unsecured Facility include certain restrictions and
covenants which limit, among other things, the payment of dividends (as
discussed below), the incurrence of additional indebtedness, the incurrence of
liens and the disposition of assets, and which require compliance with financial
ratios relating to the maximum leverage ratio,
39
<PAGE>
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 Operating Partnership has three investment grade credit ratings. Standard &
Poor's Rating Services ("S&P") and Fitch IBCA ("Fitch") have each assigned their
BBB rating to existing and prospective senior unsecured debt of the Operating
Partnership. S&P and Fitch have also assigned their BBB- rating to prospective
preferred stock offerings of the Corporation. Moody's Investors Service has
assigned its Baa3 rating to the existing and prospective senior unsecured debt
of the Operating Partnership and its Ba1 rating to prospective preferred stock
offerings of the Corporation.
The terms of the Operating Partnership's unsecured corporate debt include
certain restrictions and covenants which require compliance with financial
ratios relating to the maximum amount of debt leverage, the maximum amount of
secured indebtedness, the minimum amount of debt service coverage and the
maximum amount of unsecured debt as a percent of unsecured assets.
As of June 30, 2000, the Operating Partnership had 225 unencumbered properties,
totaling 20.4 million square feet, representing 76.0 percent of the Operating
Partnership's total portfolio on a square footage basis.
The Operating Partnership and Corporation have an effective shelf registration
statement with the SEC for an aggregate 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 $785.3 million of
unsecured corporate debt.
Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures. Management believes that the Operating
Partnership will have access to the capital resources necessary to expand and
develop its business. To the extent that the Operating Partnership's cash flow
from operating activities is insufficient to finance its non-recurring capital
expenditures such as property acquisition and construction project costs and
other capital expenditures, the Operating Partnership expects to finance such
activities through borrowings under its revolving credit facilities and other
debt and equity financing.
The Operating Partnership expects to meet its short-term liquidity requirements
generally through its working capital and net cash provided by operating
activities, along with the 2000 Unsecured Facility and the Prudential Facility.
The Operating Partnership is frequently examining potential property
acquisitions and construction projects and, at any given time, one or more of
such acquisitions or construction projects may be under consideration.
Accordingly, the ability to fund property acquisitions and construction projects
is a major part of the Operating Partnership's financing requirements. The
Operating Partnership expects to meet its financing requirements through funds
generated from operating activities, proceeds from property sales, long-term or
short-term borrowings (including draws on the Operating Partnership's revolving
credit facilities) and the issuance of additional debt or equity securities. In
addition, the Operating Partnership anticipates utilizing the 2000 Unsecured
Facility and the Prudential Facility primarily to fund property acquisitions and
construction projects.
As of June 30, 2000, the Operating Partnership's total debt had a weighted
average term to maturity of 5.1 years. The Operating Partnership does not intend
to reserve funds to retire the Operating Partnership's unsecured corporate debt,
Harborside mortgages, $150.0 Million Prudential Mortgage Loan, its other
property mortgages or other long-term 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 corporate debt, preferred stock,
and/or obtaining additional mortgage debt, some or all of which may be completed
during 2000. The Operating Partnership anticipates that its available cash and
cash equivalents and cash flows from operating activities, together with cash
available from borrowings and other sources, will be adequate to meet the
Operating Partnership's capital and liquidity needs both in the short and
long-term. However, if these sources of funds are insufficient or unavailable,
the Operating Partnership's ability to make the expected distributions discussed
below may be adversely affected.
40
<PAGE>
To maintain its qualification as a REIT, the Corporation must make annual
distributions to its stockholders of at least 95 percent of its REIT taxable
income, determined without regard to the dividends paid deduction and by
excluding net capital gains. The Corporation currently relies on the
distributions it receives from the Operating Partnership to make distributions
to its stockholders. Moreover, the Operating Partnership intends to continue to
make regular quarterly distributions to its unitholders which, based upon
current policy, in the aggregate would equal approximately $155.1 million on an
annualized basis. However, any such distribution, would only be paid out of
available cash after meeting operating requirements, scheduled debt service on
mortgages and loans payable, and preferred unit distributions.
41
<PAGE>
SIGNIFICANT TENANTS
The following table sets forth a schedule of the Operating Partnership's 20
largest tenants for the Consolidated Properties as of June 30, 2000, based upon
annualized base rents:
<TABLE>
<CAPTION>
Percentage of Percentage of
Annualized Operating Partnership Square Total Operating Year of
Number of Base Rental Annualized Base Feet Partnership Lease
Properties Revenue ($) (1) Rental Revenue (%) Leased Leased Sq.Ft. (%) Expiration
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donaldson, Lufkin &
Jenrette Securities Corp. 1 8,316,096 1.8 271,953 1.1 2011
AT&T Wireless Services 2 8,199,960 1.7 382,030 1.5 2007 (2)
AT&T Corporation 4 8,069,341 1.7 520,496 2.0 2009 (3)
Keystone Mercy Health Plan 3 7,532,982 1.6 330,394 1.3 2015 (4)
IBM Corporation 4 7,028,473 1.5 362,753 1.4 2007 (5)
Prentice-Hall Inc. 1 6,744,495 1.4 474,801 1.9 2014
Allstate Insurance Company 9 5,863,006 1.2 270,154 1.1 2009 (6)
Nabisco Inc. 3 5,694,073 1.2 310,243 1.2 2005 (7)
Toys `R' US - NJ, Inc. 1 5,342,672 1.1 242,518 0.9 2012
American Institute of Certified
Public Accountants 1 4,981,357 1.1 249,768 1.0 2012
Board of Gov./Federal Reserve 1 4,694,247 1.0 117,008 0.5 2009 (8)
Dean Witter Trust Company 1 4,319,507 0.9 221,019 0.9 2008
Winston & Strawn 1 4,302,008 0.9 108,100 0.4 2003
CMP Media Inc. 1 4,206,598 0.9 206,274 0.8 2014
KPMG Peat Marwick, LLP 2 3,824,080 0.8 161,760 0.6 2007 (9)
Move.com 1 3,701,763 0.8 94,917 0.4 2006
Bank of Tokyo - Mitsubishi Ltd. 1 3,378,924 0.7 137,076 0.5 2009
Bankers Trust Harborside Inc. 1 3,272,500 0.7 385,000 1.5 2003
Cendant Operations Inc. 1 3,117,051 0.7 148,431 0.6 2008
Deloitte & Touche USA, LLP 1 3,073,126 0.7 115,967 0.4 2002
-----------------------------------------------------------------------------------------------------------------------------------
Totals 105,662,259 22.4 5,110,662 20.0
====================================================================================================================================
</TABLE>
(1) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
(2) 12,150 square feet expire September 2004; 345,799 square feet expire March
2007; 24,081 square feet expire June 2007.
(3) 3,950 square feet expire August 2000; 66,268 square feet expire December
2000; 63,278 square feet expire May 2004; 387,000 square feet expire
January 2009.
(4) 27,245 square feet expire January 2003; 303,149 square feet expire April
2015.
(5) 28,289 square feet expire January 2002; 1,065 square feet expire November
2002; 85,000 square feet expire December 2005; 248,399 square feet expire
December 2007.
(6) 22,444 square feet expire July 2001; 47,364 square feet expire September
2002; 18,882 square feet expire April 2003; 2,867 square feet expire
January 2004; 36,305 square feet expire January 2005; 23,024 square feet
expire October 2005; 6,108 square feet expire August 2006; 70,517 square
feet expire June 2007; 31,143 square feet expire April 2008; 11,500 square
feet expire April 2009.
(7) 9,865 square feet expire September 2001; 300,378 square feet expire
December 2005.
(8) 94,719 square feet expire May 2005; 22,289 square feet expire July 2009.
(9) 104,556 square feet expire September 2002; 57,204 square feet expire July
2007.
42
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS
The following table sets forth a schedule of the lease expirations for the total
of the Operating Partnership's office, office/flex, industrial/warehouse and
stand-alone retail properties, included in the Consolidated Properties,
beginning July 1, 2000, assuming that none of the tenants exercise renewal
options:
<TABLE>
<CAPTION>
Average Annual
Percentage Of Rent Per Net
Net Rentable Total Leased Annualized Rentable Percentage Of
Area Subject Square Feet Base Rental Square Foot Annual Base
Number Of To Expiring Represented By Revenue Under Represented Rent Under
Year Of Leases Leases Expiring Expiring By Expiring Expiring
Expiration Expiring (1) (Sq. Ft.) Leases (%) (2) Leases ($) (3) Leases ($) Leases (%)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7/1/00-12/31/00 256 1,490,198 5.8 26,192,268 17.58 5.6
2001.......... 527 2,834,176 11.1 45,918,474 16.20 9.7
2002.......... 536 3,585,845 14.0 62,957,243 17.56 13.3
2003.......... 448 3,717,746 14.5 65,181,163 17.53 13.8
2004.......... 334 2,323,366 9.1 44,334,554 19.08 9.4
2005.......... 286 2,859,481 11.2 56,116,970 19.62 11.9
2006.......... 105 1,412,989 5.5 29,696,175 21.02 6.3
2007.......... 64 1,521,732 5.9 31,383,457 20.62 6.7
2008.......... 40 1,084,117 4.2 18,254,250 16.84 3.9
2009.......... 36 1,097,738 4.3 21,298,156 19.40 4.5
2010.......... 61 944,524 3.7 19,212,405 20.34 4.1
2011 and thereafter 49 2,731,935 10.7 50,927,546 18.64 10.8
---------------------------------------------------------------------------------------------------------------------------
Totals/Weighted
Average 2,742 25,603,847 100.0 471,472,661 18.41 100.0
===========================================================================================================================
</TABLE>
(1) Includes office, office/flex, industrial/warehouse and stand-alone retail
property tenants only. Excludes leases for amenity, retail, parking and
month-to-month tenants. Some tenants have multiple leases.
(2) Excludes all unleased space as of June 30, 2000.
(3) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
(4) Reconciliation to Operating Partnership's total net rentable square footage
is as follows:
<TABLE>
<CAPTION>
Square Feet Percentage of Total
----------- -------------------
<S> <C> <C>
Square footage leased to commercial tenants 25,603,847 95.3%
Square footage used for corporate offices, management offices,
building use, retail tenants, food services, other ancillary
service tenants and occupancy adjustments 425,086 1.6
Square footage unleased 835,958 3.1
---------- --------
Total net rentable square footage (does not include
residential, land lease, retail or not-in-service properties) 26,864,891 100.0%
---------- --------
---------- --------
</TABLE>
43
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS: OFFICE PROPERTIES
The following table sets forth a schedule of the lease expirations for the
office properties beginning July 1, 2000, assuming that none of the tenants
exercise renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage Of Rent Per Net
Net Rentable Total Leased Annualized Rentable Percentage Of
Area Subject Square Feet Base Rental Square Foot Annual Base
Number Of To Expiring Represented By Revenue Under Represented Rent Under
Year Of Leases Leases Expiring Expiring By Expiring Expiring
Expiration Expiring (1) (Sq. Ft.) Leases (%) (2) Leases ($) (3) Leases ($) Leases (%)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7/1/00-12/31/00 213 1,214,468 5.7 22,985,977 18.93 5.5
2001.......... 437 2,159,752 10.2 38,977,000 18.05 9.3
2002.......... 434 2,731,188 12.9 53,967,997 19.76 12.8
2003.......... 375 3,121,966 14.8 59,322,147 19.00 14.1
2004.......... 284 1,822,335 8.6 38,538,729 21.15 9.1
2005.......... 239 2,440,656 11.5 50,947,678 20.87 12.1
2006.......... 86 1,134,526 5.4 25,192,679 22.21 6.0
2007.......... 56 1,386,301 6.5 29,412,223 21.22 7.0
2008.......... 36 925,747 4.4 17,171,967 18.55 4.1
2009.......... 26 966,678 4.6 19,469,636 20.14 4.6
2010.......... 47 750,968 3.5 16,568,653 22.06 3.9
2011 and thereafter 42 2,510,911 11.9 48,363,186 19.26 11.5
---------------------------------------------------------------------------------------------------------------------------
Totals/Weighted
Average 2,275 21,165,496 100.0 420,917,872 19.89 100.0
===========================================================================================================================
</TABLE>
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Excludes all unleased space as of June 30, 2000.
(3) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
44
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS: OFFICE/FLEX PROPERTIES
The following table sets forth a schedule of the lease expirations for the
office/flex properties beginning July 1, 2000, assuming that none of the tenants
exercise renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage Of Rent Per Net
Net Rentable Total Leased Annualized Rentable Percentage Of
Area Subject Square Feet Base Rental Square Foot Annual Base
Number Of To Expiring Represented By Revenue Under Represented Rent Under
Year Of Leases Leases Expiring Expiring By Expiring Expiring
Expiration Expiring (1) (Sq. Ft.) Leases (%) (2) Leases ($) (3) Leases ($) Leases (%)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7/1/00-12/31/00 40 274,395 6.8 3,189,396 11.62 6.9
2001.......... 87 664,977 16.5 6,849,197 10.30 14.8
2002.......... 100 808,217 20.0 8,491,539 10.51 18.3
2003.......... 69 497,806 12.3 5,357,898 10.76 11.5
2004.......... 39 291,611 7.2 3,303,333 11.33 7.1
2005.......... 44 405,671 10.0 4,987,415 12.29 10.8
2006.......... 19 278,463 6.9 4,503,496 16.17 9.7
2007.......... 8 135,431 3.4 1,971,234 14.56 4.2
2008.......... 4 158,370 3.9 1,082,283 6.83 2.3
2009.......... 9 119,260 2.9 1,722,320 14.44 3.7
2010.......... 14 193,556 4.8 2,643,752 13.66 5.7
2011 and thereafter 6 213,024 5.3 2,299,360 10.79 5.0
---------------------------------------------------------------------------------------------------------------------------
Totals/Weighted
Average 439 4,040,781 100.0 46,401,223 11.48 100.0
===========================================================================================================================
</TABLE>
(1) Includes office/flex tenants only. Excludes leases for amenity, retail,
parking and month-to-month office/flex tenants. Some tenants have multiple
leases.
(2) Excludes all unleased space as of June 30, 2000.
(3) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
45
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS: INDUSTRIAL/WAREHOUSE PROPERTIES
The following table sets forth a schedule of the lease expirations for the
industrial/warehouse properties beginning July 1, 2000, assuming that none of
the tenants exercise renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage Of Rent Per Net
Net Rentable Total Leased Annualized Rentable Percentage Of
Area Subject Square Feet Base Rental Square Foot Annual Base
Number Of To Expiring Represented By Revenue Under Represented Rent Under
Year Of Leases Leases Expiring Expiring By Expiring Expiring
Expiration Expiring (1) (Sq. Ft.) Leases (%) (2) Leases ($) (3) Leases ($) Leases (%)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7/1/00-12/31/00 3 1,335 0.3 16,895 12.66 0.4
2001.......... 3 9,447 2.5 92,277 9.77 2.5
2002.......... 2 46,440 12.2 497,707 10.72 13.5
2003.......... 4 97,974 25.8 501,118 5.11 13.6
2004.......... 10 200,120 52.6 2,297,492 11.48 62.2
2005.......... 3 13,154 3.5 181,877 13.83 4.9
2009.......... 1 11,800 3.1 106,200 9.00 2.9
---------------------------------------------------------------------------------------------------------------------------
Totals/Weighted
Average 26 380,270 100.0 3,693,566 9.71 100.0
===========================================================================================================================
</TABLE>
(1) Includes industrial/warehouse tenants only. Excludes leases for amenity,
retail, parking and month-to-month industrial/warehouse tenants. Some
tenants have multiple leases.
(2) Excludes all unleased space as of June 30, 2000.
(3) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
the historical results may differ from those set forth above.
SCHEDULE OF LEASE EXPIRATIONS: STAND-ALONE RETAIL PROPERTIES
The following table sets forth a schedule of the lease expirations for the
stand-alone retail properties beginning July 1, 2000, assuming that none of the
tenants exercise renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage Of Rent Per Net
Net Rentable Total Leased Annualized Rentable Percentage Of
Area Subject Square Feet Base Rental Square Foot Annual Base
Number Of To Expiring Represented By Revenue Under Represented Rent Under
Year Of Leases Leases Expiring Expiring By Expiring Expiring
Expiration Expiring (1) (Sq. Ft.) Leases (%) Leases ($) (2) Leases ($) Leases (%)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2004.......... 1 9,300 53.8 195,000 20.97 42.4
2012 ......... 1 8,000 46.2 265,000 33.12 57.6
---------------------------------------------------------------------------------------------------------------------------
Totals/Weighted
Average 2 17,300 100.0 460,000 26.59 100.0
===========================================================================================================================
</TABLE>
(1) Includes stand-alone retail property tenants only.
(2) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
46
<PAGE>
INDUSTRY DIVERSIFICATION
The following table lists the Operating Partnership's 30 largest industry
classifications based on annualized contractual base rent of the Consolidated
Properties:
<TABLE>
<CAPTION>
Percentage of Percentage of
Annualized Operating Total Operating
Base Rental Partnership Square Partnership
Revenue Annualized Base Feet Leased
Industry Classification (3) ($) (1) (2) Rental Revenue (%) Leased Sq. Ft. (%)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities, Commodity Contracts & Other Financial 48,482,254 10.3 2,163,027 8.4
Manufacturing 45,744,817 9.7 2,766,760 10.8
Computer System Design Svcs. 34,196,330 7.2 1,814,397 7.1
Insurance Carriers & Related Activities 33,713,281 7.1 1,744,424 6.8
Telecommunications 32,802,016 6.9 1,929,988 7.5
Legal Services 27,804,546 5.9 1,264,086 4.9
Health Care & Social Assistance 22,341,554 4.7 1,144,152 4.5
Credit Intermediation & Related Activities 21,982,908 4.7 1,282,516 5.0
Wholesale Trade 17,473,059 3.7 1,247,374 4.9
Accounting/Tax Prep. 15,908,652 3.4 752,393 2.9
Other Professional 15,687,935 3.3 919,295 3.6
Retail Trade 13,942,320 3.0 833,258 3.3
Information Services 13,385,639 2.8 623,356 2.4
Publishing Industries 12,555,371 2.7 563,273 2.2
Arts, Entertainment & Recreation 11,478,864 2.4 785,759 3.1
Public Administration 10,383,217 2.2 360,322 1.4
Other Services (except Public Administration) 8,916,277 1.9 699,883 2.7
Transportation 8,757,450 1.9 673,895 2.6
Advertising/Related Services 8,270,160 1.8 399,462 1.6
Real Estate & Rental & Leasing 7,747,291 1.6 378,753 1.5
Management/Scientific 7,573,469 1.6 388,954 1.5
Management of Companies & Finance 7,076,808 1.5 372,430 1.5
Scientific Research/Development 6,890,375 1.5 412,902 1.6
Data Processing Services 6,062,894 1.3 277,639 1.1
Architectural/Engineering 5,561,039 1.2 312,488 1.2
Construction 4,504,058 1.0 269,431 1.1
Educational Services 3,684,716 0.8 211,205 0.8
Utilities 3,567,432 0.8 170,462 0.7
Specialized Design Services 3,408,726 0.7 161,504 0.6
Admin. & Support, Waste Mgt. & Remediation Svc. 3,101,016 0.6 222,856 0.9
Other 8,468,187 1.8 457,603 1.8
------------------------------------------------------------------------------------------------------------------------
Totals 471,472,661 100.0 25,603,847 100.0
========================================================================================================================
</TABLE>
(1) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
(2) Includes office, office/flex, industrial/warehouse and stand-alone retail
tenants only. Excludes leases for amenity, retail, parking and
month-to-month office tenants. Some tenants have multiple leases.
(3) The Operating Partnership's tenants are classified according to the U.S.
Government's new North American Industrial Classification System (NAICS)
which has replaced the Standard Industrial Code (SIC) system.
47
<PAGE>
MARKET DIVERSIFICATION
The following table lists the Operating Partnership's 25 largest markets (MSAs),
based on annualized contractual base rent of the Consolidated Properties:
<TABLE>
<CAPTION>
Annualized Percentage of
Base Rental Operating Partnership Total
Revenue Annualized Base Property Size Percentage of
Market (MSA) ($) (1) (2) Rental Revenue (%) Rentable Area Rentable Area (%)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bergen-Passaic, NJ 82,841,703 17.6 4,530,091 16.9
New York, NY (Westchester-Rockland Counties) 78,809,935 16.7 4,696,178 17.5
Newark, NJ (Essex-Morris-Union Counties) 71,270,588 15.1 3,444,598 12.8
Philadelphia, PA-NJ 37,779,413 8.0 2,657,858 9.9
Jersey City, NJ 37,245,542 7.9 1,886,800 7.0
Washington, DC-MD-VA 18,992,505 4.0 616,549 2.3
Denver, CO 16,915,371 3.6 1,007,931 3.8
Dallas, TX 14,782,631 3.1 959,463 3.6
Trenton, NJ (Mercer County) 12,714,136 2.7 672,365 2.5
Middlesex-Somerset-Hunterdon, NJ 12,706,631 2.7 659,041 2.5
San Antonio, TX 11,793,657 2.5 940,302 3.5
San Francisco, CA 11,725,703 2.5 450,891 1.7
Stamford-Norwalk, CT 9,054,159 1.9 527,250 2.0
Houston, TX 8,888,939 1.9 700,008 2.6
Monmouth-Ocean, NJ 7,176,808 1.5 577,423 2.1
Nassau-Suffolk, NY 5,762,698 1.2 261,849 1.0
Austin-San Marcos, TX 5,751,591 1.2 270,703 1.0
Phoenix-Mesa, AZ 5,411,031 1.1 416,967 1.5
Boulder-Longmont, CO 3,578,893 0.8 270,421 1.0
Tampa-St. Petersburg-Clearwater, FL 3,415,060 0.7 297,429 1.1
Bridgeport, CT 3,104,796 0.7 145,487 0.5
Omaha, NE-IA 3,096,315 0.7 319,535 1.2
Colorado Springs, CO 2,837,673 0.6 209,987 0.8
Dutchess County, NY 2,172,749 0.5 118,727 0.4
Atlantic-Cape May, NJ 1,464,090 0.3 80,344 0.3
Other 2,180,044 0.5 146,694 0.5
------------------------------------------------------------------------------------------------------------------------
Totals 471,472,661 100.0 26,864,891 100.0
========================================================================================================================
</TABLE>
(1) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
(2) Includes office, office/flex, industrial/warehouse and stand-alone retail
tenants only. Excludes leases for amenity, retail, parking and
month-to-month office tenants. Some tenants have multiple leases.
48
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ATLANTIC COUNTY, NEW JERSEY
EGG HARBOR
100 Decadon Drive ................... 1987 40,422 100.0 784 0.16 19.40
200 Decadon Drive ................... 1991 39,922 95.3 735 0.15 19.32
BERGEN COUNTY, NEW JERSEY
FAIR LAWN
17-17 Route 208 North ............... 1987 143,000 96.0 3,445 0.70 25.09
FORT LEE
One Bridge Plaza .................... 1981 200,000 99.5 4,658 0.95 23.41
2115 Linwood Avenue (4) ............. 1981 68,000 88.4 687 0.14 11.43
LITTLE FERRY
200 Riser Road ...................... 1974 286,628 100.0 1,882 0.39 6.57
MONTVALE
95 Chestnut Ridge Road .............. 1975 47,700 100.0 570 0.12 11.95
135 Chestnut Ridge Road ............. 1981 66,150 92.1 971 0.20 15.94
PARAMUS
15 East Midland Avenue .............. 1988 259,823 100.0 6,639 1.36 25.55
461 From Road ....................... 1988 253,554 99.8 6,084 1.24 24.04
650 From Road ....................... 1978 348,510 100.0 7,584 1.55 21.76
140 Ridgewood Avenue ................ 1981 239,680 100.0 5,134 1.05 21.42
61 South Paramus Avenue ............. 1985 269,191 100.0 5,705 1.17 21.19
ROCHELLE PARK
120 Passaic Street .................. 1972 52,000 100.0 576 0.12 11.08
365 West Passaic Street ............. 1976 212,578 96.5 3,620 0.74 17.65
SADDLE RIVER
1 Lake Street ....................... 1973/94 474,801 100.0 7,466 1.53 15.72
UPPER SADDLE RIVER
10 Mountainview Road ................ 1986 192,000 100.0 3,773 0.77 19.65
WOODCLIFF LAKE
400 Chestnut Ridge Road ............. 1982 89,200 100.0 2,129 0.44 23.87
470 Chestnut Ridge Road ............. 1987 52,500 100.0 1,192 0.24 22.70
530 Chestnut Ridge Road ............. 1986 57,204 100.0 1,166 0.24 20.38
50 Tice Boulevard ................... 1984 235,000 100.0 4,837 0.99 20.58
300 Tice Boulevard .................. 1991 230,000 100.0 4,968 1.02 21.60
BURLINGTON COUNTY, NEW JERSEY
MOORESTOWN
224 Strawbridge Drive ............... 1984 74,000 95.2 1,162 0.24 16.49
228 Strawbridge Drive ............... 1984 74,000 100.0 1,434 0.29 19.38
ESSEX COUNTY, NEW JERSEY
MILLBURN
150 J.F. Kennedy Parkway ............ 1980 247,476 100.0 5,770 1.18 23.32
ROSELAND
101 Eisenhower Parkway .............. 1980 237,000 95.1 4,127 0.84 18.31
103 Eisenhower Parkway .............. 1985 151,545 99.8 3,154 0.65 20.85
HUDSON COUNTY, NEW JERSEY
JERSEY CITY
95 Christopher Columbus Drive (7) ... 1989 n/a n/a 10,266 2.10 n/a
Harborside Financial Center Plaza I . 1983 400,000 99.0 3,305 0.68 8.35
Harborside Financial Center Plaza II 1990 761,200 100.0 17,721 3.63 23.28
Harborside Financial Center Plaza III 1990 725,600 100.0 17,027 3.48 23.47
</TABLE>
49
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MERCER COUNTY, NEW JERSEY
PRINCETON
400 Alexander Road (6)........... 1987 n/a n/a 466 0.10 n/a
103 Carnegie Center.............. 1984 96,000 100.0 2,237 0.46 23.30
100 Overlook Center ............. 1988 149,600 99.8 3,738 0.76 25.04
5 Vaughn Drive................... 1987 98,500 100.0 2,271 0.46 23.06
MIDDLESEX COUNTY, NEW JERSEY
EAST BRUNSWICK
377 Summerhill Road.............. 1977 40,000 100.0 373 0.08 9.33
PLAINSBORO
500 College Road East............ 1984 158,235 100.0 3,404 0.70 21.51
SOUTH BRUNSWICK
3 Independence Way............... 1983 111,300 99.9 2,101 0.43 18.90
WOODBRIDGE
581 Main Street.................. 1991 200,000 100.0 4,574 0.94 22.87
MONMOUTH COUNTY, NEW JERSEY
NEPTUNE
3600 Route 66.................... 1989 180,000 100.0 2,413 0.49 13.41
WALL TOWNSHIP
1305 Campus Parkway.............. 1988 23,350 92.4 423 0.09 19.61
1350 Campus Parkway.............. 1990 79,747 99.9 1,329 0.27 16.68
MORRIS COUNTY, NEW JERSEY
FLORHAM PARK
325 Columbia Turnpike............ 1987 168,144 100.0 4,022 0.82 23.92
MORRIS PLAINS
201 Littleton Road............... 1979 88,369 100.0 1,771 0.36 20.04
250 Johnson Road................. 1977 75,000 100.0 1,090 0.22 14.53
MORRIS TOWNSHIP
340 Mt. Kemble Avenue............ 1985 387,000 100.0 5,529 1.13 14.29
412 Mt. Kemble Avenue (7)........ 1986 n/a n/a 6,481 1.33 n/a
PARSIPPANY
7 Campus Drive................... 1982 154,395 100.0 2,551 0.52 16.52
8 Campus Drive .................. 1987 215,265 100.0 5,235 1.07 24.32
2 Dryden Way..................... 1990 6,216 100.0 68 0.01 10.94
4 Gatehall Drive (4)............. 1988 248,480 98.2 5,856 1.20 24.00
2 Hilton Court................... 1991 181,592 100.0 4,556 0.93 25.09
600 Parsippany Road.............. 1978 96,000 100.0 1,347 0.28 14.03
1 Sylvan Way..................... 1989 150,557 100.0 3,513 0.72 23.33
5 Sylvan Way..................... 1989 151,383 96.8 3,542 0.72 24.17
7 Sylvan Way..................... 1987 145,983 100.0 2,920 0.60 20.00
PASSAIC COUNTY, NEW JERSEY
CLIFTON
777 Passaic Avenue............... 1983 75,000 63.1 939 0.19 19.84
TOTOWA
999 Riverview Drive.............. 1988 56,066 100.0 930 0.19 16.59
WAYNE
201 Willowbrook Boulevard........ 1970 178,329 99.0 2,426 0.50 13.74
</TABLE>
50
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SOMERSET COUNTY, NEW JERSEY
BASKING RIDGE
222 Mt. Airy Road................ 1986 49,000 100.0 743 0.15 15.16
233 Mt. Airy Road................ 1987 66,000 100.0 762 0.16 11.55
BRIDGEWATER
721 Route 202/206................ 1989 192,741 100.0 3,974 0.81 20.62
UNION COUNTY, NEW JERSEY
CLARK
100 Walnut Avenue................ 1985 182,555 100.0 4,548 0.93 24.91
CRANFORD
6 Commerce Drive................. 1973 56,000 85.5 1,048 0.21 21.89
11 Commerce Drive................ 1981 90,000 90.8 1,053 0.22 12.89
12 Commerce Drive................ 1967 72,260 89.4 613 0.13 9.49
20 Commerce Drive................ 1990 176,600 100.0 3,819 0.78 21.63
65 Jackson Drive................. 1984 82,778 100.0 1,591 0.33 19.22
NEW PROVIDENCE
890 Mountain Road................ 1977 80,000 100.0 2,051 0.42 25.64
------------------------------------------------------------------------------------------------------------------
TOTAL NEW JERSEY OFFICE 11,091,129 99.0 234,878 48.07 21.40
------------------------------------------------------------------------------------------------------------------
DUTCHESS COUNTY, NEW YORK
FISHKILL
300 South Lake Drive............. 1987 118,727 98.3 2,144 0.44 18.37
NASSAU COUNTY, NEW YORK
NORTH HEMPSTEAD
111 East Shore Road.............. 1980 55,575 100.0 1,515 0.31 27.26
600 Community Drive.............. 1983 206,274 100.0 4,860 0.99 23.56
ROCKLAND COUNTY, NEW YORK
SUFFERN
400 Rella Boulevard.............. 1988 180,000 99.0 3,579 0.73 20.08
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
100 Clearbrook Road.............. 1975 60,000 100.0 939 0.19 15.65
101 Executive Boulevard.......... 1971 50,000 79.5 802 0.16 20.18
555 Taxter Road (4).............. 1986 170,554 100.0 4,017 0.82 23.55
565 Taxter Road (4).............. 1988 170,554 78.7 3,294 0.67 24.54
570 Taxter Road.................. 1972 75,000 86.2 1,431 0.29 22.13
HAWTHORNE
30 Saw Mill River Road........... 1982 248,400 100.0 5,221 1.07 21.02
1 Skyline Drive.................. 1980 20,400 99.0 249 0.05 12.33
2 Skyline Drive.................. 1987 30,000 98.9 510 0.10 17.19
17 Skyline Drive................. 1989 85,000 100.0 1,237 0.25 14.55
7 Skyline Drive.................. 1987 109,000 100.0 2,176 0.45 19.96
TARRYTOWN
200 White Plains Road............ 1982 89,000 88.1 1,805 0.37 23.02
220 White Plains Road............ 1984 89,000 99.4 1,896 0.39 21.43
WHITE PLAINS
1 Barker Avenue.................. 1975 68,000 96.6 1,600 0.33 24.36
3 Barker Avenue.................. 1983 65,300 93.3 1,257 0.26 20.63
50 Main Street................... 1985 309,000 98.8 7,682 1.57 25.16
11 Martine Avenue................ 1987 180,000 100.0 4,376 0.90 24.31
1 Water Street................... 1979 45,700 99.8 994 0.20 21.79
</TABLE>
51
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YONKERS
1 Executive Boulevard............ 1982 112,000 100.0 2,453 0.50 21.90
3 Executive Plaza................ 1987 58,000 100.0 1,258 0.26 21.69
-----------------------------------------------------------------------------------------------------------------
TOTAL NEW YORK OFFICE 2,595,484 96.8 55,295 11.30 22.01
-----------------------------------------------------------------------------------------------------------------
CHESTER COUNTY, PENNSYLVANIA
BERWYN
1000 Westlakes Drive............. 1989 60,696 93.0 1,455 0.30 25.78
1055 Westlakes Drive............. 1990 118,487 100.0 2,298 0.47 19.39
1205 Westlakes Drive............. 1988 130,265 99.8 2,861 0.59 22.01
1235 Westlakes Drive............. 1986 134,902 99.7 3,062 0.63 22.77
DELAWARE COUNTY, PENNSYLVANIA
LESTER
100 Stevens Drive................ 1986 95,000 100.0 853 0.17 8.98
200 Stevens Drive................ 1987 208,000 100.0 3,785 0.77 18.20
300 Stevens Drive................ 1992 68,000 100.0 1,140 0.23 16.76
MEDIA
1400 Providence Road - Center I.. 1986 100,000 81.3 1,812 0.37 22.29
1400 Providence Road - Center II. 1990 160,000 83.5 3,086 0.63 23.10
MONTGOMERY COUNTY, PENNSYLVANIA
LOWER PROVIDENCE
1000 Madison Avenue.............. 1990 100,700 100.0 1,815 0.37 18.02
PLYMOUTH MEETING
1150 Plymouth Meeting Mall....... 1970 167,748 84.8 2,975 0.61 20.91
Five Sentry Parkway East......... 1984 91,600 100.0 1,498 0.31 16.35
Five Sentry Parkway West......... 1984 38,400 100.0 664 0.14 17.29
-----------------------------------------------------------------------------------------------------------------
TOTAL PENNSYLVANIA OFFICE 1,473,798 94.9 27,304 5.59 19.53
-----------------------------------------------------------------------------------------------------------------
FAIRFIELD COUNTY, CONNECTICUT
GREENWICH
500 West Putnam.................. 1973 121,250 98.3 2,779 0.57 23.32
NORWALK
40 Richards Avenue............... 1985 145,487 97.7 2,841 0.58 19.99
SHELTON
1000 Bridgeport Avenue........... 1986 133,000 89.5 2,316 0.47 19.46
-----------------------------------------------------------------------------------------------------------------
TOTAL CONNECTICUT OFFICE 399,737 95.2 7,936 1.62 20.86
-----------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA
WASHINGTON
1201 Connecticut Avenue, NW (4).. 1940 169,549 96.6 4,643 0.95 28.35
1400 L Street, NW................ 1987 159,000 100.0 5,868 1.20 36.91
1709 New York Avenue, NW......... 1972 166,000 100.0 6,893 1.41 41.52
-----------------------------------------------------------------------------------------------------------------
TOTAL DISTRICT OF COLUMBIA OFFICE 494,549 98.8 17,404 3.56 35.61
-----------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRINCE GEORGE'S COUNTY, MARYLAND
LANHAM
4200 Parliament Place............ 1989 122,000 91.3 2,335 0.48 20.96
-----------------------------------------------------------------------------------------------------------------
TOTAL MARYLAND OFFICE 122,000 91.3 2,335 0.48 20.96
-----------------------------------------------------------------------------------------------------------------
BEXAR COUNTY, TEXAS
SAN ANTONIO
200 Concord Plaza Drive.......... 1986 248,700 92.4 4,451 0.91 19.37
1777 N.E. Loop 410............... 1986 256,137 92.8 3,573 0.73 15.03
84 N.E. Loop 410................. 1971 187,312 87.9 2,477 0.51 15.04
111 Soledad...................... 1918 248,153 93.0 2,452 0.50 10.62
COLLIN COUNTY, TEXAS
PLANO
555 Republic Place............... 1986 97,889 97.2 1,472 0.30 15.47
DALLAS COUNTY,TEXAS
DALLAS
3030 LBJ Freeway................. 1984 367,018 96.1 6,347 1.30 18.00
3100 Monticello.................. 1984 173,837 94.9 2,763 0.57 16.75
8214 Westchester................. 1983 95,509 79.2 1,301 0.27 17.20
IRVING
2300 Valley View................. 1985 142,634 85.4 2,204 0.45 18.09
RICHARDSON
1122 Alma Road................... 1977 82,576 100.0 607 0.12 7.35
HARRIS COUNTY, TEXAS
HOUSTON
14511 Falling Creek.............. 1982 70,999 98.8 853 0.17 12.16
5225 Katy Freeway................ 1983 112,213 100.0 1,429 0.29 12.73
5300 Memorial.................... 1982 155,099 100.0 2,297 0.47 14.81
1717 St. James Place............. 1975 109,574 94.0 1,345 0.28 13.06
1770 St. James Place............. 1973 103,689 90.4 1,374 0.28 14.66
10497 Town & Country Way......... 1981 148,434 81.1 1,904 0.39 15.82
POTTER COUNTY, TEXAS
AMARILLO
6900 IH - 40 West (7)............ 1986 n/a n/a 458 0.09 n/a
TARRANT COUNTY, TEXAS
EULESS
150 West Parkway................. 1984 74,429 95.9 1,032 0.21 14.46
TRAVIS COUNTY, TEXAS
AUSTIN
1250 Capital of Texas Hwy. South. 1985 270,703 98.8 5,571 1.14 20.83
-----------------------------------------------------------------------------------------------------------------
TOTAL TEXAS OFFICE 2,944,905 93.4 43,910 8.98 15.97
-----------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARICOPA COUNTY, ARIZONA
GLENDALE
5551 West Talavi Boulevard....... 1991 181,596 100.0 1,614 0.33 8.89
PHOENIX
19640 North 31st Street.......... 1990 124,171 100.0 1,198 0.25 9.65
20002 North 19th Avenue (6)...... 1986 n/a n/a 307 0.06 n/a
SCOTTSDALE
9060 E. Via Linda Boulevard...... 1984 111,200 100.0 2,407 0.49 21.65
-----------------------------------------------------------------------------------------------------------------
TOTAL ARIZONA OFFICE 416,967 100.0 5,526 1.13 13.25
-----------------------------------------------------------------------------------------------------------------
ARAPAHOE COUNTY, COLORADO
AURORA
750 South Richfield Street....... 1997 108,240 100.0 2,911 0.60 26.89
DENVER
400 South Colorado Boulevard..... 1983 125,415 97.2 2,066 0.42 16.95
ENGLEWOOD
9359 East Nichols Avenue......... 1997 72,610 100.0 903 0.18 12.44
5350 South Roslyn Street......... 1982 63,754 96.2 1,058 0.22 17.25
BOULDER COUNTY, COLORADO
BROOMFIELD
105 South Technology Court....... 1997 37,574 100.0 539 0.11 14.35
303 South Technology Court-A..... 1997 34,454 100.0 421 0.09 12.22
303 South Technology Court-B..... 1997 40,416 100.0 421 0.09 10.42
LOUISVILLE
1172 Century Drive............... 1996 49,566 100.0 562 0.11 11.34
248 Centennial Parkway........... 1996 39,266 100.0 563 0.12 14.34
285 Century Place................ 1997 69,145 100.0 1,117 0.23 16.15
DENVER COUNTY, COLORADO
DENVER
3600 South Yosemite.............. 1974 133,743 100.0 1,289 0.26 9.64
DOUGLAS COUNTY, COLORADO
ENGLEWOOD
384 Inverness Drive South........ 1985 51,523 100.0 813 0.17 15.78
400 Inverness Drive.............. 1997 111,608 99.9 2,756 0.56 24.72
67 Inverness Drive East.......... 1996 54,280 100.0 662 0.14 12.20
5975 South Quebec Street......... 1996 102,877 99.8 2,380 0.49 23.18
PARKER
9777 Pyramid Court............... 1995 120,281 100.0 1,323 0.27 11.00
EL PASO COUNTY, COLORADO
COLORADO SPRINGS
8415 Explorer.................... 1998 47,368 100.0 570 0.12 12.03
1975 Research Parkway............ 1997 115,250 100.0 1,679 0.34 14.57
2375 Telstar Drive............... 1998 47,369 100.0 570 0.12 12.03
</TABLE>
54
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
JEFFERSON COUNTY, COLORADO
LAKEWOOD
141 Union Boulevard.............. 1985 63,600 98.9 1,099 0.22 17.47
-----------------------------------------------------------------------------------------------------------------
TOTAL COLORADO OFFICE 1,488,339 99.5 23,702 4.86 16.00
-----------------------------------------------------------------------------------------------------------------
SAN FRANCISCO COUNTY, CALIFORNIA
SAN FRANCISCO
795 Folsom Street (4)............ 1977 183,445 100.0 4,701 0.96 25.63
760 Market Street................ 1908 267,446 95.1 7,877 1.61 30.97
-----------------------------------------------------------------------------------------------------------------
TOTAL CALIFORNIA OFFICE 450,891 97.1 12,578 2.57 28.73
-----------------------------------------------------------------------------------------------------------------
HILLSBOROUGH COUNTY, FLORIDA
TAMPA
501 Kennedy Boulevard............ 1982 297,429 88.8 3,786 0.77 14.33
-----------------------------------------------------------------------------------------------------------------
TOTAL FLORIDA OFFICE 297,429 88.8 3,786 0.77 14.33
-----------------------------------------------------------------------------------------------------------------
POLK COUNTY, IOWA
WEST DES MOINES
2600 Westown Parkway............. 1988 72,265 100.0 1,120 0.23 15.50
-----------------------------------------------------------------------------------------------------------------
TOTAL IOWA OFFICE 72,265 100.0 1,120 0.23 15.50
-----------------------------------------------------------------------------------------------------------------
DOUGLAS COUNTY, NEBRASKA
OMAHA
210 South 16th Street............ 1894 319,535 94.3 3,310 0.68 10.98
-----------------------------------------------------------------------------------------------------------------
TOTAL NEBRASKA OFFICE 319,535 94.3 3,310 0.68 10.98
-----------------------------------------------------------------------------------------------------------------
TOTAL OFFICE PROPERTIES 22,167,028 97.4 439,084 89.84 20.34
=================================================================================================================
</TABLE>
55
<PAGE>
PROPERTY LISTING
OFFICE/FLEX PROPERTIES
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BURLINGTON COUNTY, NEW JERSEY
BURLINGTON
3 Terri Lane..................... 1991 64,500 61.4 399 0.08 10.07
5 Terri Lane..................... 1992 74,555 62.2 413 0.08 8.91
MOORESTOWN
2 Commerce Drive (4)............. 1986 49,000 100.0 364 0.07 7.43
101 Commerce Drive............... 1988 64,700 100.0 336 0.07 5.19
102 Commerce Drive (4)........... 1987 38,400 87.5 182 0.04 5.42
201 Commerce Drive............... 1986 38,400 100.0 196 0.04 5.10
202 Commerce Drive (4)........... 1988 51,200 100.0 269 0.06 5.26
1 Executive Drive................ 1989 20,570 91.2 107 0.02 5.70
2 Executive Drive (4)............ 1988 60,800 100.0 473 0.10 5.42
101 Executive Drive.............. 1990 29,355 45.8 125 0.03 9.30
102 Executive Drive.............. 1990 64,000 90.0 422 0.09 7.33
225 Executive Drive.............. 1990 50,600 100.0 320 0.07 6.32
97 Foster Road................... 1982 43,200 100.0 187 0.04 4.33
1507 Lancer Drive................ 1995 32,700 100.0 139 0.03 4.25
1510 Lancer Drive................ 1998 88,000 100.0 370 0.08 4.20
1256 North Church................ 1984 63,495 49.9 319 0.07 10.07
840 North Lenola................. 1995 38,300 100.0 272 0.06 7.10
844 North Lenola................. 1995 28,670 100.0 213 0.04 7.43
30 Twosome Drive................. 1997 39,675 100.0 223 0.05 5.62
40 Twosome Drive................. 1996 40,265 63.1 196 0.04 7.71
50 Twosome Drive................. 1997 34,075 100.0 269 0.06 7.89
WEST DEPTFORD
1451 Metropolitan Drive.......... 1996 21,600 100.0 149 0.03 6.90
MERCER COUNTY, NEW JERSEY
HAMILTON TOWNSHIP
100 Horizon Drive................ 1989 13,275 0.0 13 0.00 0.00
200 Horizon Drive................ 1991 45,770 100.0 446 0.09 9.74
300 Horizon Drive................ 1989 69,780 73.8 826 0.17 16.04
500 Horizon Drive................ 1990 41,205 57.8 313 0.06 13.14
MONMOUTH COUNTY, NEW JERSEY
WALL TOWNSHIP
1325 Campus Parkway.............. 1988 35,000 100.0 261 0.05 7.46
1340 Campus Parkway.............. 1992 72,502 94.6 793 0.16 11.56
1345 Campus Parkway.............. 1995 76,300 100.0 707 0.14 9.27
1433 Highway 34.................. 1985 69,020 79.1 445 0.09 8.15
1320 Wyckoff Avenue.............. 1986 20,336 100.0 47 0.01 2.31
1324 Wyckoff Avenue.............. 1987 21,168 100.0 188 0.04 8.88
PASSAIC COUNTY, NEW JERSEY
TOTOWA
1 Center Court................... 1999 38,961 37.8 144 0.03 9.78
2 Center Court................... 1998 30,600 99.3 349 0.07 11.49
11 Commerce Way.................. 1989 47,025 100.0 476 0.10 10.12
20 Commerce Way.................. 1992 42,540 100.0 412 0.08 9.69
29 Commerce Way.................. 1990 48,930 100.0 482 0.10 9.85
40 Commerce Way.................. 1987 50,576 100.0 560 0.11 11.07
45 Commerce Way.................. 1992 51,207 100.0 483 0.10 9.43
60 Commerce Way.................. 1988 50,333 84.3 348 0.07 8.20
80 Commerce Way.................. 1996 22,500 100.0 286 0.06 12.71
</TABLE>
56
<PAGE>
PROPERTY LISTING
OFFICE/FLEX PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
100 Commerce Way................. 1996 24,600 100.0 285 0.06 11.59
120 Commerce Way................. 1994 9,024 100.0 92 0.02 10.20
140 Commerce Way................. 1994 26,881 99.5 278 0.06 10.39
-----------------------------------------------------------------------------------------------------------------
TOTAL NEW JERSEY OFFICE/FLEX 1,943,593 88.2 14,177 2.92 8.27
-----------------------------------------------------------------------------------------------------------------
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
11 Clearbrook Road............... 1974 31,800 100.0 334 0.07 10.50
75 Clearbrook Road............... 1990 32,720 100.0 816 0.17 24.94
150 Clearbrook Road.............. 1975 74,900 100.0 1,049 0.21 14.01
175 Clearbrook Road.............. 1973 98,900 98.5 1,441 0.29 14.79
200 Clearbrook Road.............. 1974 94,000 99.8 1,184 0.24 12.62
250 Clearbrook Road.............. 1973 155,000 94.5 1,277 0.26 8.72
50 Executive Boulevard........... 1969 45,200 97.2 384 0.08 8.74
77 Executive Boulevard........... 1977 13,000 100.0 166 0.03 12.77
85 Executive Boulevard........... 1968 31,000 99.4 407 0.08 13.21
300 Executive Boulevard.......... 1970 60,000 99.7 581 0.12 9.71
350 Executive Boulevard.......... 1970 15,400 98.8 243 0.05 15.97
399 Executive Boulevard.......... 1962 80,000 100.0 967 0.20 12.09
400 Executive Boulevard.......... 1970 42,200 100.0 618 0.13 14.64
500 Executive Boulevard.......... 1970 41,600 100.0 574 0.12 13.80
525 Executive Boulevard.......... 1972 61,700 100.0 837 0.17 13.57
1 Westchester Plaza.............. 1967 25,000 100.0 294 0.06 11.76
2 Westchester Plaza.............. 1968 25,000 100.0 447 0.09 17.88
3 Westchester Plaza.............. 1969 93,500 98.5 1,117 0.23 12.13
4 Westchester Plaza.............. 1969 44,700 99.8 629 0.13 14.10
5 Westchester Plaza.............. 1969 20,000 100.0 291 0.06 14.55
6 Westchester Plaza.............. 1968 20,000 100.0 301 0.06 15.05
7 Westchester Plaza.............. 1972 46,200 100.0 650 0.13 14.07
8 Westchester Plaza.............. 1971 67,200 100.0 866 0.18 12.89
HAWTHORNE
200 Saw Mill River Road.......... 1965 51,100 88.8 623 0.13 13.73
4 Skyline Drive.................. 1987 80,600 100.0 1,246 0.25 15.46
8 Skyline Drive.................. 1985 50,000 98.9 797 0.16 16.12
10 Skyline Drive................. 1985 20,000 100.0 283 0.06 14.15
11 Skyline Drive................. 1989 45,000 100.0 683 0.14 15.18
12 Skyline Drive (4)............. 1999 46,850 100.0 733 0.15 15.65
15 Skyline Drive................. 1989 55,000 100.0 972 0.20 17.67
YONKERS
100 Corporate Boulevard.......... 1987 78,000 98.2 1,269 0.26 16.57
200 Corporate Boulevard South.... 1990 84,000 99.8 1,383 0.28 16.50
4 Executive Plaza................ 1986 80,000 99.9 1,033 0.21 12.93
6 Executive Plaza................ 1987 80,000 100.0 1,025 0.21 12.81
1 Odell Plaza.................... 1980 106,000 100.0 1,309 0.27 12.35
5 Odell Plaza.................... 1983 38,400 99.6 504 0.10 13.18
7 Odell Plaza.................... 1984 42,600 99.6 665 0.14 15.67
-----------------------------------------------------------------------------------------------------------------
TOTAL NEW YORK OFFICE/FLEX 2,076,570 99.0 27,998 5.72 13.63
-----------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
PROPERTY LISTING
OFFICE/FLEX PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FAIRFIELD COUNTY, CONNECTICUT
STAMFORD
419 West Avenue.................. 1986 88,000 96.8 1,431 0.29 16.80
500 West Avenue.................. 1988 25,000 100.0 361 0.07 14.44
550 West Avenue.................. 1990 54,000 100.0 779 0.16 14.43
600 West Avenue (4).............. 1999 66,000 100.0 623 0.13 9.43
650 West Avenue.................. 1998 40,000 100.0 632 0.13 15.80
-----------------------------------------------------------------------------------------------------------------
TOTAL CONNECTICUT OFFICE/FLEX 273,000 99.0 3,826 0.78 14.16
-----------------------------------------------------------------------------------------------------------------
TOTAL OFFICE/FLEX PROPERTIES 4,293,163 94.1 46,001 9.42 11.39
==================================================================================================================
</TABLE>
58
<PAGE>
PROPERTY LISTING
INDUSTRIAL/WAREHOUSE PROPERTIES
<TABLE>
<CAPTION>
Percentage of
Percentage Total Office,
Net Leased Annual Office/flex, Average
Rentable as of Base and Industrial/ Base Rent
Property Year Area 6/30/00 Rent Warehouse Per Sq. Ft.
Location Built (Sq. Ft.) (%) (1) ($000'S) (2) Base Rent (%) ($) (3) (5)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
1 Warehouse Lane................. 1957 6,600 100.0 57 0.01 8.64
2 Warehouse Lane................. 1957 10,900 100.0 113 0.02 10.37
3 Warehouse Lane................. 1957 77,200 100.0 290 0.06 3.76
4 Warehouse Lane................. 1957 195,500 97.4 1,938 0.40 10.18
5 Warehouse Lane................. 1957 75,100 97.1 725 0.15 9.94
6 Warehouse Lane................. 1982 22,100 100.0 514 0.10 23.26
-----------------------------------------------------------------------------------------------------------------
TOTAL INDUSTRIAL/WAREHOUSE PROPERTIES 387,400 98.1 3,637 0.74 9.57
-----------------------------------------------------------------------------------------------------------------
TOTAL OFFICE, OFFICE/FLEX,
AND INDUSTRIAL/WAREHOUSE
PROPERTIES 26,847,591 96.9 488,722 100.00 18.79
=================================================================================================================
</TABLE>
(1) Based on all leases in effect as of June 30, 2000.
(2) Total base rent for 12 months ended June 30, 2000, determined in accordance
with GAAP. Substantially all of the leases provide for annual base rents
plus recoveries and escalation charges based upon the tenant's
proportionate share of and/or increases in real estate taxes and certain
operating costs, as defined, and the pass through of charges for electrical
usage. For those properties acquired or placed in service during the 12
months ended June 30, 2000, amounts are annualized, as per Note 4.
(3) Base rent for the 12 months ended June 30, 2000 divided by net rentable
square feet leased at June 30, 2000. For those properties acquired or
placed in service during 12 months ended June 30, 2000, amounts are
annualized, as per Note 4.
(4) As this property was acquired or placed in service during the 12 months
ended June 30, 2000, the amounts represented for base rent are annualized.
These annualized amounts may not be indicative of the property's results
had the Operating Partnership owned or placed such property in service for
the entire 12 months ended June 30, 2000.
(5) Excludes office space leased by the Operating Partnership.
(6) The property was sold by the Operating Partnership in 1999.
(7) The property was sold by the Operating Partnership in 2000.
59
<PAGE>
FUNDS FROM OPERATIONS
The Operating Partnership considers funds from operations ("FFO"), after
adjustment for straight-lining of rents and non-recurring charges, one measure
of REIT performance. Funds from operations is defined as net income (loss)
before distributions to preferred unitholders, computed in accordance with GAAP,
excluding gains (or losses) from debt restructuring, other extraordinary items,
and sales of depreciable rental property, plus real estate-related depreciation
and amortization. Funds from operations should not be considered as an
alternative to net income as an indication of the Operating Partnership's
performance or to cash flows as a measure of liquidity. Funds from operations
presented herein is not necessarily comparable to funds from operations
presented by other real estate companies due to the fact that not all real
estate companies use the same definition. However, the Operating Partnership's
funds from operations is comparable to the funds from operations of real estate
companies that use the current definition of the National Association of Real
Estate Investment Trusts ("NAREIT"), after the adjustment for straight-lining of
rents and non-recurring charges.
Funds from operations for the three and six month periods ended June 30, 2000
and 1999 as calculated in accordance with NAREIT's definition as published in
October 1999, after adjustment for straight-lining of rents and non-recurring
charges, are summarized in the following table (IN THOUSANDS):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before gain on sales of rental property
and minority interest $ 40,153 $ 25,321 $ 85,586 $ 66,134
Add: Real estate-related depreciation and
amortization (1) 23,434 22,769 46,152 45,720
Gain on sale of land -- -- 2,248 --
Non-recurring charges 9,228 16,458 9,228 16,458
Deduct: Rental income adjustment for
straight-lining of rents (2) (3,400) (3,833) (5,590) (7,378)
Minority interest in consolidated
partially-owned properties (2,982) -- (5,072) --
-------------------------------------------------------------------------------------------------------
Funds from operations, after adjustment
for straight-lining of rents and
non-recurring charges $ 66,433 $ 60,715 $ 132,552 $ 120,934
Deduct: Distributions to preferred unitholders (3,765) (3,869) (7,634) (7,738)
-------------------------------------------------------------------------------------------------------
Funds from operations, after adjustment for
straight-lining of rents and non-recurring
charges, after distributions to
preferred unitholders $ 62,668 $ 56,846 $ 124,918 $ 113,196
=======================================================================================================
Cash flows provided by operating activities $ 120,576 $ 110,008
Cash flows provided by (used in)
investing activities $ 62,329 $ (90,548)
Cash flows used in financing activities $(181,041) $ (13,750)
-------------------------------------------------------------------------------------------------------
Basic weighted average units outstanding (3) 66,627 67,173 66,527 67,092
-------------------------------------------------------------------------------------------------------
Diluted weighted average units outstanding (3) 73,284 74,104 73,237 74,040
-------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes the Operating Partnership's share from unconsolidated joint
ventures of $686 and $509 for the three months ended June 30, 2000 and
1999, respectively, and $1,420 and $1,610 for the six months ended June 30,
2000 and 1999, respectively.
(2) Includes the Operating Partnership's share from unconsolidated joint
ventures of ($3) and ($26) for the three months ended June 30, 2000 and
1999, respectively, and $54 and ($44) for the six months ended June 30,
2000 and 1999, respectively.
(3) See calculations for the amounts presented in the following reconciliation.
60
<PAGE>
The following schedule reconciles the Operating Partnership's basic weighted
average units to the diluted weighted average units presented above:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic weighted average units: 66,627 67,173 66,527 67,092
Add: Weighted average preferred units 6,457 6,618 6,537 6,655
(after conversion to common units)
Stock options 200 313 173 293
------------------------------------------------------------------------------------------------------------------
Diluted weighted average units: 73,284 74,104 73,237 74,040
==================================================================================================================
</TABLE>
INFLATION
The Operating Partnership's leases with the majority of its tenants provide for
recoveries and escalation charges based upon the tenant's proportionate share
of, and/or increases in, real estate taxes and certain operating costs, which
reduce the Operating Partnership's exposure to increases in operating costs
resulting from inflation.
61
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Approximately $1.2 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 the market interest rates. The following table presents
principal cash flows (in thousands) based upon maturity dates of the debt
obligations and the related weighted-average interest rates by expected maturity
dates for the fixed rate debt. The interest rate on the variable rate debt as of
June 30, 2000 ranged from LIBOR plus 65 basis points to LIBOR plus 80 basis
points.
<TABLE>
<CAPTION>
JUNE 30, 2000
Long-term
Debt, Including 7/1/00- Fair
Current Portion 12/31/00 2001 2002 2003 2004 Thereafter Total Value
---------------- -------- ---- ---- ---- ---- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate..... $7,124 $7,468 $3,458 $195,612 $312,195 $713,512 $1,239,369 $1,184,442
Average Interest
Rate....... 6.93% 7.44% 8.20% 7.30% 7.34% 7.19% 7.24%
Variable Rate.. $215,730 $ 32,178 $ 247,908 $ 247,908
</TABLE>
62
<PAGE>
MACK-CALI REALTY, L.P.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Reference is made to "Other" in Note 15 (Commitments and
Contingencies) to the Consolidated Financial Statements, which is
specifically incorporated by reference herein.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Item 5. OTHER INFORMATION
Not Applicable.
63
<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
2.1 Agreement and Plan of Merger, dated as of June 27, 2000, among
Mack-Cali Realty Corporation, Mack-Cali Realty L.P., Prentiss
Properties Trust and Prentiss Properties Acquisition Partners,
L.P. (filed as Exhibit 2.1 to the Operating Partnership's
Form 8-K dated June 27, 2000).
3.1 Restated Charter of Mack-Cali Realty Corporation dated June 2,
1999, together with Articles Supplementary thereto (filed as
Exhibit 3.1 to the General Partner's Form 8-K dated June 10,
1999 and as Exhibit 4.2 to the Operating Partnership's Form
8-K dated July 6, 1999 and each 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 General
Partner's Form 8-K dated June 10, 1999 and incorporated herein
by reference).
3.3 Second Amended and Restated Agreement of Limited Partnership
dated December 11, 1997, for Mack-Cali Realty, L.P. (filed as
Exhibit 10.110 to the General Partner'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. (filed as
Exhibit 3.1 to the General Partner'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. (filed as
Exhibit 10.2 to the Operating Partnership's Form 8-K dated
July 6, 1999 and incorporated herein by reference).
4.1 Amended and Restated Shareholder Rights Agreement, dated as of
March 7, 2000, between Mack-Cali Realty Corporation and
Equiserve Trust Company, N.A., as Rights Agent (filed as
Exhibit 4.1 to the Operating Partnership's Form 8-K dated
March 7, 2000 and incorporated herein by reference).
4.2 Amendment No. 1 to the Amended and Restated Shareholder Rights
Agreement, dated as of June 27, 2000, by and among Mack-Cali
Realty Corporation and Equiserve Trust Company, N.A. (filed as
Exhibit 4.1 to the Operating Partnership's Form 8-K dated
June 27, 2000).
4.3 Indenture dated as of March 16, 1999, by and among Mack-Cali
Realty, L.P., as issuer, Mack-Cali Realty Corporation, as
guarantor, and Wilmington Trust Company, as trustee (filed as
Exhibit 4.1 to the Operating Partnership's Form 8-K dated
March 16, 1999 and incorporated herein by reference).
64
<PAGE>
EXHIBIT
NUMBER EXHIBIT TITLE
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).
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 Amended and Restated Employment Agreement dated as of July 1,
1999 between John R. Cali and Mack-Cali Realty Corporation
(filed as Exhibit 10.4 to the Operating Partnership's Form
10-Q dated June 30, 1999 and incorporated herein by
reference).
10.4 Amended and Restated Employment Agreement dated as of July 1,
1999 between Brant Cali and Mack-Cali Realty Corporation
(filed as Exhibit 10.5 to the Operating Partnership's Form
10-Q dated June 30, 1999 and incorporated herein by
reference).
10.5 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).
10.6 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).
10.7 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).
10.8 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).
10.9 Restricted Share Award Agreement dated as of July 1, 1999
between John R. Cali and Mack-Cali Realty Corporation (filed
as Exhibit 10.10 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 July 1, 1999
between Brant Cali and Mack-Cali Realty Corporation (filed as
Exhibit 10.11 to the Operating Partnership's Form 10-Q dated
June 30, 1999 and incorporated herein by reference).
10.11 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).
65
<PAGE>
EXHIBIT
NUMBER EXHIBIT TITLE
10.12 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).
10.13 Credit Agreement, dated as of December 10, 1997, by and among
Cali Realty, L.P. and the other signatories thereto (filed as
Exhibit 10.122 to the General Partner's Form 8-K dated
December 11, 1997 and incorporated herein by reference).
10.14 Amendment No. 1 to Revolving Credit Agreement dated July 20,
1998, by and among Mack-Cali Realty, L.P. and The Chase
Manhattan Bank, Fleet National Bank and Other Lenders Which
May Become Parties Thereto (filed as Exhibit 10.5 to the
Operating Partnership's Form 10-K dated December 31, 1998 and
incorporated herein by reference).
10.15 Amendment No. 2 to Revolving Credit Agreement dated December
30, 1998, by and among Mack-Cali Realty, L.P. and The Chase
Manhattan Bank, Fleet National Bank and Other Lenders Which
May Become Parties Thereto (filed as Exhibit 10.6 to the
Operating Partnership's Form 10-K dated December 31, 1998 and
incorporated herein by reference).
10.16 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 General Partner's Form 8-K
dated September 19, 1997 and incorporated herein by
reference).
10.17 First Amendment to Contribution and Exchange Agreement, dated
as of December 11, 1997, by and among the Company and the Mack
Group (filed as Exhibit 10.99 to the General Partner's Form
8-K dated December 11, 1997 and incorporated herein by
reference).
*27 Financial Data Schedule
(b) Reports on Form 8-K
The Operating Partnership did not file any current reports on Form 8-K during
the quarter ended June 30, 2000.
----------
*filed herewith
66
<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,
as its General Partner
Date: August 14, 2000 /s/ MITCHELL E. HERSH
-------------------------------
Mitchell E. Hersh
Chief Executive Officer
Date: August 14, 2000 /s/ BARRY LEFKOWITZ
-------------------------------
Barry Lefkowitz
Executive Vice President &
Chief Financial Officer
67
